The collapse in global oil prices over the past 12 months is decimating oil and gas exploration activity in Australia, according to independent analyst EnergyQuest.
EnergyQuest chief executive officer Dr Graeme Bethune detailed findings of the group’s March quarterly report at the Australia Domestic Gas Outlook conference in Sydney.
He said the total number of exploration and development oil and gas wells drilled in Australia had nearly halved, falling from 1534 in 2014 to 821 last year, including exploration wells falling from 119 to 54.
“In that time, exploration spending fell from $1034 million in Q4 2014 to $446 million in Q4 2015,” Dr Bethune said.
“This is Australia’s lowest oil exploration spend in a decade.”
However development drilling in Queensland was highlighted as a positive amid the gloom.
“This region will need to maintain production to fuel the LNG projects,” Dr Bethune said.
“Drilling there fell from 1173 wells in 2014 to 612 wells in 2015. This was a natural consequence of the initial need to drill, discover and develop maiden gas flows for the commissioning cycles for the new LNG plants – but substantial numbers of additional development wells are still needed now as the plants move to long-term output.
“Production of close to 1500 petajoules (PJ) per annum from the Bowen and Surat basins is needed to underpin the Gladstone-based LNG projects as well as to meet other demand.
“Some of the best fields are able to deliver 2PJ or more per well. If this could be achieved on average across the basins, it would still imply a need for 750 wells per annum.
“This figure seems to be what the LNG companies are assuming, with plans to drill 800 wells a year in total. However, many areas are poorer than this and recoveries will fall over time. Average recoveries of 1 PJ per well would therefore need around 1500 wells per annum.”
Australian LNG export revenue was growing quickly to “benefit the whole economy”, the report showed.
Gross Australian LNG production in 2015 was 30.4 million tonnes – an increase of 23.5 per cent year on year.
As the new east coast LNG plants soak up available gas, EnergyQuest forecast a southern supply gap of about 80PJ in 2020, increasing to about 170PJ in 2025.
The oil price slump did not hit sales, with Australian oil and gas company sales volumes up strongly in the fourth quarter of 2015 (by 6.8 per cent on average) – but revenue realised per barrel of oil equivalent fell by an average 29 per cent.
The price-hit players in Australia’s energy sector saw the ASX 200 Energy Index halve – from 15,332 in September 2014 to 7511 at the end of January 2016 – its lowest level in 11 years.
Fourteen of the 79 oil and gas juniors on the ASX are either exiting the industry, being forced into major asset sales and/or contemplating a switch to another sector, according to EnergyQuest.