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Western Australian
Oil and Gas Review
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OODSIDE
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CONTENTS
Premier’s Foreword 2
Western Australian Oil and Gas 2008 — Year in Review 3
Movements in the Western Australian LNG sector in 2007 7
WA Oil and Gas Industry Evolution —
Structural Transformation of a Competitive Industry 9
The Future of Hydrocarbons:
Implications for Western Australia in 2008 and Beyond 11
Tight Gas to the Rescue 14
Investor Buy-in —
Customers See Opportunities in Local Oil and Gas Sector 15
Map 1: Significant Hydrocarbon Discoveries In Western Australia 18
Map 2: North West Shelf Oil And Gas 19
Oil and Gas Projects 2008 (Index) 20
OPERATING PROJECTS
Blacktip Gas 21
Barrow Island Oil 22
Beharra Springs Gas and Condensate 24
Blina–Boundary–Lloyd–Sundown–West Terrace Oil 26
Cliff Head Oil 28
Dongara–Mondarra–Yardarino–Xyris–Apium–Elegans
Gas, Oil and Condensate 29
East Spar Gas and Condensate 32
Enfield Oil 33
Griffin, Chinook–Scindian Oil and Gas 34
Harriet area fields Gas, Oil and Condensate 35
Hovea–Eremia Oil 41
Jingemia Oil 43
John Brookes Gas and Condensate 45
Laminaria–Corallina Oil and Condensate 46
Legendre Oil and Gas 47
Mount Horner Oil 48
Mutineer–Exeter Oil 48
North West Shelf Gas Project Gas, Oil and Condensate 50
Rough Range Oil 52
Stag Oil 54
Stybarrow Oil 55
Thevenard Island Oil and Gas 56
Wandoo Oil 57
Woodada Gas and Condensate 59
Woollybutt Oil 60
PROJECTS UNDER CONSIDERATION
Exmouth Plateau Gas 61
Greater Gorgon Area Gas 61
Ichthys Gas and Condensate 64
Macedon Gas 64
Julimar / Brunella Gas 65
Outer Browse Basin Gas 66
Pluto Gas and Condensate 67
Pyrenees Oil 68
Scarborough Gas 69
Tern–Petrel Gas 70
Torosa–Brecknock–Calliance Gas and Condensate 71
Van Gogh Oil 72
Wheatstone and Iago Gas 72
Whicher Range Gas 73
Yulleroo and Pictor Oil and Gas 74
PROJECTS NOT CURRENTLY IN PRODUCTION
Airlie Island Oil 76
Tubridgi Gas 77
WESTERN AUSTRALIAN PETROLEUM FACT SHEET 78
Abbreviations, permits and conversions 82
WESTERN AUSTRALIAN GOVERNMENT OVERSEAS NETWORK 83
1
Premier’s Foreword
Welcome to the 2008 edition of In actively seeking and encouraging companies with core
the Department of Industry and competencies in this area, the AMC aims to leverage off these
Resources’ Western Australian specialist skills to further develop local technologies and
Oil and Gas Review. capabilities in order to continue to provide excellent service to
Western Australia has a the oil and gas industry.
prosperous oil and gas sector, In addition, a Technology Precinct has been established at the
and this publication provides AMC which focuses on technology-driven organisations within
readers with details of current the marine, defence, oil and gas industry sectors.
projects in the State, as well Located within the Technology Precinct the new $11 Million
as information about the vast Central Services Facility will be the core meeting and networking
potential that still exists for the point for marine, defence, oil and gas organisations.
sector.
Western Australia continues to lead the way as Australia’s The Western Australian Government recognises that the oil and
number one resources investment destination, with more than gas sector is a highly competitive global industry.
$100 billion worth of projects either underway or planned over Developers and operators need to continually innovate and adopt
the next few years. These projects will create more than 38,000 new technology in order to remain competitive and to meet
construction jobs and more than 9000 permanent jobs. Oil and gas environmental and safety standards.
developments contribute a large portion of this.
