The Australian Government is boosting gas exploration in the Bass Strait off Victoria's coast, amid growing concerns about declining production in the region.
Gas supply to the eastern states has become a contentious political issue, heightened by the Victorian Government's decision to ban fracking for onshore gas exploration.
This has also brought renewed attention to existing supply from the Bass Strait, where almost fifty years after the first Australian exploration permit was issued in 1959 gas production is steep decline.
The main gas and oil operations there are in the Gippsland basin, owned by a joint venture of Esso Australia and BHP. Esso and BHP are also partners in the Kipper Tuna Turrum project, the largest domestic gas development on the eastern seaboard.
Kipper is expected to start production in 2017, but it will only partially offset the decline production of gas across the Bass Strait, according to a report Meeting east Australia's gas supply challenge released by McKinsey Australia in March.
It projects that domestic gas demand will remain at around 700 peta joule (PJ) per year out to 2030.
The main supply for the eastern seaboard comes from offshore production in the Bass Strait, while most of the gas produced from unconventionally sources, mainly coal seam gas, is tied up in export contracts - LNG to 90%, according to the report.
However, recently the Government has announced
an Australian Domestic Gas Security Mechanism through
which the government could impose export controls when there is a
shortfall of gas supply in the domestic market.)
The McKinsey report suggests that shortfalls are indeed on the cards.
It projects that current levels of offshore gas production in the Bass, Gippsland and Otway basins will fall from currently around 405 petajoule (PJ) to 136 PJ by 2030. This
However, the report suggests that the rate of decline of around 8% per year could be halved if brownfield potential in Gippsland and Otway basins were developed.Securing affordable gas for the eastern states has been high on the agenda of the Australian Government.
Accordingly, in its 2017 Offshore Petroleum Exploration Acreage Release it has included five areas that are located close to existing infrastructure and fields in the Bass Strait.
The 2017 acreage release offers a total of 21 areas located across eight basins off the Northern Territory, Tasmania, Victoria, Western Australia, and the Ashmore and Cartier Islands. Of these, 20 will be awarded under a work program bidding process, which requires interested companies to submit comprehensive exploration plans.
The Government will also offer an area for cash bidding, a system it re-introduced in 2014 to encourage exploration in relatively mature areas that require only minimal additional exploration. The offered acreage is located in the highly prospective Dampier Sub-Basin within Western Australia's Northern Carnarvon Basin.