Katherine Regional Mining and Exploration Forum

Potential for oil and gas developments in

the Northern Territory

Steven Gerhardy: Director – Northern Territory

29 May 2014

Who are we?

• Peak national body for Australia’s upstream oil and gas industry

• 85 full member companies - 98% of Australian oil and gas production

• 250+ associate members

Our Objectives

• Development of Australia’s oil and gas resources in a manner that maximises the returns to the Australian industry and community.

• Regulatory and commercial conditions that enable member companies to operate safely, sustainably, and profitably.

• Increase community and government understanding of the upstream petroleum industry by publishing information about the sector’s activities and economic importance to the nation.

A new era for NT oil and gas

• Growing gas demand

• Potentially huge onshore gas resources

• Exploration required to understand extent and accessibility

• Development unlikely to be rapid – rigs, infrastructure, skills, geology

• Opportunity to prepare, engage and derive regional benefits

Current oil and gas production

• LNG is already the NT’s largest export :

– Darwin LNG commenced 2006

– Ichthys project to more than treble LNG exports from 2016

• Blacktip (Wadeye) - gas to PWC for power generation

• Mereenie - NT’s oldest operating oil and gas project (1984)

• Surprise oil - NT’s newest project (March 2014)

• Dingo gas - development commenced

Source: DME as at December 2013

Growth drivers – gas demand

Source: Santos 2013

Drivers - gas resources and technology

• Large undeveloped offshore discoveries

• Potentially large shale oil and gas resources in the NT’s onshore basins:

– 262 tcf of potential shale gas resources (larger than Australia’s identified conventional gas resources)

• Development of Floating LNG (FLNG):

– Shell Prelude FLNG project to be world’s first (3.6 mtpa)

– Bonaparte FLNG FID planned for 2015

– Supply base opportunities for Darwin

• Improvements in horizontal drilling and hydraulic fracturing of shales at depths of 2-5 kms

Onshore activity

• Airborne surveys and seismic programs resulting in greater drilling

– 25-30 wells in 2014 (2 in 2013)

• Central Australia:

– $100 million 8 well program at Mereenie (Santos)

– $50 million 5 well program in southern Georgina (Statoil)

– Smaller programs by Central Petroleum and Tamboran

• Top end:

– Beach Energy in the Bonaparte

– Origin, Santos and Pangaea in the Macarthur

– Armour Energy in Georgina Source: DME as at March 2014

Producing shale oil

and gas

• Drawing from formations 2-5 kilometres below ground

• Existing technologies –drilling, fracking, monitoring

• Aquifers protected by well construction and geology

• Risks to the environment have proven to be very low

Shale gas is well understood

• Comprehensive independent review of impacts by ACOLA

– 252pp of peer reviewed science by 2300 leading Australian scientists and scholars

• CSIRO and others have the skills

to assist with

– interpretation

– analysis

– communications

• Inquiry into Hydraulic Fracturing

The potential benefits

• US shale oil and gas has created 1.7 million jobs by 2012 (2.5 million jobs by 2015).

• Queensland CSG has revitalised regional centres, new sources of training and jobs, work for local businesses and revenue for governments.

• Expansion of the NT onshore industry would deliver jobs, economic growth and improved infrastructure in remote and regional areas:

– the long operating lives of large gas projects provide large, long-term benefits to local economies.

• Major boost to NT Government royalty receipts.

Onshore development timetable

• Adapting US shale experience to Australian geology will take time

• Oil discoveries (Surprise) and gas discoveries close to existing pipelines (Moomba-191) can be quickly commercialised.

• New gas projects may take many years of work before being ready to proceed:

– Resource definition, preliminary engineering, supplier pre-quals

– Pipelines and other infrastructure

– Markets (overseas or local)

– Finance

– Joint ventures with larger companies to access technology and share costs and risks

Collaboration the key to success

• Ensuring effective regulation (DME) and facilitation• A strategic framework which sets course for development • Local, Territory and Federal consistency• Stakeholder engagement

• Promoting a code of practice • Building partnerships with stakeholders • Peak body engagement, regional forums and public advocacy• Individual operator consultation and communications

• Sharing fact-based information, listening and responding• Developing an access agreement with pastoralists

• Ensuring input to operational and regulatory strategies

Governments

Industry

Community

Working with landholders

• Workshops/ engagement with the NTCA

• NTCA/APPEA model access and compensation agreement:

– Fairness and equity

– Respectful engagement

– Transparent information

– Balanced negotiation (and dispute resolution mechanisms)

– Fair compensation and other benefits

• Working with Land Councils to help communities understand the industry and embrace the opportunities for benefits

Northern Australia inquiry and White Paper

• The Northern Australia parliamentary inquiry and the development of a northern Australia white paper are strongly supported:

– increased oil and gas investment could form one of the key pillars of regional development

• APPEA has identified four key policy areas that government at all levels need to focus on to realise the potential of the oil and gas industry in Northern Australia:

– regulatory reform

– workforce mobility

– infrastructure

– indigenous opportunities

Conclusions

• The shale gas industry is an exciting prospect for the Northern Territory

• Industry is working to engage with Traditional Owners and pastoralists

• Industry committed to best practice management, regulation and transparency and has demonstrated over many decades that onshore oil and gas can be produced safely with minimal risk to the environment

• Comprehensive independent information is available – ACOLA, CSIRO

• The potential of onshore gas should be incorporated into regional planning

• The process of community engagement and provision of science-based information will be important

Further information and contacts

Steven GerhardyDirector – Northern Territory

sgerhardy@appea.com.au(08) 8943 0675

WA Onshore Gas website – www.wa-onshoregas.infoAPPEA – www.appea.com.auCSIRO Gas Industry Social and Environmental Alliance – www.gisera.org.auAustralian Council of Learned Academies – www.acola.org.au