Unconventional Oil and Gas Autumn Issue by Monkey Media

UNCONVENTIONAL Issue 4 // AUTUMN 2016

JOSH FRYDENBERG: BREATHING LIFE BACK INTO RESOURCES

DRILLING DOWN TO THE CORE OF EXPLORATION

HOW DO WE MAINTAIN OUR SOCIAL LICENCE?

THE DIGITAL OILFIELD: RE-ENERGISING THE INDUSTRY

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UNCONVENTIONAL

OIL GAS UNCONVENTIONAL

WELCOME

Issue 4 // AUTUMN 2016

UNCONVENTIONAL OIL & GAS

FROM THE PUBLISHER

JOSH FRYDENBERG: LEAVING HIS MARK ON OIL & GAS

DRILLING DOWN TO THE CORE OF EXPLORATION

HOW DO WE MAINTAIN OUR SOCIAL LICENCE?

AUTUMN 2016

THE DIGITAL OILFIELD:

RE-ENERGISING THE INDUSTRY

Cover image highlights our coverage of the digital technologies that are revolutionising the industry.

Published by

Monkey Media Enterprises ABN: 36 426 734 954 PO Box 1763 Preston South VIC 3072 P: (03) 9988 4950 F: (03) 8456 6720 monkeymedia.com.au info@monkeymedia.com.au unconventionaloilandgas.com.au info@unconventionaloilandgas. com.au ISSN: 2204-8901

Publisher and Editor Chris Bland Managing Editor Laura Harvey Associate Editors Michelle Goldsmith Emily Thomas Journalist Jessica Dickers Marketing Director Amanda Kennedy

I’m observing with cautious optimism the signs of hope we’re starting to see in the oil and gas industry. At the time of writing this, the oil price is starting to edge higher – of course it remains volatile, and by the time you read this I’m not sure where it will lie – but what we do know is that the industry will recover in the long run, and I believe we’re now starting to make the first tentative moves in the right direction. The long run is what we’ve always been focused on here at Unconventional Oil & Gas. There were people who raised an eyebrow at the thought of launching a new oil and gas magazine when we did last year, and while we’re certainly operating in a challenging environment right now, we believe in the long-term future of this industry. As such, we’re maintaining our rock solid commitment to delivering the best content, building the best audience, and being the best oil and gas magazine in the country, regardless of the state of the market. The release of the report from the Australian Competition and Consumer Commission’s inquiry into the competitiveness of wholesale gas prices in eastern and southern Australia is also, I believe, good news for the industry. ACCC Chairman Rod Sims noted that “the future supply outlook is uncertain – meeting future domestic and LNG demand will require extensive development of undeveloped gas reserves and resources”. The ACCC has urged the COAG energy group to consider a number of recommendations to alleviate the supply issues we face, and, ultimately, bring forward the development of the bountiful gas reserves – conventional and unconventional – we are currently sitting on. The positive signs for the industry couldn’t come at a better time, as we all gather in Brisbane for the annual APPEA

Convention. This is without doubt the industry’s premier event – it’s the event of choice for the leaders and decision-makers in the industry. The event is an excellent fit for our magazine, and we’re proud to be associated as an official media partner. I’m looking forward to catching up with as many of you at the event as possible. One of the highlights of the event will be hearing from Federal Resources Minister, Josh Frydenberg, who will open the conference. Ahead of his APPEA speech, Unconventional Oil & Gas Managing Editor Laura Harvey had the chance to interview Mr Frydenberg about his first eight months in the oil and gas industry. You can read about the mark Mr Frydenberg wants to leave on the industry on page 16. Chris Bland Publisher and Editor

Marketing Consultant Aaron White Graphic Designers Alejandro Molano Jacqueline Buckmaster Creative Director Sandy Noke

UNCONVENTIONAL

4,921

OIL GAS

This publication has been independently audited under the AMAA's CAB Total Distribution Audit.

Audit Period: 01/04/2015 – 30/09/2015

AUTUMN 2016 // ISSUE 4

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CONTENTS INTERVIEW Josh Frydenberg: breathing life back into unconventionals..................16

He’s the Liberal rising star who’s popular across party lines, with a reputation for his considerable work ethic. He’s been touted as a potential future Prime Minister, and currently, he’s our newest Federal Minister for Resources. Unconventional Oil & Gas Managing Editor Laura Harvey recently caught up with Josh Frydenberg to learn about his plan to breathe life back into the oil and gas industry.

NORTHERN TERRITORY

New Territory for unconventional oil and gas..........................................22

INFORMATION AND COMMUNICATIONS TECHNOLOGY

Re-energising the industry with digital technologies.............................28

How do upstream oil and gas companies survive the steepest decline in oil prices the industry has seen in decades? The economics of unconventional fields have always been more challenging than traditional oil and gas plays, but given the very nature of unconventional development and production, digital technologies can make a more significant impact.

TECHNICAL

Shale resource development potential: the Australian context...........32

The current low oil price environment is proving to be a considerable challenge to the development of a shale industry in Australia. Here, we take a look at some of the factors that will need to fall into place to see a shale revolution kick off in Australia.

EXPLORATION AND SEISMIC

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Drilling down to the core of exploration......................................................38

The Perth Core Library is an invaluable resource for Australian petroleum and mineral exploration. The facility, located in the Perth suburb of Carlisle, archives thousands of state and Commonwealth drill core and cutting samples, which are crucial to exploration research. Currently, the library is undergoing a $7.3 million expansion so that it can accommodate an influx of samples and cater for the increased use of its resources seen in recent years. In this feature, we look at the role the Perth Core Library plays in Western Australian and national oil and gas exploration, and examine what the future holds for the facility.

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EXPLORATION AND SEISMIC

Shale gas: a key to the mystery of the Min Min light..............................44

Geological evidence from petroleum exploration in the Burke River Structural Belt east of Boulia in Western Queensland provides a rational explanation for the legend of the Min Min light. Rod Gould and David Warner shed light on the role shale gas may have to play in this natural phenomenon.

COMMUNITY

What is required to obtain and maintain a social licence?................... 50

In the last issue of Unconventional Oil & Gas, we looked at the way news coverage of the unconventional industry has evolved over the past decade, culminating in highly toxic coverage in the mainstream media. In this issue, we explore the topic in further detail, considering the idea of explorers obtaining and maintaining the “social licence” to explore and develop our precious resources.

POLICY

ACCC weighs in on east coast uncertainty............................................. 56

The Australian Competition and Consumer Commission (ACCC) has released its recommendations from the East Coast Gas Inquiry, which include improved market transparency, changes to pipeline regulation and new approaches to gas development.

BASIN PROFILE

The Amadeus Basin......................................................................................58

In this installment of our regular feature profiling Australian geological basins, we explore the Amadeus Basin. The Amadeus Basin contains mature producing conventional oil and gas fields, and is now being explored for its unconventional gas potential. Areas within the basin are thought to contain significant shale and tight gas resources that could be suitable for future development.

Project Charlie: boosting Queensland’s gas production...................... 60

REGULARS Publisher’s welcome �� 2 Contributors �� 6 News �� 8 The Good Oil ��62 Advertisers’ index ��64 WWW.UNCONVENTIONALOILANDGAS.COM.AU

AUTUMN 2016 // ISSUE 4

CONTRIBUTORS Federal Minister for Resources, Energy and Northern Australia

Josh Frydenberg

Josh Frydenberg is the Federal Member for Kooyong and the Minister for Resources, Energy and Northern Australia. Prior to being elected to office, Mr Frydenberg served as a senior adviser to former Foreign Minister Alexander Downer and former Prime Minister John Howard. Outside of politics he has held senior positions in the banking and legal sector. Mr Frydenberg has been the Resources Minister since September 2015, and he has given himself a clear mandate for his time in the role. He wants to be known as a Resources Minister who is an advocate for the industry – by educating Australians about the importance of oil and gas to our economic livelihood; by maintaining Australia’s openness to foreign investment; and by making sure the community is fully aware that unconventional gas extraction cannot only be environmentally sustainable and responsible, but is also vitally important for future gas supply in this country, and for our economic development and growth.

Unconventional Oil and Gas Lead Australia and Asia Pacific, Accenture

Nicholas Heyes

Nicholas Heyes is a leader in Accenture’s Energy Practice and manages the Unconventional Energy group across Asia Pacific. He has more than 28 years of global consulting experience and has worked with clients in the energy industry on major transformational work in Europe, North America and now APAC. He focuses on helping his clients set up and manage efficient and sustainable upstream development and operations capabilities. Mr Heyes is currently based in Brisbane, Australia and is advising the coal seam gas companies on how to set up and run their operations. This has entailed the development of new operating models, processes and technologies to support the capabilities required to efficiently develop reserves and to manage those production operations profitably.

Navinda De Silva Postdoctoral Research Associate UCL Australia

AUTUMN 2016 // ISSUE 4

Dr Navinda De Silva is a Postdoctoral Research Associate at UCL Australia, conducting research on the possibility of developing shale gas in Australia, similar to the US shale gas revolution. Dr De Silva completed a PhD in civil engineering at Monash University in Melbourne and a Master’s Degree in civil engineering at the University of Tokyo, Japan. His research interests are unconventional gas development, energy policy, CCS and minerals. He has published articles in international journals on fuel, energy policy, energy research, and marine and petroleum geology.

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Peter Wilkinson

General Manager, Risk Noetic Group

Peter Wilkinson is the General Manager, Risk in the Noetic Group. Mr Wilkinson spent 27 years in the UK Health and Safety Executive (HSE) regulating offshore and onshore oil and gas following the Piper Alpha disaster, including attending a subsurface blowout of a CSG well in the grounds of a hospital! His last four years in HSE were spent in Australia developing the National Offshore Petroleum Safety Authority (now NOPSEMA). From 20052009 Mr Wilkinson was on the leadership team of Caltex Australia, as General Manager Operational Excellence and Risk. Mr Wilkinson now consults internationally in mining and oil and gas including on the Montara blowout for former resources Minister Martin Ferguson, and for the US Government’s Chemical Safety Board over a four-year period on the 2011 BP Macondo Deepwater Horizon disaster. Mr Wilkinson is a Chartered Fellow of the UK Institution of Occupational Health and Safety, a member of the Society of Petroleum Engineers and sits on the Australian Government’s Nuclear Safety Committee.

Principal Consilium Consulting

Demus King

Demus King is the Principal at Consilium Consulting, establishing the business in 2016 following a 15-year career in the Australian Public Service. Between 2013 and 2016 Mr King was head of offshore resources, with policy and legislative oversight of Australia’s offshore petroleum regime. In this role he worked closely with state and territory governments and regulatory agencies, to deliver continuous improvement of the regime and cooperatively exercise regulatory functions under the Offshore Petroleum and Greenhouse Gas Storage Act, 2006 (OPGGS Act). Throughout his career Mr King has developed and implemented policy on: resources and energy trade and investment and geopolitical resources and energy issues; domestic energy security; and national energy market reform.

Paul Carter

Sales and Marketing Manager Upstream SGS Australia

Paul Carter has written three international bestselling books, including the famous (or should that be infamous?) Don’t tell mum I work on the rigs: she thinks I’m a piano player in a whorehouse. Mr Carter has sold over two million books worldwide and his first two books are currently being turned into a feature film. Mr Carter grew up in Aberdeen, Scotland’s oil capital, and moved to Perth at the age of 15. By the time he was 16, he was working on drilling tools. Mr Carter has clocked up 20 years of experience out in the field, working in Australia and far-flung destinations around the world, avoiding coups, jihadists and wars – all in the name of blessed hydrocarbons. Currently he’s the Sales and Marketing Manager Upstream for SGS Australia, based in Perth.

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AUTUMN 2016 // ISSUE 4

LNG PRODUCERS TO SHARE MAINTENANCE SCHEDULES

he Australian Competition and Consumer Commission (ACCC) has authorised three major Queensland LNG projects to share their maintenance schedules, providers, and techniques for five years. Australia Pacific LNG, Gladstone LNG, and the Queensland Curtis LNG Project will be allowed to share maintenance schedules with each other, but they will also be required to publicly disclose this information. The ACCC imposed this condition after it had been formulated in consultation with the LNG producers and market participants. ACCC Chairman Rod Sims said “Coordinating the maintenance undertaken at these facilities will increase the efficiency of these events and reduce the likelihood of major disruptions to domestic gas markets, which could occur if multiple maintenance events at the applicants’ facilities overlap.” The LNG producers’ facilities convert natural gas into LNG for export. Each LNG facility is connected to gas wells in the Surat and Bowen basins of Queensland. However, they also purchase gas in nearby wholesale markets. When the applicants’ LNG facilities are offline, they may redirect their gas to these wholesale markets for sale. The LNG facilities use very large quantities of gas and can have large effects upon the market price when their facilities are offline. Wholesale gas traders raised concerns that coordination between the LNG facilities would allow them to trade advantageously in gas markets, because each LNG facility will know when maintenance is going to occur. “These LNG producers can create significant volatility in domestic gas markets when they go offline for maintenance. This condition allows all market participants to know when maintenance is going to occur and to make sure that they aren’t exposed to unnecessary risk,” Mr Sims said. As part of its current east coast gas markets review, the Australian Energy Market Commission (AEMC) released a draft recommendation that the LNG producers be required to publish two-year forecasts of their facilities’ capacity and gas demand,

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including any scheduled downtimes. Submissions on the ACCC’s draft determination called for the ACCC to impose conditions on authorisation similar to the requirements in the AEMC draft recommendation. The ACCC decided this was not appropriate. In this case, the ACCC decided to keep the scope of the condition focused upon remedying information asymmetry issues about scheduled maintenance that arise from the proposed conduct. However, in response to submissions on the draft determination, the ACCC has amended the condition to ensure that information published by the LNG producers is updated if it changes. “Information is a crucial component for creating efficient, wellfunctioning markets and we understand why market participants want these LNG producers to provide more detailed information to all gas market participants,” Mr Sims said. “The AEMC is closely scrutinising the appropriate level of information these LNG producers should be required to provide to the market, and the ACCC considers that the AEMC’s review is the appropriate forum to assess these broader information transparency issues.” Authorisation is granted for five years, rather than the longer periods sought by the LNG producers. The evolving nature of the east coast gas markets gives rise to significant uncertainty about the impact of the proposed conduct on related markets. In these circumstances, it will be appropriate for the ACCC to conduct a review in the near future to ensure the ACCC’s assessment of benefits and detriments remains accurate, and in order to assess the effectiveness of the condition of authorisation. Authorisation provides statutory protection from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

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NEWS

LESS CSG WATER THAN ORIGINALLY ANTICIPATED

he Office of Groundwater Impact Assessment’s (OGIA) new report on the impacts of water extraction in Surat Basin CSG projects show Queensland CSG operations will produce 26 per cent less water over the life of industry than previously thought. The Underground Water Impact Report (UWIR) provides an assessment of the impacts of water extraction on underground water resources in Queensland’s Surat Basin. The report is based on three years’ worth of water-monitoring data from water bores. The Australian Petroleum Production and Exploration Association (APPEA) Government Relations Director, Eastern Australia, Chris Lamont, has welcomed the report’s findings. “The Surat area is arguably one of the world’s most-studied underground water systems,” Mr Lamont said. “This latest research shows the impact on underground water resources is well understood. It builds on the body of evidence that shows the industry is sustainable when properly regulated. “Around 97 per cent of water produced by CSG activity is put to beneficial use. Treated CSG water provided to farmers can reduce dependency on shallow groundwater resources and surrounding rivers for irrigation and livestock watering, and can also reduce overall demand on critical aquifers. Understanding groundwater systems through extensive monitoring is helping to ensure sustainability.” The report also found that of the 22,500 water bores in the study area (the majority privately operated), 469 may be affected by natural gas production, which represents an 11 per cent reduction on OGIA’s 2012 report. These bores, which produce saline water from the Walloon coal measures, represent 2.1 per cent of the 22,500 bores in the study area. Data was collected from 491 monitoring points.

