What’s in the pipeline for 2022?

Ahead of the 9th annual Australian Domestic Gas Outlook (ADGO) 2022 conference, we interviewed four of the experts who will be speaking.

We spoke with David Berman (Commercial Director, ExxonMobil Australia), Morné Engelbrecht (Acting CEO of Beach Energy), David Maxwell (Managing Director, Cooper Energy), and Stuart Nicholls (CEO, Strike Energy) to learn what has them excited for the year ahead, their view of any gas production stumbling blocks in 2022, and their opinion of the investment environment for gas production over the next twelve months.

What has domestic gas leaders excited for 2022?

For ExxonMobil’s David Berman, the biggest project for 2022 stems from Esso Australia’s 2021 commissioning of West Barracouta, the largest domestic gas project for eastern Australia this decade.
“As West Barracouta demonstrates,” he says, “there is still plenty of potential in Bass Strait and we are exploring opportunities that could see the Gippsland gas continue to play an integral role in delivering a reliable, affordable and lower emissions energy system for Australia.”

Similarly, Beach Energy’s Morné Engelbrecht is excited about the completion the Otway Offshore project. “This has recently connected the Geographe wells into the east coast market. We will also be drilling the development wells for the Waitsia Stage Two project, where construction of the new gas plant continues in 2022. Beach is deep in the execution phase of our growth plan, so 2022 will involve a lot of hard work from the team – and I am confident we have the right people and the right plans to deliver success.”

Cooper Energy’s David Maxwell, says 2022 is about building and growing from what was achieved in 2021. “This included record production and revenue; the commencement of the long-term Sole Gas Sales Agreements; the commissioning of the Athena Gas Plant; and processing our Casino, Henry, and Netherby gas through Athena.”

Maxwell is also proud of having zero lost time incidents in 2021 and achieving certification as net zero/carbon neutral. “Cooper Energy is the first in the upstream gas industry to do so,” he says. “We are continually looking for opportunities to maximise the positions we hold in the Otway and Gippsland Basins which are proven cost competitive hydrocarbon basins connected to south-eastern Australia gas markets at a time when gas supply is tight.”

Strike Energy’s Stuart Nicholls also has several big announcements to share. “2022 is a big year for Strike across the business as it progresses several opportunities within its portfolio. Early January will see Strike commence the drilling of our 100% owned South Erregulla prospect, which has the potential to unlock Project Haber. Upon success, South Erregulla will provide the feedstock gas required to move forward on our low-cost, low-carbon 1.4mtpa urea fertiliser manufacturing plant in the Mid-West of Western Australia, Project Haber,” he said.

“In 2021 Strike completed pre-feed studies on Project Haber and as a result the company is in a strong position to move forward on feed, finalise the urea offtake process and progress the equity and debt processes for Project Haber upon success at South Erregulla 1. At the end of 2021 Strike made an exciting discovery with the Walyering-5 appraisal well. We will complete flow testing in Q1 CY 22 and, upon a positive outcome, will look to recommence gas production from the Walyering field. Success at Walyering has the potential to re-invigorate an existing gas discovery that was thought to have reached the end of its life. With the application of 3D seismic Strike believes it can accurately target the prospective parts of the play that 2D seismic was unable to identify.”

Nicholls expects to receive outstanding environmental approvals for the West Erregulla Phase 1 Gas development to enable Strike to move into construction. Finally, Strike is excited to advance its geothermal project. “Strike had a first-mover advantage as it secured 100% of the geothermal rights to the Perth Basin in mid-2021,” he explains. “Since then, we have undertaken the necessary work to convert our Special Prospecting Authority into an Exploration Permit that is currently undergoing the final government approvals. Strike has retained the acreage it believes to be the most prospective and this year will work towards publishing its independently verified Inferred Resource.”

Potential stumbling blocks in the year ahead

When asked about stumbling blocks, three of the four experts mentioned the role of gas production in Australia’s new energy mix, while only one spoke about the challenges of COVID-19.

