2011 PESA industry review: production and development

Abstract

2011 was a lacklustre year for Australian hydrocarbon production, however a stellar year for LNG development. Domestic gas production was flat despite two new gas developments, Reindeer/Devil Creek and Halyard/Spar, which came into production during the year. Oil production fell, primarily due to the redevelopment of North West Shelf oil facilities, with Kitan in the Timor Sea being the only new offshore oil field that commenced production.

LNG production was also flat however, Final Investment Decisions (FID) were announced for five new LNG projects, including Ichthys early in 2012, bringing the combined value of all eight sanctioned LNG projects to more than $180 billion. This is a huge volume of development, not only for the industry but for the whole Australian economy. Importantly, it has also moved Australia closer to becoming the world’s largest LNG producer. Increasing development costs and competition for skilled labour still remain the biggest challenges for the industry.

Introduction of the carbon tax was also an important development in 2011, marking a significant step towards a low-carbon economy and increasing the opportunity for natural gas, but also burdening trade-exposed industries like LNG.

The success of unconventional gas in the United States and CSG in Australia has sparked a step-change in exploration and development of unconventional gas in onshore Australia.

Consolidation in coal seam gas sector continued on the east coast with the two acquisitions of Eastern Star Gas by Santos and Bow Energy by Arrow Energy. Continuing to effectively engage with the community will be central to the industry’s success.