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Australia: Commercial gas found in 1962 Liquefied natural gas production began at Karratha in 1989; capacity is of 2.5 million tons per year, 334 million cubic feet a day Bill White Researcher/writer for the Office of the Federal Coordinator
Australia’s petroleum industry started getting traction in the 1950s, a timeline roughly parallel to the birth of oil and gas development in Alaska and western Canada.
Like Alaska and Canada’s Alberta, Australia was a raw, rugged and sparsely populated place.
Only 8.3 million people lived across the vast continent in 1950, roughly the same as New York City’s population at that time.
Australia was known to have petroleum resources since its British penal colony era in the early 1800s. Sealers and whalers caulked their ships with bitumen gathered along southern beaches.
But for well over a century the fledgling petroleum industry was largely limited to mining scant quantities of oil shale to feed kerosene manufacturing, with an occasional burst of excitement over oil and gas discoveries that quickly flamed out.
Prospectors targeted oil and gas seeps, and took cues from oily scum in local creeks as well as bitumen beds.
A gas well in the small town of Roma, west of Brisbane, flowed for 10 days in 1906 ... before dying away. A gas and condensate discovery nearby in 1927 ignited a national stock exchange boom ... for a short time.
Concerned about lack of oil resources in an industrial world, the government stepped up to juice the industry.
In 1920, the national government offered 50,000 Australian pounds ($180,000 U.S. in 1920) as a reward for discovery of commercial quantities of oil. In 1936, the Petroleum Oil Search Act made 250,000 Australian pounds (about $1 million U.S.) available to encourage drilling.
Twenty-one years later, new oil-exploration subsidies were enacted, and in 1959 those subsidies were broadened to include seismic and other survey work.
Technology breakthroughs It was the increasing sophistication of seismic exploration more than government incentives that really spurred the industry ahead.
Australia’s first reflection seismic survey was shot in the Roma area in 1949. Roma lies in the Surat Basin, an area that was to become a keystone of Australia’s petroleum development, providing some of the first oil and gas to the Brisbane and Sydney urban areas in the decades to come. It also is at the center of the current coal-bed methane boom that aims to feed at least three LNG plants in the nearby port of Gladstone.
Meanwhile, thousands of miles away, in a remote but geologically promising site on the northwest coast, a joint venture of Standard Oil of California, now called Chevron, and an Australian company called Ampol Exploration was spudding wells. The venture, called WAPET for Western Australian Petroleum, announced in December 1953 that it struck oil with its Rough Range No. 1 well on the northwest edge of the nation. Standard Oil said the discovery well flowed nearly 500 barrels a day, a respectable although not remarkable rate.
“This was the first oil flow to have been recorded anywhere in Australia, and it caused jubilation throughout the country. The stock market boomed and leading politicians and newspapers claimed that this could be Australia’s most significant development of the 20th century,” according to an account of the discovery. “Australia had no domestic production of oil or gas at that time, and the costs of oil imports were a major burden on the economy.”
The next year, geologists with the joint venture crossed a channel from Rough Range to conduct basic reconnaissance on Barrow Island. This island was so remote that just two years before the British decided the Monte Bello Islands, about 15 miles northwest of Barrow, would be a splendid site to conduct their first nuclear explosion. The British blew a 25-kiloton atomic bomb, somewhat more powerful than the Hiroshima and Nagasaki bombs.
The geologists were the first civilians to visit Barrow Island since the atomic test.
In the end, the Rough Range prospect turned out to be another duster. But the announcement inspired an expansion of oil exploration throughout Australia.
And it turned out the geologists were on to something.
They were prospecting along the southern rim of the mostly offshore Carnarvon Basin. Carnarvon turned out to be one of the world’s great natural gas plays, as well as endowed with oil. It hosts the gas fields that supply the North West Shelf LNG plant, the first of the nation’s three LNG plants to open, and the Pluto plant that started up this year.
An estimated 92 percent of Australia’s conventional gas resource lies in the Carnarvon and nearby Browse and Bonaparte basins. Two of the nation’s four big conventional-gas LNG projects under way will tap Carnarvon fields. The other two target Browse fields. Bonaparte is home of the gas field that supplies ConocoPhillips’ Darwin LNG plant, which opened in 2006.
Barrow Island is hosting the Gorgon LNG plant under development in the Carnarvon Basin.
The age of discovery Australia’s first commercial oil find occurred in 1962 about 100 miles from Roma. Drillers penetrated the first commercial gas field the next year.
The gas discovery occurred in the arid plains west of Roma on Dec. 31, 1983. The well flowed 2 million cubic feet a day. Excited drillers called in the news to their boss in Adelaide.
After hanging up, the boss exclaimed to a colleague, “Our lives have all been changed.”
They recalled a plane flying to deliver parts north to the well. Then they hustled to a liquor store to buy “as much champagne as we believed could go on that small aircraft ... and sent it up to the boys for a celebration on New Year’s Eve,” one participant recalled.
“Believe me, it was celebrated!” he said. The gas pipeline to Adelaide opened in 1969.
Oil and gas discoveries then cascaded across Australia through the 1960s.
Out in Western Australia, the Standard Oil-led joint venture struck oil on Barrow Island in 1964. Production started three years later, and the find remains one of Australia’s most prolific oil fields ever. The Barrow Island discovery started a stampede to drill into the younger formations off the continent’s northwest coast.
In the process of this exploration, the Carnarvon Basin was defined as Australia’s great oil and gas province.