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NEWS

POSITIVE OUTLOOK FOR ENERGY SECTORS

he future for Australia’s energy and resource sectors looks bright, with LNG export earnings predicted to increase by around 150 per cent, according to a new Resources and Energy Quarterly report. The report from the Chief Economist of the Department of Industry, Innovation and Science, highlights the essential role resources and energy play in Australia’s economy. The quarterly report predicts Australia’s resource and energy export earnings will grow by 30 per cent to $208 billion between 2015-16 and 2020-21. Notably, LNG export earnings are expected to increase by around 150 per cent to $42 billion. Further, iron ore export earnings are expected to increase by 29 per cent to $72 billion. At 926 million tonnes in 2021, this will account for 58 per cent of global iron ore trade. The report said Australia’s energy and resource sectors currently account for around 10 per cent of Australia’s economy and employ more than 300,000 Australians. Despite current challenges, mining sector employment is also more than twice the size today than it was before the mining boom. While acknowledging that current challenges remain, the report also highlights that consumption of most commodities is projected to increase, particularly as Asian economies urbanise. In the face of softer commodity prices, a lot of hard work has been undertaken to increase the competitiveness of Australia’s energy and resources sectors, and this should be acknowledged. Innovation plays an important role with research and development expenditure by resources and energy companies accounting for around 15 per cent of all such expenditure in Australia. As a result, we are seeing autonomous drills, trucks, and underwater vehicles being deployed on many Australian sites. Importantly, labour productivity increased by 33 per cent for the sector over the last two financial years. Boosting productivity has helped to ensure that Australia maintains its competitive edge through this challenging period. With commodity demand set to increase in the medium to long term, the future for these great Australian sectors continues to look bright.

JEMENA REDUCES SIZE OF NEGI

emena, the contractor for the North East Gas Interconnector (NEGI), has been forced to reduce the pipeline’s diameter, after gas developers were recently deterred by the Northern Territory Opposition’s lack of support for onshore drilling. Jemena won the contract in November 2015 with a plan to build a 14-inch diameter pipeline, but now the diameter has been reduced to 12 inches. Jemena’s Head of Business Development, Antoon Booey, said, “There just isn’t enough gas to justify anything bigger than a 12-inch pipeline at this stage. “When we were awarded the business in November last year we had an expectation there would be more gas available to be transported, but since late last year there’s been a real lack of interest to contract with us for gas transportation agreements.” In early 2016, Northern Territory Opposition Leader Michael Gunner announced that a moratorium on fraccing within the territory would go into effect should his party be elected into power. Mr Gunner said the moratorium would stay in place until the Labor Government could determine the full implications of hydraulic fracturing. The proposed moratorium has been heavily criticised by key industry players, including the Australian Petroleum Production and Exploration Association (APPEA) due to the impact it would have on projects, including the NEGI pipeline. NT Chief Minister Adam Giles expressed his concerns when the moratorium was announced. “Labor’s ban threatens the $800 million gas pipeline to the east coast, and the 900 jobs it will create by robbing the pipeline of gas it needs to be viable.” Mr Booey said it was hard to say how much Labor’s support for a moratorium on fraccing caused gas developers to be reluctant to commit to using the pipeline. Mr Booey said gas developers “need to get their act together and start producing enough gas” for the pipeline, but Jemena is still confident of its success in the long term. The order for the pipeline was made with suppliers on April 1.

WELLDOG AWARDED MAJOR CSG CONTRACT

ellDog has inked exclusive, multi-year contracts worth approximately $35 million through its Artificial Lift business unit based in Toowoomba, Queensland. The contracts commit the company to providing cost effective, downhole progressing cavity pumping (PCP) system equipment, as well as technologies to extend pump lifetime, to coal seam gas operators active in the Surat and Bowen basins. “Frequent workovers caused by heavy solids production and pump failure have plagued CSG since it started,” said WellDog CEO John M. Pope. “Our solids management technical products have been proven over the past few years to provide a step change increase in pump lifetime. “The pump, which was developed by Baker Hughes and features an elastomer designed for Queensland coal seam gas applications, should further increase pump performance and reliability substantially.

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“We’re pleased to see these advanced technical solutions being adopted by the CSG industry.” The contracts were awarded by multiple operators via competitive tender processes that attracted the world’s top artificial lift equipment and service providers. WellDog submitted the winning bids in partnership with Baker Hughes, its key artificial lift provider. Baker Hughes is a global leader in artificial lift systems and services for the oil, gas, and water production markets.

Correction In the Summer 2016 edition of Unconventional Oil & Gas, in the article Evaluation of thermal maturation (rank) of sedimentary rocks – more than just vitrinite reflectance, there was in error in Figure 1. The left and right hand images were published the wrong way around. We apologise for this oversight.

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MULTIDISCIPLINARY GROUP 30 YEARS IN THE MAKING Delivering value to the industry, based on history, experience and exceptional service, was the impetus behind the creation of Valmec in 2012, a multi-disciplinary construction and maintenance service provider in Australia.

he founding directors and shareholders of the Valmec group all share their heritage from working at hps, a Western Australian SME they established in 1988. In 2005, the company was acquired by Enerflex, a global supplier of compression and processing equipment. Market rationalisation and the growth of existing players during the resources boom created a vacuum within the market for small to medium sized contractor offerings, and the impetus for the establishment of Valmec emerged. Through acquisition and development of internal capabilities in structural, mechanical and piping (SMP) and electrical and instrumentation (E&I), utilising known experienced personnel resources, the company quickly started to undertake remote area works for major resource and mining companies. This multidisciplinary combination, with a core lean offering to a market that was starting to pursue value, as opposed to capacity, led to a rapid growth in order book and backlog. In 2013 the company listed on the Australian Stock Exchange under the name Valmec (ASX:VMX), funding future project delivery and growth. “Any service company, especially in a business-to-business offering, is heavily dependent upon its people for success and client satisfaction,” said Steve Dropulich, Managing Director of Valmec Australia. “We always had a deliberate strategy of providing the best value solution to our clients, operating with lean overheads. Having culturally aligned and experienced people is key to our success.” In 2014, Valmec announced the strategic acquisition of Exterran (Australia) Pty Ltd, the Australian service and maintenance arm of Exterran Corporation, the world’s largest packager of gas engine driven reciprocating compression. With access to Exterran compression and processing equipment, and the acquisition of new service capabilities, the Valmec management team is confident that it can

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replicate the success achieved through the hps journey, even within current market conditions. “We did it once before and we are confident we can do it again,” said Mr Dropulich. “This time we have the benefit of experience and client feedback from the first time. Our company continues to secure numerous contract awards, and is now able to provide the market with a genuine alternative for their ongoing service and maintenance needs, having access to OEM parts, technology and trained technicians. Clients also like the fact that we are Australian-owned, with easy access to management, and a non-combative approach. Today Valmec continues to establish itself with clients across Australia for projects being delivered up to $50 million in size. The more remote, complex, interface rich and technical in nature, the better the fit for the Valmec offering. “We don’t intend to be all things to everyone,” said Valmec Director, Oil and Gas, Kelvin Andrijich. “We are very flexible in our offering and our contract models. We work with partners for engineering capabilities, and for our projects outside of Western Australia, for civil and earthworks capabilities. Our lean model allows us to comply to the requirements of the Tier One oil and gas and resources companies, yet remain competitive in the fit-for-purpose demands of utilities, Tier Two producers and general contracting services. “Our service contracts and frame agreements vary from thousands through to millions of dollars per year. We can provide a certified technician or a complete site maintenance and operations support service. We are changing the traditional model of service work from “do and charge”, to fixed price work offerings where it makes sense. Many of our clients want this certainty, and a willingness from their service provider to back their own efficiency and competence. It has been a successful move for us to date.” In Western Australia, the company has also diversified heavily into the civil and

infrastructure space, undertaking works for local councils, land subdivisions and roads, through to non-process infrastructure and turnkey solutions for the resources sector. “Our civil and underground services works are bid and won in a highly competitive, almost commoditised industry,” said Valmec Executive Director Vince Goss. “This competition and culture keeps us lean in delivery, yet allows us to work in the more complex and remote area industrial projects. “We also have an Indigenous partnership with Aboriginal building and maintenance services group, Pindari, a past winner in the WA Excellence Awards, which provides an excellent offering to Pilbara operating businesses and engineering alliances for the emerging design and construct project market.” Geographically, Valmec covers almost the entire map of Australia between service and project delivery and established operational facilities and offices. “Our clients in South Australia want to work with companies that support the local state industry,” said Mr Dropulich. “We saw the opportunity in that state and have based our group Valmec Services General Manager, Brad Lucas, in Adelaide. Brad brings a wealth of service and maintenance experience to Australia and puts Valmec on the doorstep of the South Australian oil and gas industry, while also providing easy access to the onshore upstream developments along the eastern seaboard.” Going forward, Valmec looks to continue its “clients for life program”, and to progressively and sustainably expand the business in line with client demands and needs. “It is amazing to look at the experience of our people and how many projects across sectors and industries they have worked in,” said Mr Dropulich. “It is people that deliver projects and services, and while we are quite a young company in name, we have hundreds of years of collective experience, many of these working together and not just individually.”

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A CATALYST FOR INNOVATION AND NEW PARTNERSHIPS New developments and exploration opportunities will feature strongly at the APPEA 2016 Conference and Exhibition, being held in Brisbane from 5-8 June.

rganised by the industry for the industry, this is the Southern Hemisphere’s largest oil and gas conference. It will attract thousands of participants and visitors from around Australia and across the globe. Senior executives and leading analysts will discuss the major issues confronting the oil and gas sector in this challenging era. APPEA Chairman Bruce Lake said the APPEA Conference and Exhibition remains the best forum for examining the issues currently facing the upstream petroleum industry, and tough times make the event more important than ever. “The best companies use hardship as a catalyst for innovation and forming new partnerships,” Mr Lake said. “Hence the conference theme – ‘Competing for Growth’. At APPEA 2016, industry professionals can network, do business, share ideas and learn about new technologies and case studies that point the way forward.” The Conference will examine oil and gas projects, technologies, trends and opportunities across Australia. International experts and local industry executives will provide up-to-date analyses, case studies and technical know-how on the big issues. In addition, politicians, executives and analysts will discuss policy concerns and opportunities for reform. “This is our strongest platform for conveying the industry’s key messages to politicians and

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the media,” Mr Lake said. Key plenary sessions at APPEA 2016 include the opening session, with its focus on the Conference theme. This plenary will feature high-powered addresses from the Queensland and Australian governments, highlighting their roles in facilitating the industry’s growth and plans for the future. The Tuesday morning plenary, The Future of Energy, will examine how changes in global energy markets are creating threats and opportunities for oil and gas producers. Speakers include: ♦♦ Woodside Chief Executive Peter Coleman ♦♦ University of Western Australia Professor Peter Hartley ♦♦ McKinsey Managing Partner John Lyden ♦♦ KPMG US National Sector Leader for Energy Regina Mayor. The Wednesday morning plenary – Technology and Innovation – will examine how technological change is reshaping energy production, and how innovation can help the oil and gas sector boost its competitiveness. The closing plenary – at 2.30pm Wednesday – is a panel discussion on stakeholder engagement. This is one of the key issues and main pressure points for the oil and gas industry. APPEA expects a particularly strong turnout for this session. Speakers include GasFields Commission Queensland Chairman John Cotter, Oil Search Managing Director Peter Botten and

Broadspectrum Limited Chairman Diane Smith-Gander. The concurrent sessions will also provide plenty of interest. Concurrent presentations include: ♦♦ AWE General Manager, Exploration and Geoscience Neil Tupper on the Perth Basin’s Waitsia field (Monday 2pm) ♦♦ Wood Mackenzie Australasia upstream oil and gas research analyst Saul Kavonic on The death of Australian LNG - and how to bring it back to life (Tuesday 3.45pm) ♦♦ Oil Search Executive General Manager Exploration and New Ventures Keiran Wulff on PNG’s untapped potential (Wednesday 11.15am). The Wednesday morning session will focus on Market developments and the fall of the global oil price. Presentations in this session will examine the US influence on global oil and gas prices; changes in LNG sales and marketing; pressure for LNG price reviews; and the impact of LNG on the eastern Australian gas market. The APPEA Conference remains a key conduit for oil and gas information and analysis, and a critical networking point for anyone involved in the industry.

For more information see www.appeaconference.com.au.

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The Australian Petroleum Production & Exploration Association presents

Where the world meets Australian oil and gas

APPEA 2016

5 6 TH C O N F E R E N C E A N D E X H I B I TI O N 5 â&#x20AC;&#x201C; 8 JUNE BRISBANE AUSTRALIA Largest annual upstream event in the Southern Hemisphere Organised by the industry for the industry Networking and business development Technology and innovation International attendees from +30 countries PRINCIPAL SPONSORS

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INTERVIEW

JOSH FRYDENBERG: He’s the Liberal rising star who’s popular across party lines, with a reputation for his considerable work ethic. He’s been touted as a potential future Prime Minister, and currently, he’s our newest Federal Minister for Resources. Unconventional Oil & Gas Managing Editor Laura Harvey recently caught up with Josh Frydenberg to learn about his plan to breathe life back into the oil and gas industry.

osh Frydenberg assumed the role as Minister for Resources, Energy and Northern Australia in September 2015, capping off an impressive rise through the Liberal Party ranks. Prior to being elected to office, Mr Frydenberg undertook his political apprenticeship by completing stints as a ministerial adviser to former Foreign Minister Alexander Downer and former Prime Minister John Howard. When Mr Frydenberg was elected to the blue ribbon seat of Kooyong in Victoria in 2010, he became only the seventh person in the history of Federation to hold the seat – an honour that, quite clearly, isn’t bestowed on just anyone. Since then, his journey towards the resources portfolio has been rapid. By September 2013, he was appointed to the government’s front bench as the Parliamentary Secretary to the Prime Minister; and by December 2014, Mr Frydenberg was appointed to the ministry as Assistant Treasurer. In September 2015, Mr Frydenberg was appointed Minister for Resources, Energy and Northern Australia. Away from politics, Mr Frydenberg’s achievements are many. He’s a Harvard graduate and an Oxford scholar; he’s held senior roles in the banking and legal sectors; he spent a gap year playing tennis professionally; he’s even spent a month working as a jackaroo on a sheep station in South Australia. Highly ambitious and with a huge appetite for hard work, he is, quite frankly, not a bad player to have going in to bat for your team. And in his current role as Resources Minister, that’s exactly what Mr Frydenberg is setting out to do. He comes to the resources industry in one of the most challenging periods the industry has ever faced – the crash in oil price has sent huge shockwaves through the industry, massively halting exploration and production activity. Add to the mix moratoria in Victoria and New South Wales, which are effectively shutting those states out of business, and you have an operating environment that is highly complex.

