Rystad Energy has recently completed a well-level production forecast for coal seam gas (CSG) projects in Australia, generating interesting results. Based on reported remaining proven and probable (2P) reserves and well numbers, production from currently producing or under development CSG projects is expected to decline by 60% over the next 10 years. Countering this, we expect projects currently in the discovery and exploration phases will offset this reduction by 30%. This still leaves a net 30% decrease in CSG production over the considered period.
“For an LNG export industry already struggling to fill facilities, an additional 30% reduction in feed gas would be disastrous, causing multiple trains to be taken offline,” warned Daniel Levy, a senior analyst on Rystad Energy’s upstream team.
It should be noted that the above production forecast assumes no additional 2P reserve write-downs. This assumption seems optimistic, given the trends observed over the past three years, with infill wells producing less than expected and permeability “sweet spots” in acreage proving to be smaller and harder to target than previously anticipated based on the 2P numbers certified in the early part of this decade.
“In multiple cases, we have observed that in order to deplete 2P reserves, operators will need to decrease well spacing while moving out from their core acreage without significant drops in well productivity,” added Levy. “This is an unlikely scenario given the underwhelming rate of improvement in technology and well productivity observed over the past decade.”
Unless economic reserves on the trillion cubic feet (Tcf) scale can be discovered and developed with a breakeven of less than AU$8 per gigajoule (GJ)*, Rystad Energy expects material reductions in Australia’s East Coast LNG export volumes from 2026 onwards, with trains closing by around 2028. There are options that could extend this timeline, such as reducing gas volumes earmarked for domestic use (which could be replaced by LNG imports), or the electrification of LNG facilities to save 6% to 10% of the feed currently used by facilities for power generation. Yet the only long-term solution is to find and develop new resources. To that end, the industry is eagerly watching shale developments in the Northern Territory and Cooper Basin, as well as new CSG potential in the Galilee and deep Permian coals of the Bowen basin.
*1 gigajoule = approximately 278 kilowatt hours
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