“It’s important to appreciate that growing and maintaining Australia’s natural gas supplies is actually the key to unlocking more renewable energy,” says Berman. “Policies aimed at supporting the development of renewables should consider the critical role of natural gas in maintaining the energy reliability we are all used to. More certainty from all levels of government will allow the industry to make the investments in natural gas that are needed now in order to maintain Australia’s energy security into the future.”

Maxwell agrees. “The gas industry will increasingly be the facilitator for the accelerated development of new energy; in particular wind and solar electricity generation. The gas industry has illustrated in the past its capacity to work together and ensure the gas market needs are met. I expect this trait will continue – there will be challenges, and they will be worked through. We ask the governments to work with us in making this happen.”

Maxwell also notes that gas supply in south-east Australia will be tight and increasingly reflective of international gas prices.

Similarly, Nicholls believes 2021 demonstrated the ongoing importance of gas as part of the global energy mix. “As we start 2022, the importance of gas hasn’t diminished. Strike’s acreage in the Perth Basin, Western Australia, contains some of Australia’s lowest-cost gas to produce.”

For Engelbrecht, COVID-19 is still a risk that needs to be managed with care. “Generally speaking, our industry is well positioned to deliver, however we are not immune to the challenges of COVID-19, which is now entering its third year. The supply chain and resourcing impacts from positive cases and close contacts will present ongoing challenges throughout the year – ensuring business continuity and keeping our workforce safe must be the priority.”

The investment environment for gas production in the next twelve months

For some of our experts, any talk of the investment environment is inseparable from emissions reductions.

“There is no doubt that ESG will continue to be a major focus for investors in 2022 – and rightly so,” says Engelbrecht. “In every meeting I have with investors, they want to know what we are doing about reducing our emissions. In that regard, Beach has a good story to tell. We have our commitment to reducing operated emissions by 25 per cent by 2025 compared to 2018 levels.”

“We are also participants in the Moomba carbon capture and storage project – one of the leading projects of its type in Australia that will materially reduce Beach’s emissions footprint. Ultimately, demand for gas will remain strong as it plays a key role in a lower carbon energy mix and Beach is committed to developing that supply,” he says.

Maxwell agrees that ESG factors are increasingly important. “There are very good opportunities for companies with stable/growing revenue, a clear strategy and the appropriate ESG credentials,” he says.

Maxwell also lists several challenges and opportunities for the investment environment, including the tightening of Foreign Investment Review Board requirements reducing the number of new entrants, industry consolidation and repositioning in the second half of 2021 (e.g. BHP/Woodside, Santos/Oil Search and Senex/Posco), and the need for increased exploration and development to maintain domestic gas supply.

Nicholls believes Strike has a differentiated story when it comes to its strategy to be an integrated energy, renewables and fertiliser player in Australia. “Whilst we are geographically and geologically advantaged with our low-cost gas, we also believe from flow testing that we have some of the cleanest gas in Australia. Further, our strategic decision to advance Project Haber could see Australia displace up to 1.4mtpa of imported urea fertiliser. We expect this to reduce the carbon intensity of the urea used in Australia by up to 60% when logistic supply chains and source fuel is accounted for.”

Berman points to the speculation about the future of natural gas supplies, especially in Victoria, over the past 12 months. “Esso Australia has done the heavy lifting to deliver natural gas to the east coast domestic market over the last 50 years and has recently invested billions of dollars exploring for and developing new natural gas resources for the domestic market,” he says. “However, costs and regulatory timelines in Australia are high by international standards. All levels of government need to streamline processes and provide certainty to the market to ensure industry can make the investments in natural gas that are needed for the future.”

Join us at ADGO 2022 to hear from David Berman, Morné Engelbrecht, David Maxwell, Stuart Nicholls and a host of other domestic gas leaders on 21-23 March 2022.