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Minister Frydenberg tours the APLNG facility.

But Mr Frydenberg has given himself a clear mandate. He wants to be known as a Resources Minister who is an advocate for the industry – by educating Australians about the importance of oil and gas to our economic livelihood; by maintaining Australia’s openness to foreign investment; and by making sure the community is fully aware that unconventional gas extraction cannot only be environmentally sustainable and responsible, but is also vitally important for future gas supply in this country, and for our economic development and growth. Here’s how he plans to achieve it.

A conventional approach to unconventionals In the eight months since he assumed the resources portfolio, Mr Frydenberg has undertaken an extensive tour of many of the country’s biggest oil and gas projects (he’s seen the CSG-LNG mega projects at Gladstone, as well as the Gorgon and Darwin WWW.UNCONVENTIONALOILANDGAS.COM.AU

INTERVIEW

BREATHING LIFE BACK

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INTERVIEW

“I’m going to focus on working closely with the industry and stakeholders to put the facts on the table about why this sector is important to Australia, from an economic perspective and from an energy supply perspective.”

LNG projects). He’s also represented the industry at a number of global energy events, and he has openly staked his claim as being pro-unconventional resources. “I do strongly support the unconventional gas sector; the reality is, 40 per cent of the eastern seaboard gas market is supplied by unconventional means, and the vast majority comes from one state, namely Queensland.” Mr Frydenberg has quickly come to grips with one of the biggest challenges facing the unconventional industry – community concern about extraction techniques, and the low oil price environment the industry is currently operating under. “I see the pressure being put on companies by groups like Lock the Gate. We have to ensure the facts are on the table regarding the importance of unconventional gas to the Australian gas supply market. “I am listening to the concerns raised by particular groups – they raise legitimate

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issues that do need to be addressed. It’s fair to say in the early stages of the industry, there were some cowboys, and they’ve created a bad name for certain companies and indeed the industry. “Those cowboys have been pushed out of the sector, and now there’s a lot of legitimate and responsible activity taking place, and I think a lot of the processes – community consultation, cooperation with farmers, and environmentally sustainable extraction methods – have all been improved considerably. “A key message I’m going to focus on is working closely with the industry and stakeholders to put the facts on the table about why this sector is important to Australia, from an economic perspective and from an energy supply perspective. I’ll also be explaining how this can be done in an environmentally sustainable way.” Mr Frydenberg notes that in Queensland, more than 5,000 land access agreements

between the landowner and companies have been successfully negotiated, amicably. “As I saw firsthand on a trip to the Western Darling Downs, agriculture and unconventional gas wells can coexist effectively.” The next step will be helping other states come to this conclusion. On the subject of the moratoria currently in place in New South Wales and Victoria, Mr Frydenberg says he is concerned by what he has seen. “I’ve been troubled by the moratoria that have been put in place in Victoria and New South Wales when it comes to unconventional gas – and it should be said that they’ve received bipartisan support in the states – because I see a real issue down the track with the ability for unconventional gas extraction to take place. “I’m hoping to see more production, and more exploration. We’re so reliant on Queensland at the moment, and I hope

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INTERVIEW

Mr Frydenberg expects the LNG industry to continue to deliver strong returns for Australia.

that’s not the case going forward – I hope unconventional exploration will develop in other states, and I hope it’s done in a way that is compatible with the local environment and local community.”

A measured approach Mr Frydenberg comes to the resources portfolio from his previous position as Assistant Treasurer, so it should come as little surprise that he intends to bring a strong economic focus to his work in the resources sector. “I came from the role of Assistant Treasurer, so I bring an economic focus to the portfolio,” said Mr Frydenberg. It’s for this reason that he’s keen to see exploration return to the more robust levels we’ve become used to seeing from the industry. “I think Australians benefit through increased supply and lower prices, for both households and commercial businesses. Lower energy prices mean more

economic activity and more job creation, and I will continue to make the case for environmentally sustainable unconventional gas extraction around the country.” Having trained as a lawyer, this is also having a clear impact on his current role. Given his background in the legal world, it’s perhaps unsurprising that Mr Frydenberg believes the answer to the emotive arguments against the development of unconventional resources is rooted firmly in cold, hard, scientific facts. Mr Frydenberg believes the key to overcoming the emotion that is dominating the conversation around unconventional gas exploration is through Commonwealth agencies such as CSIRO, and industry associations such as the Australian Petroleum Production and Exploration Association (APPEA). “Groups like the CSIRO have an important role to play here. They’re a credible organisation who can put the science on the

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table and I think that’s really important. “Through the COAG Energy Council, I’ve also asked APPEA to collate a lot of data about wells, land access agreements, and how farmers and companies can work cooperatively, and I think putting that information out there will be pretty useful.” The science around unconventional exploration is also something Mr Frydenberg wants to promote, and for the industry to better utilise, when it comes to identifying targets to explore. “One of the things I’m focused on is leveraging off Geoscience Australia, and the material they provide. The Browse Basin and Olympic Dam – the development of these have been the product of data produced by Geoscience Australia. “I’m looking to continue the provision of geoscience data to companies to assist their exploration and to provide for further exploration going forward.”

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INTERVIEW

“I’d like my mark on this sector to be the promotion of innovation and technology in the sector, as well as improving the level of understanding within the broader community about the importance of the energy sector to Australia, in terms of export earnings, employment, economic growth and productivity.” Innovation agenda The need for the industry to have its roots firmly in science and fact segues well into the focus for the current Coalition Government on innovation. Prime Minister Malcolm Turnbull is advocating heavily for Australia to become the “innovation nation”, and according to Mr Frydenberg, the oil and gas industry is a prime breeding ground for the kind of innovation that the country needs moving forward. “What I’ve enjoyed about this role so far is getting an appreciation for the innovation and the size and the scale of the industry. “Innovation is absolutely the future for the oil and gas industry. It’s key to productivity, it’s key to environmental sustainability and it’s key to global competitiveness.” Mr Frydenberg notes that it’s important to realise we’re not the only country in the world that produces gas – and the cost of production is a relevant factor when companies, be they Australian or multinational, are looking for places to invest. “The only way we can stay ahead of our competitors is through innovation, technological proficiency and having a skilled workforce – all of which I think we do very well.” Mr Frydenberg argues that our innovation is what has allowed us to attract so much foreign investment to the CSGLNG industry in Queensland. “In order to continue to attract investment of this magnitude, we need to continuously evolve and innovate to stay ahead of the curve.”

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Mr Frydenberg firmly believes the agricultural and CSG industries can happily coexist.

Leaving his mark on industry For My Frydenberg, his first eight months in the resources portfolio have been a busy and challenging learning curve, and he’s set himself some lofty future goals. “I’d like my mark on this sector to be the promotion of innovation and technology in the sector, as well as improving the level of understanding within the broader community about the importance of the energy sector to Australia, in terms of export earnings, employment, economic growth and productivity. “At the same time I would like all Australians to be very proud of the fact that we’re dominant internationally in the energy space, and that we lead the world when it comes to environmentally sustainable, innovative practices with our skilled workforce. “I would like to continue to promote the importance of foreign investment in Australia. We need to recognise that the development of our resources depends to a large extent on foreign investment. I’m very focused on ensuring that Australia is very welcoming of investment, and I want to facilitate that, particularly at a time where there are some pricing challenges in the sector which mean that exploration is not at the same level as its previous highs. “And I want to make Australians fully aware that unconventional gas extraction cannot only be environmentally sustainable and responsible; but it’s also vitally important for future gas supply in this country, and for our economic development and growth.”

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INTERVIEW

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NORTHERN TERRITORY

NEW TERRITORY FOR UNCONVENTIONAL

OIL AND GAS

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NORTHERN TERRITORY

The Northern Territory has large potential unconventional hydrocarbon resources within a number of basins. The underexplored nature of some of these basins means that the full extent of the Northern Territoryâ&#x20AC;&#x2122;s unconventional resources is yet to be quantified â&#x20AC;&#x201C; current estimates may just be scratching the surface. Recent years have seen a rapid uptake of acreages in the Territory, with many in the industry betting on the Territory as a likely hotspot for future unconventional oil and gas development. A number of projects are also underway to benefit the industry, including the planned construction of the NEGI pipeline, which will link NT gas to the eastern gas markets.

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NORTHERN TERRITORY

he Northern Territory’s unconventional oil and gas industry is still at a relatively early stage of development. However, potential unconventional oil and gas resources – including shale oil and gas, tight oil and gas, and coal seam gas – are thought to exist in basins around the territory, including the Georgina Basin, the McArthur Basin/Beetaloo Sub-basin and the Amadeus Basin. While many NT basins are underexplored, the 2015 unconventional gas resources assessment from the COAG Energy Council’s Upstream Petroleum Resources Working Group provided a best estimate of 257,276PJ of prospective unconventional gas resources across the Territory. The Georgina Basin is a large frontier basin that straddles the Northern Territory/ Queensland border and is thought to contain potential shale gas, shale oil, tight gas and tight oil resources. Although many areas of the basin remain too under-explored to adequately

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assess resource potential, the EIA has assessed oil and gas resources for two prospective areas in the basin: an eastern region covering the Dulcie Syncline and surrounding area, and a western region covering the Toko Syncline and surrounding area. The total risked wet and dry shale gas in-place in both areas was estimated at 67Tcf, with a risked, technically recoverable shale gas resource of 13Tcf. Total risked shale oil and condensate in-place was estimated at 25 billion barrels, with a risked, technically recoverable shale oil and condensate resource of 1 billion barrels. The McArthur Basin is a large basin covering an area of approximately 180,000 square kilometres. While still considered a frontier basin, the McArthur Basin is thought to have very high unconventional gas and oil potential, particularly in thick black shale units in McArthur Group (Barney Creek Formation) and Roper Group (Kyalla and Velkerri Formations). The broader McArthur Basin is thought to hold at least 240Tcf of potentially

recoverable gas. However, the commercial viability of these resources is yet to be proven. The most well-characterised areas in the McArthur Basin, and those which have probably received the most interest with regards to unconventional hydrocarbons, are located within the Beetaloo Sub-basin. The Beetaloo Sub-basin is considered prospective for shale and tight oil and gas, and is considered by some within the industry to be one of the most promising shale plays in the country. The EIA estimates that the Beetaloo Sub-basin contains 194Tcf shale gas in-place and 93 billion barrels of shale oil/ condensate. This includes 94Tcf shale gas and 28 billion barrels shale oil/condensate from the Middle Velkerri Shale and 100Tcf shale gas and 65 billion barrels shale oil/ condensate from the Lower Kyalla Shale. The risked recoverable amounts are 44Tcf shale gas and 4.7 billion barrels shale oil/ condensate. A number of exploration activities are underway in the sub-basin to determine

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NORTHERN TERRITORY

McArthur Basin

Wiso Basin Current shale gas exploration activity

Beetaloo Sub-basin

Georgina Basin

Current shale gas & oil exploration activity Potential shale oil/gas basins

Amadeus Basin

Reproduced with the permission of Geoscience Australia

Map of the Northern Territory and its oil and gas basins.

whether these resources are suitable for commercial development. The Amadeus Basin covers approximately 170,000 square kilometres in central Australia, most of which lies within the southern Northern Territory, with the remainder in Western Australia. The basin has a number of producing conventional oil and gas fields. Due to the inaccessible and under-explored nature of some areas of the basin, the basin’s overall unconventional resource potential remains unassessed. However, a number of estimates for different formations or permit areas in the basin have suggested it has significant potential shale and tight gas resources. Other basins within the NT that are thought to have unconventional hydrocarbon potential include the Eromanga Basin (potential shale gas), onshore areas of the Bonaparte Basin (potential tight and shale gas), the Mount Isa Superbasin (potential shale gas), the Ngalia Basin (potential tight gas), the Wiso Basin (potential shale gas) and the Pedirka Basin (potential shale gas and CSG). According to the EIA, the NT also has the potential for the oldest producing hydrocarbon source rocks in the world, if the oil and gas shows reported in shale exploration wells drilled in the PreCambrian shales in the Beetaloo Sub-basin and the Middle Cambrian shale in the Georgina Basin prove to be commercial. Recently, an independent assessment by SRK Consulting, undertaken for Armour Energy, saw a significant increase in overall estimated resources in the Northern Territory, including unconventional

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resources. The update included maiden prospective gas resources from the Tawallah group unconventional reservoirs in the McArthur Basin of the Northern Territory. This finding supports the idea that the NT’s prospective resources are likely much greater than previously thought.

Exploring unfamiliar territory Many of the Northern Territory’s basins represent largely uncharted territory for oil and gas explorers, having undergone limited exploration in the past. Furthermore, many of the basins cover extremely large areas, and even those like the Amadeus Basin, which contains producing conventional oil and gas fields, have other unexplored areas. Throughout the Territory’s basins, various companies are in the process of collecting seismic data, quantifying hydrocarbon resources and evaluating their suitability for future development. According to the COAG Energy Council Upstream Petroleum Resources Working Group: “The rapid uptake of acreage in the Northern Territory is an indication of the interest in the prospectivity of the basins in this region. There have been widespread indications of petroleum during petroleum and stratigraphic drilling, and mineral exploration over many years. Some operating companies are currently following up these indications, notably Armour Energy in the Glyde Sub-basin of the McArthur Basin. Santos, Origin Energy and Sasol, and Pangaea Resources are actively investigating shale plays in the Beetaloo Sub-basin.” In the NT sections of the Georgina

Basin, companies including Baraka Energy & Resources, Central Petroleum and Armour Energy are currently active. Central Petroleum is currently in negotiations for EP(A)132. Formerly, a joint venture between Statoil Australia Oil & Gas, Baraka Energy & Resources Ltd and PetroFrontier Corporation was undertaking a significant exploration campaign in the NT Georgina Basin, focusing on EP127, EP128. However, while Baraka Energy & Resources is renewing its interest in EP127, Statoil and Petrofrontier have decided to withdraw from the basin. The process of transferring ownership of the permit to provide Baraka with a 100 per cent equity position is currently underway. Companies active within the Beetaloo Sub-basin include Falcon Oil and Gas, Hess, Origin, Pangaea Resources and Sasol Petroleum. A joint venture exploration project, the Beetaloo Basin Project (Origin, Sasol and Falcon Oil & Gas JV), is undertaking significant exploration activities. Other companies such as Paltar Petroleum, Sweetpea Petroleum and Tamboran also hold titles in the basin. Additionally, American Energy Partners (AEP) and Energy & Minerals Group (EMG) have recently farmed into Beetaloo acreages. Meanwhile, present in the broader McArthur Basin are companies including Armour Energy, Santos, Origin Energy, Sasol Petroleum Australia, Pangaea (NT), Imperial Oil and Gas, Inpex Oil and Gas Australia. The main companies currently active

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NORTHERN TERRITORY

within the Amadeus Basin are Central Petroleum, Santos and Mosman Oil and Gas. The Southern Amadeus Joint Venture between Central Petroleum and Santos is currently collecting large amounts of seismic data on the basin. Meanwhile, Mosman owns and operates two granted permits in the basin (EP 145 and 156) and one application (EPA 155), and is currently in the process of evaluating their potential resources.

