Origin Targeting Ironbank CBM Project Feed in FY18
Origin Energy is planning to begin Front End Engineering and Design (Feed) at the Ironbark coalbed methane project in Queensland during the current fiscal year ending June 2018, CEO Frank Calabria said October 18 in his address to the company’s annual general meeting. “Gas will continue to be a core part of Origin,” he said.
Ironbark is a wholly Origin-owned project located in Queensland’s Surat Basin and is earmarked to produce gas for the Australian market. The country’s east coast markets have faced a significant gas shortage, along with high prices and LNG exporters such as Origin are now under pressure from the federal government to increase supplies to the domestic market.
Delivering to the domestic market
Origin’s chairman Gordon Cairns acknowledged that gas prices have risen above the consumer price index, contributing to increasing cost pressures for many customers. He said that there are a number of reasons for the challenges facing the gas market. “Australia has exhausted lower cost gas supply that delivered historically lower prices for customers and we are now accessing resources with much higher costs of production. We have also created an east coast LNG export market, which connected domestic prices to global gas prices.”
He said that encouraging supply is the critical solution to obtaining both a security of supply and a reduction in prices, but the market has been unable to develop any new gas supply owing to drilling bans in various states on the east coast. Cairns argued, however, that further domestic supply commitments made recently by LNG projects for 2018 and 2019 should provide further downward pressure on prices.
The three LNG exporters based in Queensland – Origin, Santos and Shell – met with prime minister Malcolm Turnbull earlier this month and assured the government of their ability to make up the shortfall in domestic supply.
The Australian Energy Market Operator (AEMO) has projected shortfall risk for 2018 of between 54 PJs and 107 PJs, and for 2019 of between 48 PJs and 102 PJs. These projections are significantly higher than its predictions made in March this year. The total projected demand for domestic gas is expected to be about 642 PJs in 2018, and 598 PJs in 2019.
Cairns said that in the near-term Origin’s 37.5%-owned project, Australia Pacific LNG (APLNG) will contribute to the solution by diverting more gas from the export to the domestic market. APLNG is a joint venture between Origin Energy (37.5%), ConocoPhillips (37.5%) and Sinopec (25%).
“We are actively working to bring on more gas supply to offer customers for 2018, and we will continue to pursue future development opportunities including Ironbark and Beetaloo,” Cairns said.
In February 2017 Origin announced the discovery of a material contingent shale resource in the Northern Territory’s Beetaloo Basin – the most prospective underdeveloped onshore basin for unconventional gas.
Shardul Sharma