Australian upstream company Santos concedes it is coming a distant second in the public relations battle with environmental activists over the development of its coalseam gas reserves in the eastern state of New South Wales.
Santos is clearly exasperated with the lack of traction its message has been getting in the public debate, which is being driven by anti-CSG lobbyists including the Greens political party and high-profile conservative radio commentator Alan Jones.
The frustration being felt by Santos Vice President Eastern Australia James Baulderstone was almost palpable when I met him on the sidelines of the Australian Petroleum Production and Exploration Association conference in Perth this week. As he sees it, unless New South Wales can start to unlock its massive CSG reserves from as soon as 2017, the state is staring at an economic disaster.
There’s a lot at stake for Santos. The company has already spent A$1.5 billion on its New South Wales coalseam gas business, most of which went into its 2011 takeover of Eastern Star Gas, owner of the Narrabri project in the state’s central north.
Santos is now aiming to develop an A$2 billion CSG project at Narrabri to supply the domestic market in New South Wales. The gas would go a long way toward plugging a supply gap set to open up from 2016 as the state’s existing long-term contracts start to expire in precisely the same time frame as three new LNG export plants begin operations in its northern neighbor Queensland.
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The Queensland plants, being built on Curtis Island in Gladstone, will produce 25.3 million mt/year of LNG. Their need for gas, to be supplied from thousands of wells in the state’s Surat and Bowen basins, will more than triple eastern Australia’s consumption from the 700 Pj/year currently taken up by the domestic market.
With New South Wales importing around 95% of its gas from neighbors South Australia, Victoria and Queensland, the state is facing the prospect that a big slice of the 160 Pj/year it currently consumes will end up being diverted to the LNG plants in Gladstone. Hence Santos’ hopes that it can get Narrabri into production, and fast.
New South Wales has ample unconventional gas reserves but developing them has so far been a difficult process, slowed by the nervous response of the state government to the anti-CSG clamor. The government’s jitters saw it impose a 15-month moratorium on CSG exploration in 2011, more recently followed up by a series of new rules, including the introduction of 2 km (1.2 mile) “no-go” zones around residential areas and vineyards, exclusions in water catchment areas and a six-month freeze on new licence applications.
Santos had originally planned a A$500 million, 50-well exploration project around Narrabri over three years, but last year it sought and received federal government environmental approvals for a scaled-back program. The work will involve the restart of two existing pilot operations that were shut in after the Eastern Star Gas acquisition, the re-entering of three existing wells, and the drilling of one new corehole and 12 pilot wells.
Santos’ exploration work is now underway, but the company is facing ongoing opposition on the ground, with a small core group of activists regularly delaying work by staging “lock on” and “lock out” protests. The campaigners are also bombarding the public with anti-CSG messaging through social, print and television media.
As Australia’s second-largest listed oil and gas company, Santos is a regular presenter at the annual APPEA conference, the Southern Hemisphere’s biggest oil and gas industry gathering. This year, however, Baulderstone came to APPEA with a different message, and one which he hopes will help the company gain some ground in the PR trench warfare being waged in New South Wales.
Instead of ringing alarm bells over the looming gas supply crunch, Baulderstone is now focusing on what the CSG industry can do to revitalize New South Wales’ rural economy. And to illustrate the point, the company has shone a light on what has occurred in Roma, the major industry service town in gas-friendly Queensland, and compared it with what is happening in Narrabri.
The contrast is stark. Between 2001 and 2012, the population of Roma rose 9% to 13,562, while Narrabri’s fell 6% to 12,303.
Roma’s economy has grown a whopping 120% from A$850 million ($800 million) in the 2006-2007 fiscal year to A$1.864 billion in 2010-2011. Over the same period, Narrabri’s has also grown, but by less than 24%, from A$590 million to A$730 million.
Unemployment is virtually non-existent in Roma, dropping from 2.8% in 2006-2007 to 2.2% in 2010-2011. In contrast, Narrabri’s rate has moved from 5.4% to 5.5%.
Baulderstone is also plugging the benefits the CSG industry can deliver for farmers, some of whom are joining the picket lines in New South Wales. He says a four-well project can earn A$100,000 each year for the owner of the land, which is vital supplementary income for many farmers.
The other message he has for farmers is around water. The impact of CSG extraction on aquifers is a hot-button issue in agricultural communities, which rely heavily on the underground water sources.
According to Santos’ modelling, CSG extraction will produce around 3 gigaliters/year in the Namoi Catchment Area which includes Narrabri. That compares with the 400 gigaliters/year which is used by farmers and other traditional consumers, and will have a relatively neglible impact, according to the company.
In the bigger picture, Baulderstone points out more than 5 million homes and businesses in New South Wales use natural gas, with 45% of manufacturers relying on gas as their primary source of energy. Against the backdrop of those figures, the Santos executive stressed that any shortage of gas would put around 100,000 jobs at risk in the state.
Baulderstone says the new emphasis is designed to “cut through the debate and find that rational middle ground.” That ground lies between the industry and those who attended a series of small but noisy anti-CSG rallies around Australia on the eve of the APPEA conference.
As Baulderstone readily concedes: “If the industry is to succeed it has to make a positive impact on people’s lives.”
(Editor’s note: this blog has been reposted to reflect that Christine Forster is the author.)