Spurring on NT development In addition to its promising potential unconventional basins, a number of projects and programs to encourage investment in the oil and gas industry, and a relatively favourable regulatory environment, add to the Northern Territory’s attractiveness to unconventional oil and gas players. According to the recent Fraser Institute Global Petroleum Survey, the Northern Territory is rated one of the most attractive jurisdictions in Australia (and ranked 34th worldwide) due to factors including relatively attractive fiscal terms, a relatively stable regulatory environment, and Australia’s most favourable labour regulations. In 2014, the Northern Territory Government commissioned a review into the practice of hydraulic fracturing, which found that the industry could be developed safely and effectively with the right regulation and would bring significant economic benefits to the territory. In November 2015, the government released its Oil and Gas Industry Development Strategy outlining its plans to foster development of the territory’s hydrocarbon resources. The four main priorities focused on in the report include increasing awareness of and access to the Northern Territory’s oil and gas resources; the capital, development pathways, and market access needed to bring new resources into production; balanced legislation and regulation; and a competitive, highly skilled, local gas supply and service sector. The government has also recently granted a number of new PEL applications throughout the state. One major project that is encouraging renewed interest in both conventional and unconventional NT gas development is the North East Gas Interconnector (NEGI) Pipeline, intended to connect NT gas to the eastern gas markets. While the gas market within the Northern Territory is quite small, this pipeline will ensure a market for NT gas interstate. However, Jemena, the contractor for the project, recently decided to reduce the

pipeline’s diameter due to lack of contracts for gas supply. Jemena’s Head of Business Development, Antoon Booey, told journalists that “there just isn’t enough gas to justify anything bigger than a 12-inch pipeline at this stage.” However, he also stated that the project was the first step of what would hopefully be a much larger pipeline eventually. Industry speculation suggests that the lack of commitment to supply contracts may be partly due to increased regulatory uncertainty in the territory, following the announcement by Northern Territory Opposition Leader Michael Gunner that a moratorium on fraccing would go into effect should his party be elected into power.

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Mr Gunner said the moratorium would stay in place until the government could undertake a review to determine the full implications of hydraulic fracturing. Nevertheless, the Northern Territory remains a promising region for unconventional oil and gas development. As additional data is gathered on its basins and the full scope of its potential resources is discovered, we will be a step closer to determining whether we are likely to see unconventional oil and gas flowing from NT basins in the near future. If the NT’s unconventional resources are proven to be commercially viable, their development may become less a question of ‘if’ and more a question of ‘when’.

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INFORMATION AND COMMUNICATIONS TECHNOLOGY

RE-ENERGISING THE INDUSTRY WITH DIGITAL TECHNOLOGIES by Nicholas Heyes, Unconventional Oil and Gas Lead Australia and Asia Pacific, Accenture How do upstream oil and gas companies survive the steepest decline in oil prices the industry has seen in decades? The economics of unconventional fields have always been more challenging than traditional oil and gas plays, but given the very nature of unconventional development and production, digital technologies can make a more significant impact.

espite taking many severe actions, it’s clear that oil companies cannot cut their way to growth. After a two-thirds drop in oil prices, established oil companies of all types are struggling to survive with their current organisational structures, technology footprints and ways of working. Whilst unconventional companies have been at the forefront of innovation, identifying new development and production technologies and driving new working practices, the next wave of innovation will now be driven by digital. An analysis done for a large unconventional gas operation identified more than $100 million of cost savings, representing an OPEX reduction of

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more than 20 per cent, through the use of analytics, IoT, wearables, drones and mobile technologies, to completely change the face of how a large field with thousands of wells could be operated and maintained. Digital technology provides a way not only to help re-energise these companies today, but it will enable a path to completely redesign processes, and indeed the structure of these organisations, to be even more efficient in the future. And these digital investments are starting to pay off: More than half of the respondents to the 2016 Upstream Oil and Gas Digital and Technology Trends Survey said digital technologies have already added high to significant value. Respondents also credited digital with workforce productivity (59 per cent), such as helping companies reduce

costs, make faster and better decisions and increase workforce productivity. Take the rise of cloud computing, for example. It provides a relatively inexpensive way to harness volumes of data and take advantage of “as-a-service” solutions. In the past, the cloud was employed mainly for cost reduction in IT infrastructure, but it now has become an enabler to more quickly unlock the value that broader digital solutions can provide. More than half of the digital trends survey respondents (56 per cent) said they plan to use the cloud to enable analytical capabilities in the next three to five years. Unconventional oil and gas companies that quickly adopt cloud solutions will accelerate this and other value that digital solutions can deliver.

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INFORMATION AND COMMUNICATIONS TECHNOLOGY

Will it be the large oil companies that capitalise on digital technologies and achieve even greater milestones, or will it be smaller, more nimble competitors?

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INFORMATION AND COMMUNICATIONS TECHNOLOGY

Digital technology provides a way not only to help re-energise these companies today, but it will enable a path to completely redesign processes, and indeed the structure of these organisations, to be even more efficient in the future. An even larger group in the survey (72 per cent) said cost reduction is important or the most important challenge that digital can help address. Data gathered and presented in real time, for example, is a key way to create cost reduction and efficiencies. Field workers to executives are increasingly able to find information instantly at their fingertips to see how their well, asset or company is performing, right down to details of each oil well’s production. In the past, it would have taken days, even weeks to access this information, often too late to take meaningful action. But to realise the full beneﬁt of digital, companies will need to rapidly improve. While 36 per cent of the digital trends survey respondents said they are investing in big data and analytics, only 13 per cent feel that their company’s analytics capabilities are sufficient. To raise their digital game, unconventional oil and gas companies need to rapidly develop more capability and leverage external services and platforms. Over the next three to five years, the survey showed that the majority of the digital investments by upstream oil and gas companies will shift to focus on analytics and IoT, with the largest percentage

increase in emerging digital technology areas such as robotics, wearables and artificial intelligence. As oil and gas companies gain insights from this data, they will find new ways to manage their operations and back office functions, and they will rethink how they are organised to leverage technology and how they partner with oilfield services companies. In particular, digital technologies open up the ability for unconventional oil and gas companies to collaborate much more effectively in a basin – this is a major source of value for them which to date has remained relatively untapped. Will it be the large oil companies that capitalise on digital technologies and achieve even greater milestones, or will it be smaller, more nimble competitors? Time will tell, but one thing we know about the oil and gas patch, particularly in unconventionals, is that we are continually pushing the barriers of possibility and fearlessly innovating to bring oil and gas to the world. We always learn from the past to shape the future. Tomorrow will be no different: digital technologies are the next big thing. They will change the game on the never-ending path to lower cost oil and gas production.

The 2016 Upstream Oil and Gas Digital and Technology Trends Survey was sponsored by Accenture and Microsoft and conducted by PennEnergy Research in partnership with the Oil & Gas Journal.

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8.27

TECHNICAL

SHALE RESOURCE DEVELOPMENT POTENTIAL: THE AUSTRALIAN CONTEXT

by Navinda De Silva, Stefaan Simons and Paul Stevens, University College London (UCL), Australia The current low oil price environment is proving to be a considerable challenge to the development of a shale industry in Australia. Here, we take a look at some of the factors that will need to fall into place to see a shale revolution kick off in Australia.

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TECHNICAL

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TECHNICAL

he outlook for shale resource development in regions other than the US has substantially downgraded over the last two years due to the drastic decline of oil prices. In an Australian context, there was the hype of developing seven new LNG plants and the prompt need for more gas, with New South Wales projected to run out of gas by 2017. Also, many manufacturing industries highlighted the potential for the rapid increase in gas prices to export parity levels, with the expiration of a majority of long-term contracts in 2017 leading to challenges for those in manufacturing, as these industries have to compete with the demand for LNG from international gas markets including premium Asian markets. Since the Fukushima disaster in Japan in 2011, there has been a strong demand for Australian natural gas resources with the long-term contracts based on the oil-linked gas prices. This anticipated gas demand has led to increased interest in all natural gas resources, including onshore shale resource development as a potential resource to fulfil the demand for more gas – simultaneously leading to lower development costs. With seven proposed LNG plants, Australia was touted as the most probable country to develop shale gas resources. However, since the second quarter of 2014, oil prices have substantially declined, from around $110 per crude oil barrel to around $30 per crude oil barrel in January 2016 (at the time of printing, crude oil prices had risen back above $40 per barrel). Further, shale resource development is associated with the added costs of hydraulic fracturing, high drilling costs and technical challenges due to low permeability. This has substantially hindered the positive outlook of high-cost oil and gas resources development plans in regions other than the US. Traditionally, Australian long-term LNG contracts are associated with the Asian markets, and are based on oil-linked prices. Therefore, only cheaper resources will be exploited in the short to medium term, given that Australian LNG resources are already among the highest cost-based LNG resources. As described by Stevens et al in 2013, Australian shale resource development is challenging due to geology, environmental concerns, social licence to operate, service capacity limitations, environmental regulations and pipeline access concerns. Policy based solutions have been suggested to address the above challenges and encourage shale resource development in Australia. However, slow progress has been noted for all the above elements.

Table 1 shows the comparison of Australian context compared to the US context of a shale revolution. Since 2013, progress has mainly been in terms of setting up a voluntary trading platform to trade excess pipeline capacity. Thus, the Wallumbilla hub in Queensland has been set up to voluntarily trade excess pipeline capacities, enabling the use of unused pipeline capacity. This contributes to the development of a wholesale gas market by simplification of transactions. This will increase third party access to gas pipelines in other states, though a common carriage policy is not implemented in other states aside from Victoria. The common carriage access policy will become an important consideration to encourage shale resource development activity. Another notable development is the establishment of public disclosure legislation in Western Australia, to regulate the disclosure of all chemicals used in oil and gas development activities. Table 1. Comparison of shale gas characteristics of the US and Australia.

Characteristics

AUS

Favourable geology

Yes

Lots of drill core data to help identify “sweet spots”

Yes

Weak environmental regulation for fraccing

Yes

Depends on the state

Tax credits + intangible drilling cost expensing

Yes

Property rights to the landowner

Yes

Pipeline access very easy – large network + common carriage

Yes

Depends on the state

Dynamic and competitive service industry

Yes

Population familiar with oil and gas operations

Yes

Depends on the basin

Licensing large areas with vague work programs

Yes

Depends on the state

Significant government investment in basic R&D

Yes

Much of the shale gas has high liquids content

Yes

Higher gas prices and demand

Yes

Investment in infrastructure

Yes

Since 2013, public disclosure is mandatory for all the unconventional gas development activities in Western Australia. Currently, there is a moratorium on fraccing in Victoria. Other states are also considering stringent controls on chemicals used for stimulation, while encouraging public disclosure.

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TECHNICAL

The decline in oil and gas development activity following the collapse in oil prices has led to decreased interest in developing a large scale service industry with high economies of scale. The establishment of a competitive service industry will need to be underpinned by an increased demand for services such as hydraulic fracturing and directional drilling. In South Australia, the exit of Chevron from shale resource development in April 2015 has decreased the potential establishment of a competitive service industry for hydraulic fracturing activities. In the US there is a well-established service industry, with the increased activity of shale resource development, leading to lower costs associated with hydraulic fracturing and directional drilling. Also, the limited establishment of local value chains to produce proppants and guar gum necessary for Australian shale resource development is not encouraging. Diminishing interest in the development of shale resources has not encouraged the funding of shale resource based data acquisition including 3D seismic databanks. Thus, respective state governments have encouraged industry-based funding and collaborations to discover sweet spots for shale resource development. In South Australia, the state government encourages collaborations among the stakeholders through the establishment of roundtable discussions on oil and gas. Knowledge sharing of existing understanding of oil and gas activities is not common among the operators developing shale gas, as the industry is still in its infancy and the specific technologies need to be developed offering a competitive edge. Since 2013, public disclosure is mandatory for all the unconventional gas development activities in Western Australia. Currently, there is a moratorium on fraccing in Victoria. Other states are also considering stringent controls on chemicals used for stimulation, while encouraging public disclosure. Thus, there are ongoing debates regarding the regulatory mechanisms to evaluate best practice mechanisms. However, implementation of a nationally harmonised regulatory system for hydraulic fracturing based on state-based developments is a complex issue, due to the respective state regulations and public acceptance of hydraulic fracturing. Therefore, this is an ongoing debate, although probably less intensive due to the low interest in oil and gas development using hydraulic fracturing implemented on new wells. In terms of the service companies, Halliburton voluntarily publishes the chemicals used in hydraulic fracturing in Australia on its website. In the US, shale resource development became competitive

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AUTUMN 2016 // ISSUE 4

TECHNICAL

A number of parties will need to come together to kick off an Australian shale industry.

and low cost due to increased activity and technological progress. The increased activity has led to better coordination among the developers, simultaneously developing stronger service industries. The Marcellus Shale Coalition is one example where all stakeholders involved have benefited during the shale resource development process. This helps to develop constructive relationships among stakeholders, leading to more efficient development of resources. In an Australian context, there are no notable joint activities of shale resource development. The main activity would have been the joint venture of Chevron and Beach Energy to develop onshore shale resources in the Cooper Basin of South Australia. However, the subsequent exit of Chevron hindered those prospects. Shale resource development is challenged by the public, due to environmental concerns associated with the developments implemented without sufficient safety checks. Knowledge sharing and collaboration with the public is important for long-term stability of the industry. Local communities need to be well informed and involved in the process to secure the social licence to operate in the long term. This will also require direct local benefits such as employment opportunities and funding of local facilities. In the US, private mineral ownership has led to the encouragement of

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shale resource development among communities. The absence of private mineral rights has discouraged the acceptance of shale resource developments in regions outside the US, as evidenced by the lack of public acceptance for shale resource development potential in Europe, Australia, Argentina and China. Therefore, it is important to work directly with the local communities, offering employment opportunities, training and other incentives to gain the acceptance towards shale operations. The long-term planning and collaboration of stakeholders will be vital for the success for the industry and to develop resources efficiently and effectively. Overall, in an Australian context, shale resource development activities have been put on hold due to low oil prices and other associated challenges. Therefore, the implementation of suggested changes reflecting US shale resource development to suit the Australian context will become important in the medium to long term. US shale resource development was more than 25 years in the making. This is an important reflection that needs to be inbuilt into the planning of shale resource development in other regions, to expedite the commercial development plans as soon as the markets become more appealing for high-cost oil and gas developments.