In Western Australia we place a high value on the environmental
The value of Western Australian petroleum sales for 2007 was values of our State. We have firm, transparent environmental
$16.7 billion, an increase of around 8 per cent on the previous year. regulations in place to ensure we leave a sustainable legacy for
China’s phenomenal growth has resulted in an increasing demand the future.
for resources. As such, China has become the State’s largest Looking towards the future of our domestic gas market, the State
trading partner with petroleum exports to China accounting Government has released for tender WA’s first tight gas acreage
for a significant percentage of that trade. In September 2007, block - the West Erregulla block. It is located east of Dongara
China’s President Hu Jintao visited Perth, prompting a number of in the Dandaragan Trough and is thought to contain more than
significant resource agreements to be finalised between Western 388 billion cubic feet (11 billion cubic metres) of gas - enough to
Australian and Chinese companies. power WA’s entire domestic gas demand for more than one year.
Following President Hu’s visit, three of China’s principal petroleum In 2007 in State waters, production began on the Doric and Lee gas
companies have now invested in or have major business deals with fields, and the West Cycad oil and gas field. Other fields to begin
Western Australian companies. This follows PetroChina signing production included Stybarrow/Eskdale, Searipple and Apium.
an offtake agreement with Shell for the supply of liquefied natural Woodside’s Pluto LNG project was one of the most significant to be
gas (LNG) from the emerging Gorgon project. PetroChina is China’s given the go-ahead in 2007.
largest upstream petroleum company. This LNG supply deal with
Shell builds on the success of Western Australia’s current supply Environmental approval was also granted for the Gorgon gas
of LNG to Guangdong. project that will produce LNG on Barrow Island.
The North West Shelf project in Western Australia’s Pilbara region Other new fields actively under development in 2007 in
began exporting LNG to Guangdong in May 2006, under a 25-year Commonwealth waters included the Vincent oil field, the Angel gas
agreement. It still remains the largest international trade deal for field, the Van Gogh (Vincent) oil field, the Persephone gas field and
either Australia or China. the Blacktip gas field.
I am confident there will be further interest from international ARC Energy has also embarked on the largest frontier exploration
investors not only in China but from around the world, and that program to be undertaken in Western Australia.
foreign investment into WA will continue to increase.
Western Australia currently boasts more than 130 trillion cubic
In 2007, oil prices soared on global uncertainty, prices surpassed feet of discovered reserves but much still remains under-explored.
the symbolic milestone of US$100 a barrel and predictions for
2008 anticipate further increases. The State is rich in hydrocarbons, providing plenty of opportunities
for further discoveries and developments in the years ahead.
Nations that are rich in oil and gas are enjoying extraordinary gains
and opportunities, and are benefiting from the increased demand Western Australia’s petroleum exploration expenditure more
of importers such as China, Japan and India. than doubled in 2007 to reach a total of $1.9 billion, an increase
Western Australia is thriving in the current global industry climate of 102 per cent on 2006.
and the State is experiencing unprecedented prosperity. The Western Australia Government is already processing a record
w 2008Western Australia not only has the natural resources to make it an number of exploration and mining leases and the market shows
vie attractive investment option in the oil and gas sector, it also has few signs of slowing down.
strong, complementing foundations of knowledge and expertise. The booming resource sector will continue to provide a foundation
We have developed a strong service base for the industry, as well for strong economic growth in Western Australia.
as significant research and technology capabilities. I encourage you to find out more about our exciting petroleum
The State Government is committed to establishing Western sector in the Western Australian Oil and Gas Review 2008.
Australia as a centre of excellence in the provision of technology
alian Oil and Gas Reand services to the gas and subsea industry sectors.
tr The Australian Marine Complex (AMC), located in Henderson,
is dedicated to strategic innovation and is currently developing
ern Ausa cluster for companies servicing marine and defence related
t industries, including the oil and gas sector and in particular The Hon. Alan Carpenter MLA
es sub-sea technologies. Premier of Western Australia
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Western Australian Oil and Gas 2008 — Year in Review
World Economic Review and Outlook The combination of the weaker US dollar, geopolitical
According to the IMF (October 2007), global economic growth instability, OPEC’s reluctance to accelerate supply and
remained above 5 per cent in the first half of 2007. For the relatively low spare crude production capacity levels, will
first time, China, with growth of 11.5 per cent made the result in another year of strong oil prices in 2008. EIA predicts
largest contribution to global growth measured at market and the average WTI price to be US$73.5/bbl in 2008.