Although drillers found a bonanza of oil and condensate, their biggest discoveries were disappointments — not oil but vast quantities of natural gas instead.
Unlike oil, there was no global market for natural gas. As for a local market, the northwest discoveries were far from the population centers in southeast Australia. To this day no pipelines connect the Carnarvon Basin to the main cities of Sydney and Melbourne.
Like the great 1968 natural gas discovery at the Prudhoe Bay oil field in Alaska’s Arctic, the northwest Australia gas was stranded. Most of it remains stranded today.
But out of these discoveries, Australia’s liquefied natural gas industry has bloomed.
Natural gas, not oil Carnarvon’s first monster gas discovery occurred at the North Rankin field in 1971.
A home-grown business named Woodside Oil Co., now called Woodside Energy, hit pay dirt.
Woodside incorporated in 1954 shortly after the Rough Range announcement. The company had been exploring for oil offshore Australia with nothing but frustration since its founding. And it was probing for oil in the Carnarvon when it discovered North Rankin’s natural gas and condensate resources instead.
In 1972, Woodside hit another ripper nearby — the big Goodwyn gas and condensate field. The company had found nearly 50 trillion cubic feet of gas — double the estimated reserves at Alaska’s Prudhoe Bay. The liquid condensates could be marketed. But what about the gas?
Discovery announcements were coming in thick. Gas and oil were discovered near Perth in 1964. Big interior Australia gas discoveries were ballyhooed in 1964 and 1965, with the gas eventually piped to Alice Springs in the Outback and Darwin on the northern coast. Barrow Island oil production started in 1967. Melbourne got piped gas in 1969 from a southern Australia discovery.
The federal government was scrambling to enact policies that would keep the momentum going, including control of prices.
But Woodside’s Carnarvon discoveries were something else. There was way too much gas for local markets; only about 1 million people lived in all of Western Australia, an area that encompasses about one-third of the continent and is not quite twice as large as Alaska. Most people lived around Perth, 1,000 miles south of Carnarvon.
The Western Australia government moved in to assert its rights. Negotiations ensued, resulting in a 1980 contract in which Woodside committed to supply gas to local industries and homes. Today pipelines snake through parts of Western Australia to deliver Carnarvon gas. Perth got its gas in 1984. Mines in the region are the largest gas consumers today.
The startup of gas production and condensate sales, plus Woodside’s partnership with deep-pocketed global energy companies, allowed development of the next phase: The North West Shelf plant, Australia’s first LNG project.
The Karratha plant started production in 1989, with a capacity of 2.5 million tons of LNG per year, or 334 million cubic feet a day.
The plant since has expanded three times, with its total annual capacity now at 16.3 million tons, or 2.2 billion cubic feet a day. It is one of the world’s largest LNG plants — comparable to the export behemoth Cheniere Energy plans to build at Sabine Pass, La., or the project discussed for Alaska’s North Slope gas.
The Karratha plant has symbolic value beyond the mere monetizing of stranded Australia natural gas. It demonstrated that Australia’s proximity to LNG markets, know-how, reserves and government structures produce a steady, reliable, long-term flow of LNG — qualities highly valued by buyers in Japan, South Korea, China and elsewhere.
Woodside’s North West Shelf project paved the path for the company to start up its Pluto plant this year, also near Karratha, and for ConocoPhillips to open its Darwin LNG plant in 2006.
Beyond 2017 Last year, Australia exported over $10 billion worth of LNG. If prices hold at their current lofty levels, that figure could soar threefold by the end of this decade as new plants open.
But whether Australia’s LNG industry can keep expanding beyond the burst of construction now under way is unclear.
The country certainly has the gas resources to expand further.
Woodside, ConocoPhillips and Shell are mulling what to do with the Sunrise field in the Timor Sea, a discovery dating to 1974.
Australian mining giant BHP Billiton and ExxonMobil say they’ll decide late this year on the Scarborough field, discovered in 1980.
Plenty of other prospects could fuel the world’s expected growing appetite for LNG beyond 2017. The government forecasts that Australian LNG production could reach 107 million metric tons a year — 14 billion cubic feet a day — by 2035, up from about 25 million today and 81 million metric tons after the seven new plants open.
But the world teems with excess and stranded gas.
LNG projects from the U.S. Gulf Coast, western Canada, Alaska, Africa and Russia also could compete for customers post-2017. Some forecast that Brazil, Venezuela, Iran and Papua New Guinea will be players, too.
Wood Mackenzie, a global resources consultancy, last year projected that Australia could supply 36 percent of the new worldwide demand for LNG through 2025. Other countries would land the other 64 percent. Wood Mac and other analysts project LNG demand growing 50 to 100 percent during that period.
The Australian government in a 2012 gas resource assessment acknowledged the challenges of further expansion of the nation’s LNG capacity:
“There are a number of greenfield projects under consideration (Browse and Arrow LNG), while projects such as Gorgon, Wheatstone, Pluto and the CSG (coal-seam gas) projects under construction in Queensland have the land footprint to add additional capacity.
“The decision to proceed with further projects in Australia will depend on a number of factors including access to sufficient gas reserves, gas prices, project costs and the ability to secure supply contracts for LNG exports.”
This is part 2 of a story which began in the Aug. 19 issue.
Editor’s note: This is a reprint from the Office of the Federal Coordinator, Alaska Natural Gas Transportation Projects, online at www.arcticgas.gov/australia-makes-bold-move-lng-supplier.
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