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EXPLORATION AND SEISMIC

DRILLING DOWN TO THE CORE OF EXPLORATION The Perth Core Library is an invaluable resource for Australian petroleum and mineral exploration. The facility, located in the Perth suburb of Carlisle, archives thousands of state and Commonwealth drill core and cutting samples, which are crucial to exploration research. Currently, the library is undergoing a $7.3 million expansion so that it can accommodate an influx of samples and cater for the increased use of its resources seen in recent years. In this feature, we look at the role the Perth Core Library plays in Western Australian and national oil and gas exploration, and examine what the future holds for the facility.

he Perth Core Library was established as a secure purpose-built facility in 2002. However, core and cutting samples have been stored at the Carlisle site since 1953. One of the library’s primary roles is to store the core and cuttings from all petroleum exploration conducted throughout Western Australia, whether it occurs onshore or offshore in statecontrolled waters, or targets conventional or unconventional reservoirs. Since the formation of the National Offshore Petroleum Titles Administrator (NOPTA) in January 2012, the library has also served as the western hub of the National Offshore Petroleum Data and Core Repository (NOPDCR). This means that it manages the petroleum exploration core and cuttings from Commonwealth-controlled waters off Western Australia, and also those from offshore petroleum exploration from all the other states and the Northern Territory. All in all, the Perth Core Library now holds approximately two-thirds of such core and all such cuttings (with the back-up one-third core held by Geoscience Australia at the eastern hub of the NOPDCR in Canberra). The importance of core samples Core samples are cylindrical sections that are taken from sediment or rock with a hollow steel drill and analysed to test their properties. Core and cuttings can provide information vital to assessing the mineral and hydrocarbon prospectively of the area

AUTUMN 2016 // ISSUE 4

from which they were taken. As a result, the Perth Core Library is a valuable source of pre-competitive geoscience information that promotes the mineral and energy prospectivity of WA, and encourages innovative exploration. “The core and cuttings provide a snapshot of how, where and when the sediments were deposited, and how petroleum systems (source rocks, fluid movement and entrapment) evolved,” said Department of Mines and Petroleum (DMP) Geological Survey of Western Australia (GSWA) Assistant Director, Don Flint. “Interpretation of those aspects is continuously evolving. Retention of the core and cuttings in a government facility is cheap by comparison to redrilling of holes, especially offshore holes where the cost is in the tens of millions of dollars per hole. “Under state and Commonwealth legislation, petroleum core and cuttings must be supplied to government but are held confidentially – if supplied promptly – for a period of two years from the rig release date,” said Mr Flint. More than 400km of core is stored in the Perth Core Library in Carlisle, and companies and researchers can view extensive collections of core, cuttings, sidewall cores and palynological slides representing 60 years of offshore and onshore petroleum exploration. “There is considerable demand on the Perth Core Library, with viewing increasing by 300 per cent since 2006. Hence the core library is often booked out a month or two in advance.

“During 2014-15 a record of almost 100,000 metres of core was laid out for inspection, and the number of samples taken (petroleum and minerals combined) averaged about 5,000 per year,” said Mr Flint. “Petroleum clients outnumber mineral industry clients at the Perth Core Library by a ratio of three to one.” Storing core and cutting samples means that they can be viewed and analysed when needed, ensuring that exploration activities are conducted efficiently and reducing exploration risk. For instance, core samples taken many decades ago may reveal prospective sources of unconventional oil or gas that were not commercially viable when the samples were taken, but may be recoverable with newer technologies. “DMP receives all the core and cuttings regardless of whether the target is conventional or unconventional,” said Mr Flint. “We do not distinguish between them and nor is there any need to. An unconventional target such as shale gas may actually be the source rocks for a conventional system — all information is important in building up an understanding of the petroleum systems.”

Streamlined exploration with better data The Perth Core Library is home to the HyLogger spectral scanner, a rapid spectroscopic logging and imaging system that uses continuous visible and infrared spectroscopy and digital imaging to safely examine core, samples and cuttings without damaging them. This technology is being used to help create a virtual core

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EXPLORATION AND SEISMIC

library as part of the AuScope National Virtual Core Library (NVCL) program. “The HyLogger technology comprises a suite of core and chip logging, and spectroscopic-imaging systems that were developed by the CSIRO Minerals Down Under Flagship and deployed to Australian State and Territory Geological Surveys in mid-2009 as part of the collaborative NVCL program,” said Mr Flint. “This provides drill core mineralogical and image data in a standard format.”

40 AUTUMN 2016 // ISSUE 4

The data collected from core scanning, coupled with simultaneous acquisition of high-resolution digital photographs of scanned core, can provide a variety of new insights into host rock. “The current generation of instruments (HyLogger-3) had a thermal infrared (TIR) sensor added in 2011, which covered the spectrum in the range of 6,000–14,500nm. This complemented the already existing visible near-infrared (VNIR, 380–1,000nm) and shortwave-infrared

(SWIR 1,000–2,500nm) wavelengths,” said Mr Flint. “Thus the HyLogger is capable of detecting a broad suite of anhydrous rockforming minerals (feldspar, quartz, pyroxene, garnet, olivine, carbonate, and phosphate), as well as a number of hydroxyl-bearing minerals. HyLogger data provides objective information on the host-rock mineralogy and texture, as well as characterisation of lithological facies variation, stratigraphic units and their boundaries.”

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EXPLORATION AND SEISMIC

The high-quality data provided by HyLogger scanning is made available to aid research and exploration activities, and expand the available knowledge of Australia’s geological systems. “Since the installation of the NVCL HyLogger in the Perth Core Library in 2009, GSWA has scanned almost 27,000 metres of core from 75 petroleum wells. These include a spread of wells from the Canning, Northern Carnarvon, South Carnarvon, Perth, Bonaparte and Officer basins.

“HyLogger data and imagery is made available free from DMP’s website within the ‘Interactive Geological Map (GeoVIEW. WA)’ and via the AuScope portal. The raw data files require specialist software, that is, ‘The Spectral Geologist’ to interpret the data – www.thespectralgeologist.com. “There is a heavy demand on the HyLogger spectral scanner, so it is currently used only on research work (including collaborative research with academia and/ or industry), hence it is not available for

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commercial scanning work,” said Mr Flint. Specific petroleum-related projects undertaken by the HyLogger include: ♦♦ Harvey 1–4 wells as part of the South West Hub carbon dioxide sequestration project (southern Perth Basin), with characterisation of both potential injection horizons and overlying clay-rich seals. ♦♦ First-pass attempts to determine the Total Organic Carbon (TOC) content from observed spectra. Attempts to

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EXPLORATION AND SEISMIC

♦♦

date have not been successful, but mainly because a key wavelength for detecting carbon is in the mid-infrared that is not available on the GSWA HyLogger. However, this aspect is still being currently researched on WA core as the HyLogger at CSIRO in Sydney has the capability to record in the mid-infrared range. Detailed high-resolution photographs are also obtained as part of the spectral scan, but not at a scale that enables automated grain size analysis to be undertaken – that is an area being considered for enhancement. Interpretation of spectral data for core does reveal instances where the drilling mud has impregnated pore spaces in core.

Expanding to better serve the industry According to Mr Flint, a number of factors have spurred the expansion of the library. These include the need for more space to store an increasing number of samples, the necessity for more viewing space, and a desire to offer a greater range of capabilities (for instance, the opportunity to provide for private viewings where information may be commercially sensitive). Currently, the library is more than 90 per cent full.

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“The capacity of the Perth Core Library is currently about 8,640 pallets,” said Mr Flint. “When it was opened in 2002 there were about 1,250 pallets of core, cuttings and rock samples (mineral and petroleum) on hand at the time. “During the period 2002 to 2005, the rate of pallets being received averaged only about 200 per year, but this climbed during the boom years to close to 500 pallets per year – assisted by receipt of petroleum core drilled in other states and the Northern Territory, and from mineral core received from the government co-funded drilling under the Exploration Incentive Scheme. “Over the past two years, as mineral and petroleum exploration activity has waned as commodity prices have slumped, more petroleum and mineral explorers are cutting costs and ‘donating’ core to government. So, even in times of an industry downturn, material is received at a high rate even though fresh drilling is being conducted at a lower rate.” Despite low commodity prices, the library still experiences heavy use. “During 2014-15, the Perth Core Library had 1,500 petroleum clients use the facility and 1,518 pallets of petroleum samples were accessed. A total of 88 pallets of core

were received from petroleum exploration in Commonwealth-controlled jurisdictions (including from interstate), whereas 93 pallets of samples were received from petroleum exploration in Western Australia’s jurisdiction. “The fall in international crude prices has meant that all exploration targets (conventional and unconventional) are attracting less interest, but onshore areas receiving renewed interest include the North Perth Basin because of the Waitsia– Senecio discoveries.” The expansion of the library will ensure that high-quality information continues to be collected and stored, and is therefore available to aid exploration when required. “The $7.3 million upgrade to the Perth Core Library began in January 2016 with demolition of the old Norton Building at the back of the existing Core Library to make way for the expansion,” said Mr Flint. “The successful tenderer for the bulk of the work is Firm Constructions, which aims to complete the expansion by November 2016,” Mr Flint said. “The expansion will increase the Core Library storage by about 50 per cent or 3,500 square metres – as well as provide extra enclosed space for viewing core and DMP’s hyperspectral scanner

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EXPLORATION AND SEISMIC

“During 2014–15 a record of almost 100,000 metres of core was laid out for inspection, and the number of samples taken (petroleum and minerals combined) averaged about 5,000 per year.” Department of Mines and Petroleum Geological Survey of Western Australia Assistant Director Don Flint

UOG_HALF_MAY.pdf

4/14/16

(HyLogger), plus a conference room. The Federal Government (through NOPTA) has contributed $1.2 million to the expansion project.” The upgrade will also increase the functionality of the library, allow it to operate more efficiently, and enable private viewing of core. “At the moment it’s a multi-user facility restricted to a common viewing area,” said Mr Flint. “Enclosing the external viewing area gives us the opportunity to overcome one of the fundamental problems we’ve had with the Core Library up until now, and that is having different layout areas for public and confidential core.”

Investing in our resources future Expanding the Perth Core Library is an important investment for the future of the minerals and oil and gas industries, both within WA and nationally. When complete, the ungraded facility is expected to meet industry and government needs for another 20 years. According to Mr Flint, “The expanded facility, together with the ongoing DMP–NOPTA–GA agreements to manage the physical assets, will ensure that Perth retains its position as a national resources precinct.”

9:38 AM

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AUTUMN 2016 // ISSUE 4

EXPLORATION AND SEISMIC

SHALE GAS: A KEY TO THE MYSTERY OF THE MIN MIN LIGHT by Rod Gould, Hedges Gas and David Warner, DSWPET Pty Ltd Geological evidence from petroleum exploration in the Burke River Structural Belt east of Boulia in Western Queensland provides a rational explanation for the legend of the Min Min light. Rod Gould and David Warner shed light on the role shale gas may have to play in this natural phenomenon.

xploration of the petroleum tenements held by Hedges Gas covering the Burke River Structural Belt in the Southern Georgina Basin has identified extensive Cambrian shale gas source rocks cut by deep faulting. An interesting result of these investigations, synthesising all available data, has led to an alternative explanation of the mystery of the Min Min light. The Min Min light phenomenon has frequently been reported from this area, east of Boulia (see Figure 1), centred on the old Min Min Hotel. Recent seismic line 14GA-CF3, acquired by Geoscience Australia for the Geological Survey of Queensland, traverses the southern area of the Burke River Structural Belt, following the line of the Boulia-Winton section of the Kennedy Developmental Road (see Figure 3). Interpretation of 14GA-CF3 by DSWPET Pty Ltd for Hedges Gas indicates there is a thick prospective Cambrian section, underlain by Proterozoic sediments, both on the eastern side of the NNW-SSE Pilgrim Fault and, in addition, in a

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Figure 1. Sign in Boulia referring to the western part of the Boulia-Winton section of the Kennedy Developmental Road, so pinpointing the region where the Min Min has been consistently reported.

substantial offset fault block on the western side of the Pilgrim Fault complex.

Min Min lights The phenomenon referred to as a Min Min or Min Min light has been a legend of Indigenous people for thousands of years, the light being perceived as the spirits of their ancestors rising up out of the ground at night. It is mostly described as a mysterious luminescent ball of cool, generally whitish light, about the size of a watermelon, that hovers relatively low to the ground, illuminating its surrounds on all sides, being observed from dusk to

dawn when it shows up in the darkness of the night. These lights have been seen by too many people to be just the product of imagination. However, there have also been what seem to be false reports of bright directional lights that have all the hallmarks of vehicle spotlights. European interpretation, dismissing the Min Min legend as a myth, has focused on the explanation that the phenomenon was due to the spirits of tribal ancestors moving around at night. This non-Indigenous interpretation misses two important aspects of the Indigenous legend: the phenomenon is described as â&#x20AC;&#x153;rising up out

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EXPLORATION AND SEISMIC

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Figure. 2 Locality Map.

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EXPLORATION AND SEISMIC

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Figure 3. Location of seismic lines 06GA-M6 and 14GA-CF3, with the recorded positions of natural springs.

of the ground”, and it is not so easily seen in daylight. The phenomenon has been recorded by Europeans in the Boulia area since the latter part of the 1800s. The claim has been made that sightings have increased since then. It is not surprising that there are no earlier European references, as it was only in 1860-61 that the explorers of the ill-fated Burke and Wills expedition were the first to traverse this area, and Boulia was not settled until the late 1870s.

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There have been several explanations put forward for the Min Min light, none of which has been entirely or universally satisfactory (for example, see JD Pettigrew 2003). Reports associated with the location of graveyards have added a superstitious overtone to interpretations of the cause of the phenomenon. Sightings have been regularly noted from the Channel Country area east of Boulia in Western Queensland, with many reports, often greeted with some derision, coming

from the vicinity of the old Min Min Hotel (see Figure 2). The Min Min Hotel was a coaching house or “shanty” that stood on the old Boulia to Winton Road (now about 400-500m north of the present Kennedy Developmental Road) between Boulia and Middleton, close to the western boundary of the Lucknow grazing property, about 100km east of Boulia. Various dates for the destruction of the hotel have been incorrectly recorded (R Davis 1997) but the Min Min Hotel burned down on Monday 11 February 1924. There is only a trace of ruins and a grave at the site now. Some earlier reports for the location of the Min Min Hotel have also been confusing, as there was a hotel on either side of the Hamilton River and its eastern tributaries: the Hamilton Hotel on the west and the Min Min Hotel to the east. The locations of the ruins of both hotels are now clearly signposted. In the wet season, travellers could wait at these establishments for any floodwaters in the Hamilton River channels to subside. A reliable sighting of the Min Min light near the Boulia-Winton Road was reported by Detective Sergeant Lyall Booth of the Queensland Police Stock Squad who, when camped in the area at the Bulla Bulla Waterhole (see Figure 4), observed such a light in May 1981 to the north of the west bank of the braided Hamilton River (quoted in B. Chalker 2001). This sighting began around 11pm when, as with other dependable sightings, the observer’s eyes had become accustomed to the dark and so could easily discern the light. The observed light finally dived towards the ground and quietly went out.

