2015 PESA production and development review

Low oil prices through 2015 challenged oil and gas operators to cut costs and minimise expenditure to survive the long cold winter of low pricing. Oil production decreased more than 10%—relative to 2014—to 128 mmboe for 2015. In 2015, natural gas production of 2,611 PJ was relatively consistent with 2014 production, with the exception of the Bowen and Surat basins, where production more than doubled to over 630 PJ. The primary driver for the increased Bowen and Surat basin output was the first full year of operation of QCLNG and, to a lesser extent, the startup of GLNG in the fourth quarter of 2015. The start-up of two major LNG operations in Queensland, followed by a third (APLNG) within the first weeks of 2016, is a transformational event for the eastern Australian gas market. As each of the projects has commenced exports during an extremely long—and therefore low-price—LNG market, there is intense market pressure on these projects to improve profitability through efficiency improvements and cost reductions. In contrast to Australia’s other LNG exporters, which are all fed by offshore conventional fields with relatively few wells, the Queensland projects have the opportunity to benefit from constant improvements to upstream operations as they continue to drill hundreds of wells to sustain the LNG operations. North American operators have continuously improved during the past decade of unconventional gas development and this provides a proof of concept that is encouraging for Australia’s aspirants. Effective cost reductions have already been announced by operators in Queensland; maintaining these reductions as the market improves will be critical to the success of the Queensland CSG to LNG projects, and expanding efficient and cost-effective operations to other onshore basins provides an opportunity for the Australian industry-at-large.