purchasing power- parity exchange rates. India and Russia The West Australian Economy
continued to grow at more than 9 per cent and about 8 per cent Western Australia is currently experiencing its largest
respectively. economic boom due to a thriving resources sector. Western
Together these three countries made up about one-half of Australia’s gross State product grew by 6.3 per cent in 2006-07
world growth over the past year. In contrast, economic growth (adjusted for inflation), significantly faster than the long-term
in the US in the first half of 2007 was about 2.25 per cent, while average of 4.6 per cent per annum during the past 15 years.
growth in the Euro area and Japan slowed in the June quarter, Most indicators show more favourable economic conditions in
after experiencing two quarters of strong activity. Western Australia than nationally. The unemployment rate is
As a result, inflation has been subdued in these mature lower and labour force participation higher, average earnings
countries. In particular, prices in Japan were essentially flat. are higher and retail spending levels and growth are above the
On the other hand, prices rose in China and India reflecting Australian average.
strong economic activity. (IMF October 2007). Western Australia has now become the largest State in
Since its July 2007 World Economic Outlook Update, the terms of exports with more than a third of the nation’s export
IMF has maintained its global growth forecast for 2007 at products emanating from this State. The strong performance
5.2 per cent, but downgraded growth for 2008 by about of the Western Australian economy has been based on strong
0.5 percentage points to 4.8 per cent. The downgrade is investment in the State’s minerals and energy sector over the
due to financial problems in the US and uncertain prospects past few years, which is now generating record production
regarding its domestic demand (as well as in Europe). levels and export volumes.
Tight financial conditions in the US are affecting its already Western Australian Oil & Gas 2006-07
deteriorating housing sector, and may spread to other sectors Western Australia’s petroleum exploration expenditure more
of the economy – increasing the likelihood of a sharp slowdown than doubled to reach a total of $1.9 billion, an increase of
in economic activity. This downturn is likely to affect the world 102 per cent on 2006. Earlier in 2007, an unprecedented
economy, reinforced by uncertain conditions in the world credit $841 million was announced to be spent on new exploration
market. Other risks impacting are potential inflation pressures work programs in the state’s far north, including the largest
arising from increasing oil and other commodity prices, and single work commitment in Western Australia’s petroleum
robust economic activities in China and India; and continued exploration history. In July 2007, the results of a second
large global current account imbalances (ABARE September bidding round were announced with exploration programs in
2007 and IMF October 2007). new offshore permits worth more than $560 million.
World Crude Oil Most petroleum exploration, investment and development is
Despite reaching levels close to the inflation adjusted highs of taking place offshore and Western Australia’s onshore areas
1980, current oil prices appear far from triggering widespread are under–explored and relatively untouched, despite the
recession. From an average price slightly under US$55 per potential for huge resources to be found. High prices have
barrel in January 2007, the West Texas Intermediate (WTI) increased the viability of exploration activity by moderating
oil price has increased dramatically to reaching almost the increasing costs and scarcity of equipment, material and
US$98 per barrel in early 2008. skilled labour. The viability of the service industries has also
While the Organisation of the Petroleum Exporting Countries increased with the accompanied demand for infrastructure.
(OPEC) announced they would increase production by Petroleum is the largest resource sector by value and an
500,000 bbl/d at their September 2007 meeting, they are increase of $1.2 billion saw it reach a record level of
resisting calls for further increases, stating that the current $16.7 billion. This was chiefly due to continued high world
market situation is not the result of a supply shortage, but oil prices and a sharp increase in crude oil production.
due to market speculation and politics. In 2006-07 the amount of capital expenditure on mining in
On the one hand it is less prudent to hold large inventories Western Australia alone amounted to $13.5 billion. This was w 2008
of oil given the high prices, but on the other the drop in a 26 per cent increase compared to the previous financial vie
inventories in the US as reported by the US Energy Information year, and it is expected that the strong demand for the states
Administration (EIA) is helping to fuel speculation of high oil resources by Western Australian trading partners will continue
prices. In light of concerns over the current crude oil market in 2007- 2008, economic growth in Asia is increasing the global
balance, OPEC decided to convene an extraordinary meeting in demand for oil and gas.
December 2007 to reassess the situation.
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