Geological explanation In our view, the Min Min phenomenon can be reinterpreted from a geological perspective. Indeed, in 1985, Lindsay Murdoch reported “one of the most plausible explanations, according to residents, is that the light is caused by gas from cracks in the ground”. In the vicinity of the Hamilton River, where it is crossed by the Boulia-Winton Road, and near the Min Min Hotel site, there are lines of natural springs on the edge of the Great Artesian Basin assigned to the “Springvale Group” (M.A. Habermehl 1982). The springs have important remnant flora and fauna as well as geological significance. Since the mid-1900s, the flow in these springs has reduced and, in some cases, ceased altogether, due to draw-down on artesian pressure by the construction of numerous unrestricted

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EXPLORATION AND SEISMIC

Figure 4. Interpretation of faults from seismic in conjunction with aerial magnetics and gravity data, related to the location of the Great Artesian Basin springs. (From DSWPET.)

wells throughout the basin. Since 1990, the federal and state governments, in partnership with landowners, have undertaken a program of capping uncontrolled bores, resulting in some recovery of artesian pressure. There are two parallel NNW-SSE lines of springs in the area near the Hamilton River, with one NE-SW line cutting across them (see Figure 3). Both Mike Randal (1978) and Marie Habermehl considered that the obvious alignment of these springs indicated an association with faulting. Advanced processing and interpretation of the recent seismic line 14GA-CF3, in conjunction with the interpretation of available aeromag and gravity data, show that these springs do mark fault lines, and that the faults extend downwards for some 2km. At depth, the faults cut through a vertical thickness of about 1km of Cambrian-Ordovician strata, underlain by Proterozoic sediments. These deep strata are considered prospective for petroleum, particularly shale gas; outcropping rocks further to the north, correlated with these horizons, have been reported to contain residual hydrocarbons (M.C. Konecki 1960), hence supporting the determination for petroleum prospectivity. So essentially, the faults connect what are interpreted to be deep, organic rich, shale gas horizons with the surface; the traces of the faults at

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the surface are marked by the lines of the springs. Henry Lamond remarked that the springs along the Hamilton River gave rise to “strange scents and musty gases” as well as water (1937). The authors of this paper propose this rational explanation for the mysterious Min Min light phenomenon: natural gas migrates up the faults, accumulating in the spring water, and is then released intermittently into the atmosphere, resulting in “balls” of gas floating around in the air. Ignition of the gas coming from depth could occur from time to time, resulting in the phenomenon of the Min Min light. There would seem to be parallels between the Min Min light phenomenon in the Channel Country of Western Queensland and the legendary European “will-o’-the-wisp” or North American “jack-o’-lantern” phenomena, where marsh gas or methane released from peat bogs or swamps becomes ignited. Though the mechanism of this ignition is not understood, it is likely to be analogous to the spontaneous combustion in moist hay from microbial activity; similarly, but not to the same degree, rotting vegetation provides the heat in the nesting mounds of the scrub turkey. Professor Jack Pettigrew’s explanation for the observance of the Min Min lights

(2003), invoking reflection or refraction of car headlights or other light sources from over the horizon via atmospheric inversion layers, somewhat like a mirage, overlooks the fact that this Min Min light is part of Indigenous legend, long before there were coach or car lights in the 19th, 20th and 21st centuries. Additionally, a car light would produce a strong directional light, while the gentle light from a Min Min is reported to illuminate the surroundings all around. The natural release of hydrocarbon gases in the Channel Country east of Boulia has been occurring in limited amounts for millions of years. Significantly, such ignited gases would be easily observable at night in the contrasting darkness, not by daylight. Similarly, in Indigenous legend, the Min Min has these two characteristics: it is only seen at night, and it rises up out of the ground, an accurate depiction of the action of the gas. In a sense, the explanation of the Min Min, interpreted within the cultural understanding of the Indigenous people, as coming from earlier life – the spirits of past generations of their ancestors – is not at odds with a geological hypothesis: the hydrocarbon gases released from the ground, which we argue result in the phenomenon of the Min Min lights, do in fact derive from the conversion over time of now fossilised earlier life forms in organic rich layers at depth. The micro-organisms

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EXPLORATION AND SEISMIC

Figure 5. Summary information including interpretation of seismic line 14GA-CF3. (From DSWPET.)

and other life forms of the late Precambrian and Early Palaeozoic eras are thought to have given rise, over many millions of years, to all life as we know it. All the credible sightings of the Min Min lights occur near to where the deep faults and artesian springs are co-located, e.g. along the Hamilton River, near the Bulla Bulla Waterhole, and at Fletchers Creek (see Figure 5). Hedges Gas exploration in the petroleum tenements covering the Burke River Structural Belt in the eastern part of the Southern Georgina Basin has produced a credible explanation for the Min Min light phenomenon based on geology and hydrocarbon resources. This alternative explanation also serves to reinforce the existence of hydrocarbon resources in the strata of the Burke River Structural Belt.

Acknowledgements Hedges Gas Pty Ltd and DSWPET Pty Ltd wish to thank Paul Donchak, Geoscience Manager, Geological Survey of Queensland, for facilitating access to the raw data of seismic line 14GA-CF3. This seismic was initiated and funded by

the Queensland Government Geological Survey of Queensland and acquired for GSQ by Geoscience Australia. Processing of seismic data was undertaken by Louis Coleshill of LC Consulting Pty Ltd.

♦♦

References ♦♦

♦♦ ♦♦

♦♦

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Balanzategui, K., 2012. Boulia Ancestry. My Great Grandmother was Mrs A E S Hasted. Quoted at: www.gdaypubs.com. au/read/64462/boulia-ancestory Brisbane Courier, 1924. Hotel destroyed. Fire at Min Min. February 15, 1924: Page 5. Chalker, B., 2001. The Min Min light revealed; nature unbound? Part 1. Australasian Ufologist Magazine 6(3): 9-13. Davis, R,. 1997. The Ghost Guide to Australia. Bantam Books. Quoted at: www. australiasomuchtosee.com/2009minmin1 Department of Agriculture, Victoria, 2008. Haystack Fires (spontaneous combustion). Pasture Management. Department of Environment & Primary Industries, Victorian Government. Note No. AG1356: 9 pages. Habermehl, M. A., 1982. Springs in the Great Artesian Basin, Australia – their origin and nature. BMR Report 235. Konecki, M.C., 1960. Examination for

♦♦

petroleum content of outcrop samples from the Boulia area, Western Queensland. BMR Record 1960/12: 121-126. Lamond, H., 1937. Letter. Walkabout magazine, April 1, 1937. Quoted in: David A.J. Seargent, 2012. Weird Weather: Tales of Astronomical and Atmospheric Anomalies. Springer. Murdoch, L. 1985. Boulia sees lights on its dull horizon. The Age, February 1, 1985: Page 1. Pettigrew, J.D., 2003. The Min Min light and the Fata Morgana. An optical account of a mysterious Australian phenomenon. Clinical and Experimental Optometry 86(2): 109-120. Randal, M.A., 1978. Hydrogeology of the southeastern Georgina Basin and environs, Queensland and Northern Territory. GSQ Publication 366. Warner, D. & Gould, R. in preparation. New information on petroleum prospects in the Southern Georgina Basin, Western Queensland. Winton Shire Council, 2014. Middleton. Experience Winton. www. experiencewinton.com.au/middleton

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COMMUNITY

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COMMUNITY

WHAT IS REQUIRED TO OBTAIN AND MAINTAIN A SOCIAL LICENCE? By Peter Wilkinson, General Manager â&#x20AC;&#x201C; Risk, Noetic Solutions and Demus King, Principal, Consilium Consulting

The industry needs to engage communities about their developments at the outset.

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COMMUNITY

ustralia’s natural resource endowment is world-class, extending from minerals and energy deposits to deep and productive agricultural land. Together their production helps support a dynamic and resilient national economy with a GDP of $1.62 trillion in 2015. And yet, as identified by Federal Resources Minister Josh Frydenberg, there are challenges that must be addressed if the natural resources sectors (extractives and agriculture) are to continue to support the social and economic wellbeing of our regional communities and the performance of our national economy1. Without a community’s acceptance of a project, or “social licence”, a titleholder cannot operate successfully, even if legal approvals, permits and licences have been obtained. Governments must engage with the community and explain how they will govern and regulate the competing land uses and their social, environmental, safety and economic impact. This must occur before proponents present a land-use proposal to affected communities. Until communities broadly understand the governance and regulatory framework, land-use proponents will find it difficult, if not impossible, to win the support of the community in the face of effective campaigns by deeper activist groups. The speed with which opposition to onshore resource developments spread across Australia was extraordinary. Commencing in NSW with the reaction to CSG developments, it quickly influenced the debate in parliaments around the country, leading to moratoria on unconventional gas developments and fraccing. Yet CSG, shale and tight gas extraction has been taking place in Australia since the early 1900s, with the first fracture stimulation (fraccing) of a well in Australia occurring in the 1960s2. An analysis of the unconventional oil and gas story suggests that industry, public servants and regulators were hamstrung by late or absent community engagement. This made it challenging for the community to understand what was proposed, their impact and associated risks. Interest groups successfully exploit this

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gap by adopting a much more agile social campaigning and disruption strategy. The strategy involves the dissemination of a rich mixture of factual, sensational, speculative and false information via social media. This enables them to generate an emotional social response at a local, regional and national level. Some of the response we have seen can be explained by social psychology.

Explaining how people think The human brain has evolved to calculate risk and decide on a course of action, the familiar “fight or flight” response. However, the risks we encounter today are often much more complex than those faced by our ancestors. In order to deal with this complexity, the human brain often falls back on some cognitive heuristics, or mental shortcuts, to lighten the mental load and speed up decision-making. While these “mental shortcuts” can be useful, they do not guarantee an optimal decision. One of these shortcuts is the so-called availability heuristic. “Availability” refers to the ease with which an individual can bring particular information, events and experiences to mind when assessing the likelihood of a risk eventuating. It is easier to bring to mind something that is highly memorable, vivid or emotive. This helps explain why people overestimate the likelihood of dramatic or catastrophic events (e.g. terrorist attacks, airplane crashes) and underestimate everyday risks (e.g. car accidents, strokes). An example of this heuristic is an assessment of risks to beachgoers in Australia; rip-tides are responsible for far more deaths annually than sharks, but sharks elicit far more fear and consequently attention. Similarly, sensational and memorable images or anecdotal stories, such as presented in the movie Gasland (2010) will be more “available” and have much wider impact than dry statistical evidence which rebuts many of the film’s claims. As we know, the media plays an important role in influencing the public’s perceptions, including perceptions of risk. As Shell found in 19913 (in relation to the planned disposal of the Brent Spar facility), doing the science well and stating the facts, while important for the record, are insufficient to win the popular argument. WWW.UNCONVENTIONALOILANDGAS.COM.AU

COMMUNITY

For the unconventional oil and gas industry to thrive and flourish, it needs to regain its social licence to operate.

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COMMUNITY

Some risks are also feared more than others. The characteristics of a specific risk often impacts the way the human brain assesses its acceptability. Applying what we know about the acceptability of certain risks and knowledge of cognitive biases, it is possible to establish how the general public views resource extraction activities, such as those associated with oil and gas, from the perspective of public concern and acceptability. Table 1 provides a brief snapshot of a recognised risk perception matrix and some examples of activities in each category. It should not be surprising that, compared with other risks, gas exploration and production is characterised by high levels of fear and low levels of knowledge in the minds of the general public. This provides insight into how and why the opposition grew to become so effective, and why effective engagement is a fundamental part of good policy and regulatory design, shaping how the community perceives and engages with risk. Fearing potential dangers is a part of our natural survival instinct and a completely rational response, despite not being based on scientific knowledge. “Experts” who deal with the community on a footing of right and wrong, without understanding the factors that contribute to the other side’s risk perceptions, will dismiss fears without due consideration, losing the opportunity to engage, understand and respond to clarify or rectify. Involving stakeholders without a genuine intention to listen is as detrimental as excluding them completely. It further erodes trust between parties and complicates future interactions. As a corollary to this, most risk communication fails because it is left too late. Once trust has been lost or entrenched opinions formed, it is very difficult to change hearts and minds. To what extent this has already happened in the debate on unconventional gas is difficult to judge. It may vary by region, for example worse in New South Wales than in the Northern Territory. In essence, the best risk communication involves genuine engagement. It should occur early, often and with a genuine intention to listen, participate and seek acceptable compromises where possible. When undertaking this engagement, there are some things to keep in mind when delivering the message: ♦♦ Communicate at the local level and with the assistance of trusted intermediaries. The source of information can often be as important as the information itself.

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♦♦

Exercise care in the use of numbers to classify or quantify risk. A risk expressed in too complex a way may be viewed as deliberate obfuscation and erode credibility. ♦♦ Do not make risk comparisons ignoring the factors which people consider important when assessing risk. For instance, driving a vehicle may be more dangerous than living next to a nuclear power plant. However, this risk comparison is not useful as it ignores the catastrophic potential, threat to future generations, exotic nature, etc. of nuclear power in the minds of many. ♦♦ Recognise that risk communication must be genuine, frequent and take account of the factors which influence the other stakeholders’ perception of the risks. ♦♦ Uncertainty should be acknowledged. Where there are gaps in understanding or data, pretending otherwise is dangerous and disingenuous. Instead, communicate what is known, explain what is being done to get better information, and describe how the gap is being managed in the interim. This last point, the importance of what is being done to control the risk, is very important. A clear explanation of the risk controls (often described as “barriers” in upstream oil and gas) is essential.

What does this mean for policymakers and regulators? A social licence is most likely to be obtained and retained where governments put in place and explain the policy drivers and regulatory mechanisms, operational controls and behaviours before a specific project proponent engages an affected community. While there is insufficient room in this article to set these out in any detail, it is worth referencing some broad policy aspects which are required to obtain a social licence. Access rights and the adversarial system The rights to access and use land and water, either at or under the surface, are dealt with by separate and often competing titling systems in which the rights of one are not always recognised by the rights of another. While the Queensland Government has taken some steps to resolve this problem with the establishment of a GasFields Commission, no government has directly addressed this policy problem and its unintended consequences. This problem needs to be addressed. We believe the best long-term solution is one which delivers obvious benefits to both the land occupant, the developer

of the resource and the resource owner (the government). One option that springs to mind is allowing the land occupant to access a royalty agreement for the minerals below the surface, including water. On the face of it, this would not be difficult and could be achieved administratively in a way similar to the approach used on Aboriginal Freehold in Aboriginal Land Rights Act lands.

