Australia’s unconventional future: where next?

Abstract

Eastern Australia is now reliant on coal-seam gas (CSG) for its domestic gas supply; in 2018, it accounted for two-thirds of total eastern coast gas production. Australia has seen a rapid transition from relying on ‘conventional’ resources to relying on ‘unconventional’ gas supply. As legacy conventional supply sources mature and decline, exploration has been insufficient to keep up with market demand. This has created the opportunity for Australia’s vast CSG resources to fill the gap. But the development of CSG has been neither easy nor straightforward. And the costly requirement to drill hundreds, if not thousands, of wells in every single development has driven up the cost of supply. Most CSG reserves will be produced for the Pacific Basin LNG market via the three LNG projects on the east coast of Queensland. However, it is the resources beyond these LNG projects that will need to be developed, so as to ensure future supply to the east coast gas market. It is these other resources, both CSG and shale, that we evaluated to gain a picture of future gas supplies and costs. Our indicative economics showed that alternative CSG resources and Beetaloo shale both have high well-head break-even costs. In addition, the infrastructure required to get them to market will be expensive. The high costs, coupled with the demand from the LNG plants of Gladstone leads us to conclude that eastern-coast gas prices are likely to remain closely linked to global LNG prices for the foreseeable future.