Australia’s east coast is facing a long-term gas supply crisis with shortfalls now anticipated sooner than had been expected.
We have sufficient gas to meet east coast demand in 2025 — even if all LNG-produced uncontracted gas is exported — with a projected surplus of 110 PJ in FY25 as uncertainty results in low contracted volumes.
However, according to the ACCC’s June 2024 Gas Supply Report, unless new sources of supply are made available, the east coast gas market may experience shortfalls as early as 2027.
This sees the potential supply shortfalls brought forward one year earlier than previously expected, reflecting lower forecast supply due to delays in anticipated regulatory approvals for new projects and problems with legacy gas fields.
Gas production is forecast to experience a steady decline over the coming years, with demand expected to remain steady before declining from 2035 — more than 10 years away.
Already in Victoria, gas storage is much lower than normal with potential solutions being sparse and requiring significant time and effort to resolve.
Long-term solutions to gas market shortfalls will require a range of policy and market responses. Most notably, there is an urgent need to develop new sources of gas production and supply,
Importing LNG will almost certainly be required, from Port Kembla and possibly Victoria or South Australia. This imported LNG is expected to cost around A$20/GJ – and will become a key marginal price setter.
This compares to the average prices offered in 2024 for supply of $14.3/GJ for producers and $16.5/GJ for retailers.
Clearly, there is a need for new sources of gas supply.
The Taroom Trough
The two active petroleum systems of the Surat Basin and the underlying Bowen Basin in Queensland have a long history of conventional oil and gas production. Here, extensive gas transmission infrastructure is in place to supply local and international gas markets, including Australia’s premier physical and commercial gas hub, Wallumbilla, and infrastructure connecting to the Gladstone LNG port.
The prolific Bowen Basin is now set to deliver another energy source.
This could come from the Taroom Trough, which is a deeper part of the larger Bowen Basin. It hosts vast gas resources and its deeper Permian-aged sandstones and coals remain underexplored.
The Taroom Trough is a favourable location for such large companies and is attracting large sources of capital for the following reasons:
- Brownfields – many majors, large LNG buyers, etc, are already in Queensland – and even for those who are not, the existence of the incumbents reduces risk perceptions,
- Low emissions profile – the Taroom is low in CO2 (pipeline spec) and has a long-term pathway to reducing scope 1 & 2 emissions from electrification, etc.
- Materiality – the resource size is multi-Tcf (with possibly 100Ms of bbls of liquids) and could accept billions of dollars of investment
- Low sovereign risk – Queensland is a favourable location within Australia for resource investments – and despite some recent sins at Federal level, Australia itself is still much better than most of the world
- Investments in the future can be varied in response to market conditions – a key feature of an onshore unconventional play close to existing infrastructure
Home to several majors, including Shell (LON:RDSa) and Santos, the Taroom Trough hosts material discovered and potential gas resources. And at depths below 4,200 metres, the Taroom Trough has drawn comparisons to the highly productive deep Permian sections of the Perth Basin.
New play is being proven: Grandis Gas Project
At the Grandis Gas Project, in the Taroom Trough in the Southern Bowen Basin, Elixir Energy Ltd is making strides towards delivering another energy source and could provide material contribution in addressing the supply squeeze.
The Grandis project covers 1,000 square kilometres, has booked a contingent resource (2C) of 1,297 billion cubic feet of gas (and 2U prospective resources of 3,603 Bcf), and is close to existing gas transmission infrastructure centred on the Wallumbilla gas hub.
Project Grandis has recently expanded with the Queensland Government recently appointing Elixir as the preferred tenderer for a new release of petroleum acreage in and adjacent to the Taroom Trough.
Elixir has two primary targets in the Grandis Gas Project, namely tight unconventional sandstones and fractured thermally mature coals.
Drilled to total depth of 4,300 metres (14,108 feet), Elixir’s Daydream-2 well intersected a gross interval of 607 metres, with peak gas shows of up to 800 units. The well logged 180 metres of net pay in the Permian sandstones and measured an additional 65 metres of gaseous coals in the primary objective interval as a new target for stimulation and flow testing.
Importantly, the Daydream-2 well discovered a first in the Taroom Trough – a free-flowing deep permeable formation. Elixir encountered unexpected free-flowing gas zone at 4,200 metres, meaning that gas flowed to surface without stimulation.
At 4,200 metres, this is the deepest sustained natural flow of gas in Queensland and may herald the start of a whole new and material gas play in Australia.
Flow test on Lorelle sandstone
Earlier this year, Elixir successfully conducted a flow test on the Lorelle sandstone – achieving a stabilised flow rate of 1.3 million standard cubic feet per day (mmscfd) and a maximum rate of 2.3 mmscfd. Elixir understands this is the deepest unstimulated flow of gas in onshore Australia east of the Perth Basin.
The Lorelle is now expected to be a major contributor to the final results of Daydream-2 – and could really boost the economics of the vast unconventional resources of the Taroom Trough.
Daydream-2 program recommenced
As it continues to build-up the very significant contingent resources at the project, Elixir has recommenced flow testing the Lorelle sandstone and to stimulate other zones higher in the hole.
The flow test will involve the perforation and stimulation of three sandstone and two coal zones in the Permian section. These will then be progressively cleaned up and flow tested for a period estimated to be a couple of weeks.
The uppermost zone – a coal section – will firstly be independently flow tested, aiming to prove up contingent resources in the coals of the Taroom Trough for the first time.
All six zones will then be flow tested aiming to exceed a flow rate of 2.5 MMscfd. This flow test will be from only 19% of the total gas-bearing zones of the Permian section and a higher flow rate could be extrapolated to arise from future more extensive perforations and stimulations.
Elixir’s managing director Neil Young said: “The unexpected high pressure at the Daydream-2 wellhead is yet another example of the great potential of the Taroom Trough to contribute gas from an enormously thick gross section containing multiple sedimentary forms.
"The next month or so will be an exciting time for Elixir as we continue to learn more and more from what has been an incredibly valuable appraisal well to date.”