Provide access to factual data and information There is a large bank of data, including on soil, water and geology, that is relevant to many if not all land uses. In most jurisdictions this information is fractured or siloed in various locations and databases. Bringing these together into an easily understandable and accessible scientific and baseline data format, relevant to the land and activities would aid public understanding and ensure that development decisions are made based on good information. The importance of this cannot be overstated, and has been recognised in NSW where the development of an Environmental Data Portal is expected to draw together available data on water, land and air conditions. Governance and regulation The provision of independent and trusted scientific and baseline information is fundamental to community and regulatory decision-making. However, it is of little use if the community does not understand the regulatory regime, and trust in the independence and rigour of its decisionmaking framework. Regulators should provide an extra and independent layer of assurance to society, governments, and the industry and its workforce. Importantly, they should also provide assurance that appropriate measures are in place to control the range of risks associated with projects, specifically those relating to the environment, health and safety. Unfortunately, in some jurisdictions it appears that regulation involves several regulators looking at the same issues, albeit from different perspectives. For example, in the case of a coal seam gas well, the safety of those working on the well, prevention of environmental impacts from fugitive emissions and possible communication (of contaminants) between different strata zones (pollution of water) all depend on the mechanical integrity of the well and associated equipment. Yet it is common to have two (or more) agencies looking at the same issues. This is a risk because:

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COMMUNITY

Low Knowledge

Not observable Unknown to those exposed Effect delayed New risk Risks unknown to science

• • • • •

Nuclear power Water fluoridation

Low Dread

• • • • • • • •

Uranium exploration

Antibiotics

Asbestos

Caffeine

Fossil fuels

Microwave ovens

PCBs

Oral contraceptives

Coal burning (pollution)

Controllable No catastrophic potential Non-fatal consequences Equitable Individual Low risk to future generations Easily reduced Voluntary

Smoking (disease) Chainsaws

High Dread

• • • • • • •

Uncontrollable Catastrophic potential Fatal consequences Not equitable High risk to future generations Not easily reduced Involuntary

Nuclear weapons Commercial aviation

Bridges

Firearms

Skateboards

Coal mining (disease)

Swimming pools

Railroad collisions

Elevators

High Knowledge

• • • • •

Observable Known to those exposed Effect immediate Old risk Risks known to science

Table 1. Risk perception map. Adapted from Slovic, P. (1987). Perception of Risk. Science 236 (17 April) 280-285.

♦♦

There is the potential for both regulatory gaps and overlaps between authorities ♦♦ It increases the regulatory burden on duty holders (particularly where there are overlaps) ♦♦ Different regulators can approach similar issues in different ways ♦♦ There is reduced confidence in government and regulators, as no one authority is seen as ‘being in charge’. By contrast, industry has generally responded to this challenge well and has developed detailed, reasonable and published standards for the management of the risks from wells by which they are willing to be judged.

Communicate Government at all levels and the oil/gas/mining industry have been comprehensively defeated in the communications sense by the deeper activist movements. In this era of social media and resultant information manipulation, a communications or information gap within an affected or interested community provides an opportunity for activists to effectively deliver misinformation and foment division. Community understanding of, and trust in, the governance and regulatory regime is fundamental to obtaining a social licence. However, governments have not yet fully grasped the importance of engaging the community on the design and processes underpinning the regime before a proponent approaches them with a specific project.

Conclusion No one regime or jurisdiction has yet been able to consistently provide a policy, regulatory, and institutional framework that delivers social licence. We have “unpacked” what is meant by a social licence and identified the three (interrelated) social licences: ♦♦ A social licence to govern – that needs to be earned by government (local, state and federal). The community, affected parties and individual companies need to understand and trust the policy, legal and governance frameworks. ♦♦ A social licence to regulate – that needs to be earned by the regulator and related institutions. The community, proponent and industry need to understand regulatory processes and trust that the regulator will deliver robust, unbiased and informed decision-making. ♦♦ A social licence to operate – that needs to be earned and maintained by the project proponent and the broader industry. However, a regime that delivers each of these three social licences will still fail where the community does not trust or have access to information that is relevant to the decision at hand and relates to the specific concerns within the local, regional or national community. Indeed, this information is also necessary for the regulator, government and proponent. This brings us to our last point. How the whole approach to the community is “framed” is critical. If it appears that the

industry (or government) is portraying the exploration and production of unconventional oil and gas is without risk and that nobody should worry, then that itself is likely to be a self-defeating strategy. We have outlined the importance of a more inclusive approach that accepts that the role of government is to consult with all, effectively weigh both narrow and broad perspectives, and clearly articulate the reasoning for a particular decision or course of action. Further, governments, regulators and industry must acknowledge risk, explain the controls (or barriers) and demonstrate they are following them, backed up by data and information provided by an unbiased source in an easily accessible and understandable format. It is increasingly important that the industry, government and regulators are able to engage with and reassure local communities, as well as communities with no direct connection to the resources sector. As Minister Frydenberg points out, “Only by genuinely working together can we address misperceptions about the sector and respond to concerted campaigns that seek to erode the industry’s licence to operate.” Genuinely working together must involve a cooperative approach which balances the interests of multiple land users and brings forward an engaged, informed community providing social licence to govern, regulate and operate. 1

12 November 2015 speech and 29 Feb 2016 op-ed

http://www.appea.com.au/wp-content/uploads/2015/11/14-

12-Ref-Doc_HydraulicFracturing-V12.pdf 3

See http://www.iaea.org/nuccomtoolbox/documents/

Brent_Spar_Case_Study.pdf

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POLICY

ACCC WEIGHS IN ON EAST COAST UNCERTAINTY The Australian Competition and Consumer Commission (ACCC) has released its recommendations from the East Coast Gas Inquiry, which include improved market transparency, changes to pipeline regulation and new approaches to gas development.

he Federal Government has released the East Coast Gas Inquiry 2015 report, which examines the competitiveness of wholesale gas prices in eastern and southern

Australia. The report has found the three key factors feeding into the uncertainty about future gas supply on the east coast include: ♦♦ Gas flows to the LNG projects, which are removing gas from the domestic market ♦♦ The low oil price, which is resulting in declining investment in gas exploration and lower production forecasts for both domestic and LNG projects ♦♦ Moratoria and regulatory restrictions, which are affecting onshore gas exploration and development, in New South Wales, Victoria, Tasmania and potentially the Northern Territory. ACCC Chairman Rod Sims said there has been unprecedented change in the east coast gas market over the last four years with the development of Liquefied Natural Gas (LNG) facilities in Queensland. “These changes have created winners and losers, and industrial gas users in particular have been acutely affected by the transition,” Mr Sims said. “The triple whammy of the introduction of LNG and with it exposure to international gas pricing, a fall in oil prices leading to a downturn in exploration and new development, and regulatory uncertainty and exploration moratoria, has created an increasingly complex environment for many gas market participants. “The future supply outlook is uncertain. Meeting future domestic and LNG demand will require extensive development of undeveloped gas reserves and resources. “Sufficient gas is currently forecast to be produced in the east coast gas market to

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meet domestic demand and existing LNG contract commitments until at least 2025, but there is uncertainty over the timing of some developments, particularly due to low oil prices. “Some suppliers have taken advantage of this supply uncertainty and potential shortfalls to increase prices and implement more restrictive non-price terms and conditions.” The report makes a number of recommendations that the COAG Energy Council and state and territory governments can consider to alleviate gas market issues, particularly for industrial users. These recommendations include: ♦♦ Enabling new gas supply to come to market, in particular in south eastern Australia ♦♦ Revisiting the regulatory coverage of pipelines, increasing the ability for pipelines with market power to be regulated ♦♦ Ensuring the consistency and transparency of the provision of information to the market. “A $2 per gigajoule increase in the wholesale price of gas could increase residential bills by 5 per cent in New South Wales and 11 per cent in Victoria,” Mr Sims said. “The difference between a competitive market and an uncompetitive market in south eastern Australia could be as much as $4 a gigajoule for wholesale gas. A competitive market requires more gas supply and more sources of gas supply. “While the pipeline sector is responding to the changing market dynamics and offering new services, pricing based on significant pipeline market power is prevalent. “The regime regulating gas pipelines is not fit for purpose and pipeline pricing is

largely unconstrained by either the threat of regulation or effective competition. “Pipeline pricing exacerbates the effect of supply tightness on wholesale gas prices. There are currently very few constraints on monopoly pricing by pipeline operators. “Compounding supply tightness and the effects of pipeline pricing, is the effect of an opaque and illiquid east coast gas market. Confidential bilateral negotiations remain the norm for both gas supply and transportation contracts. “The lack of consistent, publicly available data on the sector is an impediment to participants, investors, and policymakers.” In responding to the report, APPEA has noted that it confirms the urgent need for policy and regulatory changes to enhance gas supply. “The report highlights that the greatest risk to the market is regulatory failure, not market failure,” said APPEA Chief Executive Dr Malcolm Roberts. “The ACCC confirms that removing unnecessary government restrictions on exploration and development is the most effective way to boost supply, enhance competition and put downward pressure on prices. “Australia has ample gas resources to supply domestic and export markets – if industry is allowed to develop these resources. But, at a time of unprecedented demand, government policies risk creating an artificial shortage of gas and higher prices. “The effects of an unnecessarily tight market are already being felt, especially in an industry where gas is both a source of energy and an irreplaceable feedstock for manufacturing products such as glass and packaging. “The risk is most pronounced in Victoria. Almost 40 per cent of the gas consumed

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POLICY

by industry in Victoria is used as a feedstock. Victoria also has the highest use of gas by households – 77 per cent of households use gas. “The ACCC was asked to conduct this review because it has the power to obtain confidential, commercial information. Using this power, the Commission has amassed the most detailed and complete data on the market. With this data, the Commission has been able to test all the claims made about the market,” said Dr Roberts. “Contrary to claims by some parties, the ACCC has found – as the Productivity Commission found in 2015 – that there is no evidence of misuse of market power or other breaches of competition law. “While market conditions were tight in 2012-2014, a range of gas supply agreements were made during this period. As the report finds, even more gas supply offers are now available. “The Commission rejected arguments for domestic gas reservation, noting that such interventionist policies will quickly reduce supply and raise prices. “The Commission has recommended measures to provide more public information on the market. APPEA understands the desire for greater transparency. APPEA will consider these recommendations on their merits and looks forward to working with governments and customers on ways to improve transparency. “The industry welcomes the Commission’s findings and trusts that the public debate can now move on from discredited arguments to the real issues. In particular, we are looking to the COAG Energy Council to make regulatory reform an urgent priority. Governments must remove regulatory barriers to bring more supply and more suppliers into the market.” APA Group has also responded to the report’s findings and has said that while it

welcomes the need to increase gas supply, it rejects the ACCC’s conclusion that further regulation of gas transmission pipelines will assist in resolving gas supply shortage in the east coast gas markets of Australia. APA Managing Director, Mick McCormack said, “APA welcomes initiatives that result in increased gas supply. However, the challenges of developing new gas supplies in a number of states have been obvious for a number of years. It is a perverse approach for the ACCC to consider that more regulation of the pipeline industry will contribute to solving this issue. “The pipeline industry has invested $30 billion in infrastructure over the last 15 years at the behest, and with the agreement, of its customers and without any government subsidy. The industry has made huge investments in infrastructure and the development of innovative services to deliver what the market needs. This has supported the exponential growth of the gas industry in Australia. “To increase regulation of pipelines will stymie further investment and innovation. It will result in pipelines being built for current demand, not future supply. This can only adversely affect future gas supply.” The Australian Pipeline and Gas Association (APGA) also rejected the recommendations made in the report to increase pipeline regulations. APGA Chief Executive Cheryl Cartwright said the ACCC’s final report shows there is no easy way for the domestic gas market to adjust to the development of three LNG export projects in Queensland. “Some of the recommendations of the report demonstrate the ACCC’s inclination to regulate infrastructure even though that will do little to address the fundamental problem in the system: how to ensure there is enough gas available for both export and domestic users,” Ms Cartwright said. “When considering the ACCC’s

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recommendations, it’s important to remember what triggered the inquiry – a tightening demand-supply balance and rising wholesale gas prices. “Changing regulation for gas transportation does not solve those problems.” Federal Minister for Resources, Energy and Northern Australia Josh Frydenberg has also responded to the report and welcomed its findings. “By putting more facts on the table, the report has made an important contribution to this debate,” Mr Frydenberg said. “It makes clear that unless the Commonwealth and state governments work together to address supply-side constraints, consumers and industry will bear the cost of higher gas prices and less reliable supply. “To this end I convened a videoconference with my colleagues on the COAG Energy Council to discuss the next steps as we consider the report’s recommendations ahead of our next formal meeting in July.” The ACCC will also further consider some practices in the market, including the joint marketing of the Gippsland Basin Joint Venture between Esso and BHPB. “While market conditions have been difficult, it is important that new supply comes online and that new opportunities are developed,” Mr Sims said. “Trading markets are developing and the Australian Energy Market Commission and the Australian Energy Market Operator are working towards further improvements in market design. “More supply, new suppliers and an increased diversity of supply sources are crucial for the future competitiveness of, and pricing in, the gas market.”

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BASIN PROFILE

THE AMADEUS BASIN In this installment of our regular feature profiling Australian geological basins, we explore the Amadeus Basin. The Amadeus Basin contains mature producing conventional oil and gas fields, and is now being explored for its unconventional gas potential. Areas within the basin are thought to contain significant shale and tight gas resources that could be suitable for future development. Unconventional gas in the Amadeus Basin The Amadeus Basin covers approximately 170,000 square kilometres in central Australia, most of which lies within the southern Northern Territory, with the remainder in Western Australia. The basinâ&#x20AC;&#x2122;s major depocentres include the Idirriki, Carmichael and Ooraminna subbasins and Missionary Plain Trough along the northern margin, and the Mount Currie

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and Seymour sub-basins in the south. To date, hydrocarbon exploration and production has been almost exclusively focused on the Northern Territory section of the basin, which is better studied and more accessible. A number of conventional oil and gas fields are currently producing in the basin. The Mereenie oil and gas field and Palm Valley gas field have been producing

since the mid-1980s, and supply energy resources to the Northern Territory via an oil pipeline to Alice Springs and gas pipelines to Alice Springs and Darwin. More recently, Central Petroleumâ&#x20AC;&#x2122;s Dingo gas field began producing in 2015, after the construction and commissioning of the 50km Dingo Pipeline to Alice Springs. The geological formations within the Amadeus Basin that have received the

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BASIN PROFILE

Key Statistics Unconventional resources

Shale gas, tight gas, shale oil Main unconventional formations

Amadeus Basin

Pacoota Sandstone, Horn Valley Siltstone, Stairway Sandstone Key active companies

Central Petroleum, Santos, Mosman Oil and Gas Key projects

Southern Amadeus Joint Venture (Central Petroleum and Santos) Amadeus Basin Project (Mosman)

most attention as potential unconventional hydrocarbon resources are the Pacoota Sandstone, Horn Valley Siltstone and Stairway Sandstone, all underlying northern sections of the basin. The Pacoota and Stairway sandstones are thought to contain shale and tight gas resources, while the Horn Valley Siltstone is thought to contain shale gas. While the unconventional oil and gas prospectivity of the basin as a whole has not been formally assessed, partly due to the lack of data on the less accessible parts of the basin, various discoveries have supported suggestions that parts of the basin contain significant shale and tight gas resources. In 2013, as part of a report prepared for Australian Council of Learned Academies (ACOLA), AWT International assessed shale gas potential in the Amadeus Basinâ&#x20AC;&#x2122;s Horn Valley Formation. The results suggested a best estimate recoverable resource of 16Tcf dry gas. Central Petroleum estimates the mean undiscovered prospective resources for shale gas and basin-centred gas in their Amadeus Basin tenements at 26.2Tcf. In March 2016, Mosman Oil and Gas announced that SRK Consulting had finalised a report into the prospective resources contained in Mosmanowned EP 145, both conventional and unconventional. SRK calculated unrisked prospective resources of 1,456Bcf (1.46Tcf) of unconventional gas in the Horn Valley Siltstone within the permit area.

