Well productivity trends in Queensland coal seam gas and the incremental well breakeven
Jimmy Zeng A *A Rystad Energy, Sydney, NSW, Australia.
The APPEA Journal 62(1) 14-23 https://doi.org/10.1071/AJ21101
Submitted: 17 December 2021 Accepted: 4 February 2022 Published: 13 May 2022
© 2022 The Author(s) (or their employer(s)). Published by CSIRO Publishing on behalf of APPEA.
Abstract
Development of coal seam gas (CSG) in Queensland (QLD) for export as liquefied natural gas (LNG) and domestic pipeline gas over the past decade has been a major Australian energy sector story. During the ramp-up period in 2015, public attention was drawn to the potential impacts of exported gas on the overall supply/demand balance and pricing outcomes for the domestic gas market. An overarching expectation of a ‘supply shortfall’ in the domestic gas market even with the growth in CSG development has taken hold as a result. This paper examines the historical record in the CSG upstream, reviewing reserves, production levels, and providing an analysis of average well flowrates. Upcoming development projects are set within this context of observed declining average well performance, and a range of ex-field breakeven gas prices to incentivise the ‘incremental CSG well’ are discussed. Maintenance of per well costs at low levels is a key factor influencing the breakeven level of ‘brownfield’ development. The analysis concludes with a reiteration of the perceived importance of CSG development for meeting expected supply shortfalls in the domestic market. Upstream risks (reserves, well performance) over the next decade are unlikely to be the major influence on CSG’s relevance to the domestic market (i.e. development is not resource-constrained). Rather, customer willingness to pay current high prices are likely to provide the key demand constraint – notwithstanding the possibility of new CSG acreage being developed at lower breakevens.
Keywords: breakevens, coal seam gas, costs, development, gas prices, production, Queensland, reserves, well flowrates.
Jimmy Zeng is Rystad Energy’s Senior Research Analyst for Australian Gas Markets, and formerly Senior Analyst for Australian Upstream. He is also the Product Manger of the company’s Australasia Solutions product suite. He has worked in a variety of project and operations engineering roles for Shell in Australia, Scotland, and South Korea. He was also an Equity Research Associate in the Australian Energy team at J. P. Morgan prior to joining Rystad. He holds dual undergraduate degrees in Engineering (Honours) and Economics from the University of Queensland, and a Graduate Certificate of Finance from Macquarie University. He is currently completing a Master of Commerce at the University of Sydney Business School. He is a member of the Australian Institute of Energy. He has previously published on gas and electricity market integration for the Institute of Electrical and Electronic Engineer’s Power & Energy Society in 2014. |
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