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It's a Gas

Posted October 12, 2013 14:46:00

Australia is on the cusp of a new resource industry based on extracting gas from shale rock.

Source: Landline | Duration: 7min 46sec

Topics: agribusiness, oil-and-gas, rural, sa


PIP COURTNEY: Australia is on the cusp of a new resource industry, one based on extracting gas from shale rock.

Like coal seam gas, this new industry raises questions about how gas extraction will interfere with underground aquifers, an issue that's troubled some farming communities.

Although shale gas reserves are found throughout Australia, the initial exploration and drilling is being done in a remote part of the Cooper Basin.

Mike Sexton reports.


MIKE SEXTON, REPORTER: This is well number 191 in the Moomba gas field at the Cooper Basin. It isn't the most impressive piece of infrastructure, a 2m high wellhead with a length of 20mm pipe. But it's the closest you'll ever see to an iceberg in the desert, because it's what's hidden that counts.

JAMES BAULDERSTONE, SANTOS: Quite rightly say it doesn't look overly impressive. What you don't see is what happens under the ground. So here you have a well that's some 3.5km deep and is extracting a resource from that one single well that provides the energy for 40,000 homes in Adelaide and Sydney.

MIKE SEXTON: It's Australia's first production well for shale gas, which is often referred to as unconventional gas. And the company operating it, Santos, believes it's a game-changing resource.

JAMES BAULDERSTONE: In the Moomba field and surrounding fields we have some 700 producing gas wells. This is one of those 700 and we're hopeful we can drill many wells like this that can really take the production from central Australia that's been producing, supplying half of the gas of the eastern seaboard for 40 years, and provide that for another 40 years.

MIKE SEXTON: Geologists have long known about the shale deposits. The reason they're now being exploited is because of Asia's continuing demand for energy.

In 2010 Santos signed enormous contracts to supply gas from the Cooper Basin via its joint venture LNG plant at Gladstone in North Queensland. Leaving themselves five years to find enough gas.

The Cooper Basin was slowly being turned off. Now the dynamic has dramatically changed.

JAMES BAULDERSTONE: This is why what we're talking about now is a game changer. But for our ability to have a larger market with the export projects coming on stream, Moomba would have closed down towards the end of this decade. So what we're now seeing, because of that scale that I spoke about before, of the high gas prices that enable these sort of fields to be developed, Moomba will be here for another 40 years.


MIKE SEXTON: Shale gas is no different from other natural gas. It's just contained tightly within the pores of a type of rock known as shale. To bring it to the surface, a traditional well is sunk and then the rock is fractured in a process known as fracking to release the gas.

DENVER FLEMING, DRILLIN OPERATOR: So what fracking does is you suspend this sand into a jello, quite literally a jello, and you pump it under high formation pressures and it pumps into the stratus cracks, the small cracks of the rock and it stays there.

And then when you flow back your fluids, the fluid that you put that with will come out, most of it, and then the gas is left to come out from this man made sponge, more or less, that we put down here.

MIKE SEXTON: Denver Fleming is a Canadian who completes the fly-in/fly-out round trip from his home in Calgary every month. He says the fundamentals for drilling for oil and gas haven't changed much in 70 years, what has is the scope.

DENVER FLEMING: The market right now in Australia is probably about 10 years behind and the technology is 10 years behind what we have in your north American plate.

What we've done is accelerated that three-fold. So we're probably about a year to a year and a half behind the North American markets as it is right now.

MIKE SEXTON: At a site called Cowralli, new technology from North America is allowing 16 wells to be drilled in one location.

From one vertical shaft, multiple horizontal shafts are drilled, like an enormous subterranean octopus, a process that brings economy of scale.

JAMES BAULDERSTONE: You can see there's one, two, three, four wells in an area where three years ago we wouldn't have drilled any. The reason we wouldn't have drilled any wells is because the gas here was more expensive to extract and we didn't have the technology.

(Sound of worker at the mine)

MIKE SEXTON: The back drop for governments and industry in Australia is the way shale gas and oil has dramatically changed the landscape of energy in the United States, where in the past decade it's gone from nothing to supplying 30 per cent of the country's needs. It's also reducing energy costs which has stimulated manufacturing.

NIGEL MCBRIDE, BUSINESS SA: Energy cost is one of two things in manufacturing. If we could provide plentiful, cheap energy, it would revolutionise our manufacturing economy here. The other thing it would generally revolutionise our economy. It's not just the jobs it would create but getting energy prices down would be an absolute key for our future.

(Sound of protestors)

MIKE SEXTON: But the extraction process isn't without critics. In the eastern states, fracking to extract coal seam gas has sparked the Lock the Gate Alliance, a movement that believes water and farmland is threatened by hydraulic fracturing.

MARK PARNELL, GREENS MP: We know that this activity pollutes ground water where it's conducted interstate, there's no reason to suspect it's not having a similar impact in South Australia.

(Sound of helicopter)

MIKE SEXTON: While the desert over the Cooper Basin can be described as many things, prime farmland is not one of them. However, it does also sit over the great Artesian Basin and the Greens are concerned fracking could impact on that and other ground water.

MARK PARNELL: We know that at Moomba they've had oil and gas production there for a very long time. There aren't a lot of people who live up that way and there's no arable farmland. So to a certain extent it's been out of sight and out of mind. But the Greens believe that there are enough question marks over hydraulic fracturing, or fracking, that we should have a moratorium until the science is in.

JAMES BAULDERSTONE: If there was a moratorium on fracking, Moomba would shut down instantaneously. Every single gas well that is currently conventionally produced, as people would call it, is fracked. So what the Greens are asking for is to shut down Moomba, effectively to shut down this operation. There will be thousands of jobs lost in this state.

MIKE SEXTON: The immediate future for Santos is an $800 million investment in its processing plant at Moomba. The infrastructure was being wound down, but now under the eye of plant manager Steph deNichilo, an expansion is under way to cope with future export demands.

STEPHENE DE NICHILO, MANAGER, MOOMBA PLANT: We'll be effectively increasing our raw gas processing capacity. So it means we will be able to take the additional production coming out of the field and sending it predominantly to LNG markets in 2015.

MIKE SEXTON: Whether or not shale gas dramatically changes Australia's energy costs like in America, remains to be seen. What is known is that the development of the resource to meet export contracts has assured the future of Moomba for decades to come.

STEPHENE DE NICHILO: The market conditions have obviously changed and leading up to 2015, with our first supply into the LNG market. So it's a real exciting opportunity for Moomba to grab that increased development coming out of the basin and delivering it to those markets.