Unconventional activity in the region Exploration activities aiming to identify and quantify prospective gas resources, conventional and unconventional, and to build a greater understanding of the basinâ&#x20AC;&#x2122;s

geology, are currently underway. The main companies currently active within the basin are Central Petroleum, Santos and Mosman Oil and Gas. A large amount of exploration work is underway, or has been completed in recent years, targeting both conventional and unconventional plays in the basin. For instance, in the half year ending 31 December 2013, a joint venture between Central Petroleum and Santos acquired 323km of 2D seismic in the greater Mereenie oil field area targeting conventional and unconventional plays. Similarly, the currently-underway Southern Amadeus Joint Venture, a three-stage farm-in agreement between Central Petroleum and Santos (operated by Santos), aims to gain seismic data to identify prospective resources. Since October 2012, stage 1 of the Amadeus Joint Venture project acquired 1,586km of 2D seismic to identify structures and play types in the southern Amadeus Basin, and Mt Kitty 1 was announced as a discovery of hydrocarbons and helium. A further of 346km of 2D seismic was acquired over the north-west Mereenie sub-block of EP 115. In July 2014, Santos announced its intention acquire a further 1,300km of 2D seismic as part of stage 2 of the project, so as to delineate drillable prospects that could result in drilling of wells in stage 3. While Central Petroleumâ&#x20AC;&#x2122;s primary focus is to prove 200PJ of conventional gas in the basin, the company considers the sections of Horn Valley Siltstone in its permits as providing a promising unconventional target. Therefore, during the drilling of such conventional targets, the company intends to acquire core and comprehensive data to evaluate

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unconventional hydrocarbon potential. Future wells in the 100 per cent Central Petroleum-owned EP115 permit will also test the proven lower Stairway Sandstone and Pacoota Sandstone, as well as deeper targets. The wells will collect core, desorption and other laboratory data to help the company define a continuous resource, shale oil or shale gas. Meanwhile, Mosman owns and operates two granted permits in the basin (EP 145 and 156) and one application (EPA 155), which bring its holdings to a total of 5,458 square kilometres. The company is currently in the process of evaluating the potential resources in its permits, with results so far suggesting promising unconventional hydrocarbon potential. This is being used to assist the company in prioritising further exploration activity.

Commercial viability Existing infrastructure exists in the basin for the currently producing Mereenie, Palm Valley and now Dingo fields. The distance of some areas of the basin from existing infrastructure may well pose an obstacle to the commercial viability of developing any unconventional resources discovered. It is likely that potential unconventional resources located closer to existing pipelines and other infrastructure will receive greater consideration in regards to potential development. As more information is gained about the Amadeus Basin and its resources, it is possible that further unconventional discoveries will be made. Further knowledge will also determine if we are likely to see unconventional oil and gas production within the basin in coming years.

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PROJECTS

QGC’s natural gas operations in Queensland’s Surat Basin supply gas to domestic and international customers.

PROJECT CHARLIE: BOOSTING QUEENSLAND’S

GAS PRODUCTION

As the mega CSG-LNG projects in Queensland shift into their operational phases, Queensland Gas Company (QGC) is continuing the hunt for reserves, expanding its natural gas tenements in Queensland through Project Charlie.

ith Australia’s LNG industry emerging from its construction boom, QGC’s new development, Project Charlie, aims to support Australia’s gas production through a $1.7 billion investment in infrastructure and wells, which will create up to 1,600 industry jobs. Project Charlie is a two-year gas development project by QGC and its joint venture partners China National Offshore Oil Corporation and Tokyo Gas. The development is located west of Wandoan within Queensland’s Western Downs Region and has three main components:

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♦♦ ♦♦ ♦♦

The creation of 300-400 gas wells Construction of a large field compression station Construction of associated pipelines and facilities. Once constructed, the new infrastructure will feed into the existing gas processing facilities at Woleebee Creek, just south of where the Charlie Field Compressor Station (FCS) will be established. These works are part of a continuous investment by QGC in its Surat Basin gas assets, which supplies gas to domestic markets as well as the Queensland Curtis LNG (QCLNG) facility on Curtis Island, which exports to international markets.

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PROJECTS

Project Charlie aims to ensure a continuous gas supply to QCLNG for export, as well as for QGC’s domestic gas customers. QGC Managing Director Tony Nunan said “Project Charlie builds on the back of all the infrastructure we’ve put in place in phase one of the QCLNG development, and allows us to step out with our next lot of wells and a compressor field station.” QGC and its parent company, BG Group, appointed CPB Contractors (formerly Leighton Contractors) as the main contractor for the project, and they began construction in late 2015 after the project received environmental approvals from the Federal and Queensland governments.

Securing Australia’s gas future The development of the new wells, pipelines and compressor station will not only support QCLNG, but the investment will also create more than 1,000 jobs over the two-year construction phase, as well as ongoing operating and maintenance work once construction is complete. Mr Nunan said the development will help sustain Australia’s natural gas supply and support the gas and resource industry with new opportunities. “The Charlie development will help to sustain the benefits of our investment in local communities and the state, including up to 1,600 construction jobs and business opportunities during the two-year project,” Mr Nunan said. “This is a vote of confidence in the secure, long-term future of Queensland’s natural gas industry, which will employ Queenslanders for many years to come.” Local suppliers within the Queensland gas industry are also likely to benefit from the new project, including specialist engineering, design and fabrication business Red Industrial, which currently delivers components to QGC assets in the region. Advanced compressor station Project Charlie was named after the section of the block on which the largest part of the development will take place. This location, and the area where the compressor station will be built, was chosen due to its land topography and its proximity to the existing and proposed infrastructure. Once built, the Charlie FCS will compress gas supplied from the natural gas wells before being transported down a pipeline to the Woleebee Creek Central Processing Plant, to be further compressed. The gas will then be transferred along QGC’s gas collection header to the export pipeline, which connects to the QCLNG Facility. This compressor station is anticipated to have a project lifespan of 30 years, including the construction period. Supporting exports QCLNG was the world’s first LNG project to use coal seam gas and it joined the export ranks, with its first production in December 2014. Since then, the plant’s first train has exported 62 cargoes of LNG to overseas markets. Commercial operations from its second train began in November 2015, after QGC assumed control of train 2 from Bechtel Australia, which originally built the facility. QGC now has full control of both LNG trains at QCLNG, and is investing in developments such as Project Charlie, to help sustain gas production and supply to the plant. QGC operations involve the production of natural gas in more than 2,000 wells within the Surat Basin and Southern Queensland. The gas produced is transported via a 540km pipeline to the Curtis plant for conversion to liquefied natural gas (LNG) and export WWW.UNCONVENTIONALOILANDGAS.COM.AU

QGC Charlie project area.

to overseas markets. The Curtis LNG facility involved more than four years of development and construction work before it was operational. By mid-2016, both trains at QCLNG are expected to reach a plateau in production, meaning they will be producing enough LNG for approximately ten vessels per month, or the equivalent of exporting around eight million tonnes of LNG per year.

The impact of Charlie The QCLNG project is one of QGC’s major developments, and investment in more wells and advanced gas infrastructure aims to sustain the plant’s gas supply. Investment in more gas production facilities will also have an impact on domestic supply, as QGC supplies gas to local markets for power generation. Project Charlie’s two-year construction phase is predicted to provide a local boom for the industry in the Western Downs region, and the development highlights that there is still current investment in Australian gas production and opportunities to support gas production for the future. CPB Contractors began construction on Project Charlie in late 2015, and the development is expected to be completed in 2017.

AUTUMN 2016 // ISSUE 4

THE GOOD OIL with Paul Carter

TIME TO GET REAL

’m sitting in the lobby of a large multinational when a young man flops down in front of me and starts crying. I ask him what on earth has happened; he looks up at me and says he has just had a fight with his girlfriend. I move next to him and look around the massive lobby. No-one notices us, no-one at all. More than half the people who walk past are looking at a device or plugged into another. All the people within earshot of us have a phone pressed to their head, and like zombies they mill about in random figure eights. Everyone looks fit; all the men are ‘V’ shaped, all the women are variations on hourglass perfection. They all look like they could fight crime for a living. My bearded topknot mate is still sobbing into his latte and shopping online, I presume he’s out of beard oil, or perhaps another paisley shirt is on the way. Looking closer, I see he’s got massive hairless tattooed arms; he must spend half his life in the gym. What the hell is going on? He thanks me for my concern and walks out. I’m happy because there goes a guy who’s completely comfortable to let

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out his feelings and move on. I must be getting old: my generation tends to be pear shaped, we drink to get drunk, never sit down to pee, never go to the doctor until it’s way too late, and we would never openly weep in public (we lock ourselves away for that, if at all). I realise that I don’t know any young people that I can relate to in a way that the generation of men I learned from related to me. Then I think of one, just one. Enter one Zach Spark, whose his name conjures up images of a stockbroker from the 1980s in a navy blue pinstripe Valentino two-piece suit with peaked lapels and matching braces. The kind of man who leases a white Porsche 928 and is a member of the Racquet Club; who leaves his golf clubs in the car and never uses public transport. In actual fact, Zach is the exact opposite. He is bearded, but not in a hipster way; he has worn that beard for a long time, and I suspect he was born with it. Zach is unburdened by ego. He has the swagger of a man tested and vetted into manhood. Only in his early 30s, he has packed a lot

into his years. There is no need to prove anything, and I am instantly comfortable with him. We are colleagues, but he is not like so many of the people I am forced to come into contact with through my job – hollow, vacuous, narcissistic little men who have never even seen a drilling rig. Scratch the surface and there’s nothing there. In the mornings when I first open my eyes, at that moment, before the weight of the day comes for me, I imagine chasing them with a chainsaw. I have become the Apex Predator. In an effort to address this, through the medium of writing, I politely ask Zach to take me with him, out into the wilderness, deep into the mountains. Because Zach is an Apex Predator too, he hunts and so we’re clear on this. He actively tracks then stalks and then cleanly shoots deer dead, just one; he cleans the beast in situ and eats it over time. He hunts Sambar deer, the ninja of the deer. It takes great skill and a wellhoned very particular skill set to do this properly. Zach is very private and modest

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sunDaY tas

experimental KPH on an untested attEmPtInG 300 ered a perfect way to kill yourself, r at be consid caRter and dange motorcycle could er is still, well, paul d name. but paul caRt secon high speed is his

and bRacE yOURself fOr His so be fOURtH bOoK—we aLl remaIn HOPeful tHat He wilL NOt InstItUtIONalised befOre cOmpletiNG His fiftH.

www.pcarter.com.au

paul carter

Whether discovering that being dyslexic means delivering your lines to camera back to front in the midst of filming a TV series, or starting a new business and travelling the world, or dealing with life’s more sober moments like the birth of a son or the loss of a father, paul caRter is still the funniest man in the bar and the nicest alpha male you’ll ever meet as he risks all for the sake of a good story.

RIDE LIKE HELl aND YOU’Ll

Get tHere DEtOURs iNto

maYHem

paul carter

Cover design: Design by Committee

MEMOIR Ride_Fullcover.indd 1

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manian

YOU’Ll

room service and another double with a side of your best illegal stimulants please. So I’m a little hesitant, even scared to make my way back. Zach is wonderfully indifferent about it. He doesn’t care what people think about hunting – he knows the worst in human nature is not found in a hunter, it’s found in the faces in the crowd. I can’t work out if his indifference is because he’s satisfied that I’m able to handle myself in the wild, because he’s read my books, or if he thinks I’m full of it and will cry as soon as I crack a nail. A little of both methinks. In my brain as we talk about the trip it’s entirely visceral for me, I have full ‘caRter moDERN DaY is a KInd Of iNDI Technicolor images of us interacting with a natURaL aNa JonEs . . . stOrYtelLER .’ nature and dominating it. This journey into masculine enlightenment of course inevitably ends with Zach calling me one day, not so long after our chat, to tell me we’re going hunting. Proper hunting with real mountains and guns and all the other associatedstraP yOURself In paraphernalia. Time to get real.

RIDE LIKE HELl aND Get tHere

about this, because most people don’t understand it. They’d prefer to know and name the deer, perhaps take it to a formal dinner dance, get to know it properly before perusing the menu and choosing the venison. They don’t want to see it in its domain or from the inside. Most people don’t know that in New Zealand, for example, the deer population is very high and the government drops poison baits to cull their numbers (and anything else that has a bite), giving them a send-off that includes paralysis, hypoxia and a slow painful death. That’s taxpayer financed, #lovenature for you. Perhaps I should find another pursuit to vent my middle-aged modern male angst, but I don’t want to. I want to go bush with Zach and just be there. I don’t need to pull the trigger, I just need to reattach with the wild. It’s been 20 years since I last ventured into it alone. I’ve become old and soft; I don’t look good naked anymore, I fell into the trappings of my success far too easily. Like slipping into a warm bath, I went from eating fish heads and rice in the jungle to

Paul Carter has written three international best-selling books, including the famous (or should that be infamous?) Don’t tell mum I work on the rigs, she thinks I’m a piano player in a whorehouse and Ride like hell and you’ll get there: detours into mayhem. Mr Carter has sold over two million books worldwide and his first two books are currently being turned into a feature film. Mr Carter grew up in Aberdeen, Scotland’s oil capital, and moved to Perth at the age of 15. By the time he was 16, he was working on drilling tools. Paul has clocked up 20 years of experience out in the field, working in Australia and far-flung destinations around the world, avoiding coups, jihadists and wars – all in the name of blessed hydrocarbons.

16/08/13 12:44 PM

AUTUMN 2016 // ISSUE 4

FEATURES SCHEDULE Winter 2016 MAJOR FEATURE

Deadline: 17 June 2016

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Rigs and rig technology, rig maintenance,

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PRODUCTS SHOWCASE

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INDUSTRY ANALYSIS

Global energy outlook

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Performance scorecard

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ADVERTISERS’ INDEX AJ Lucas Group Ltd �� 11

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Pressure And Safety Systems �� 9, 35

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Optus....................................................................... 31, OBC

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