From Bloomberg

  • Northern Territory government imposed restrictions in 2016
  • Risks can be reduced to acceptable level: chief minister

Australia’s Northern Territory has ended its ban on hydraulic fracturing, boosting the prospects for energy explorers operating in some of the country’s largest petroleum resources.

The nation is home to the world’s sixth-biggest reserves of shale oil and seventh-largest of shale gas, and the vast, remote Northern Territory remains in the early stages of exploration. The technique, known as fracking, has unlocked a flood of supply from the U.S. since the turn of the century, upending global energy markets.

The Territory “could have enough gas to serve Australia for almost 200 years,” the nation’s Resources Minister Matt Canavan said in a Twitter postTuesday. “There could be oil, too, which would help our national security.”

Australia, one of the world’s biggest shippers of liquefied natural gas and coal, has struggled in recent years with fuel and power supplies as the nation tries to balance environmental concerns and domestic needs against much-welcome revenue and jobs from energy exports.

The Beetaloo Basin, which holds about 70 percent of the Territory’s prospective shale gas resources, is being targeted by Origin Energy Ltd. as part of a venture with Falcon Oil & Gas Australia Ltd. Other companies aiming for the region’s gas include Santos Ltd., in partnership with Tamboran Resources Ltd.

Potential Revolution

Origin’s Beetaloo venture, with contingent resources of 6.6 trillion cubic feet of gas, shares characteristics similar to the prolific Marcellus and Barnett shales in the U.S., RBC Capital Markets analyst Ben Wilson said in a note Tuesday. The Territory’s McArthur Basin “has the potential to do for the Northern Territory and Australia what the shale gas revolution has done for America,” Kevin Gallagher, Santos chief executive officer, said in a statement.

“The Beetaloo is not just one play but a series of stacked plays which increases the appeal further,” Wilson said. Origin plans to drill and fracture five wells in the Basin as soon as practical, Mark Schubert, the company’s executive general manager for integrated gas, said in an emailed statement.

The territory’s fracking ban was established in September 2016 by Chief Minister Michael Gunner, who had called for a scientific study to assuage concern by some locals over the potential impact of the drilling practice on land, water and environment. His government on Tuesday said it had accepted all 135 recommendations proposed by the independent inquiry, which was chaired by Justice Rachel Pepper.

Reducing Risk

The “risk from fracking can be reduced to an acceptable level,” Gunner said in a statement Tuesday. A series of “strict new laws and regulations will be put in place to ensure that when fracking takes place, we protect the environment, the cultures and lifestyles that rely on it,” he said.

About 49 percent of the Territory will remain off limits to fracking, including national parks and conservation areas. Meanwhile, a new pipeline transporting gas from the area to Queensland is due to start later this year, according to operator Jemena Ltd. That will effectively connect Beetaloo to the gas export hub of Gladstone, as well as the Territory’s Darwin, where ConocoPhillips operates the Darwin LNG plant, according to RBC’s Wilson.

The Territory’s shale prospects have previously drawn global interest, including from the late Aubrey McClendon, whose American Energy Partners LP was poised to acquire substantial interests in the region’s McArthur Basin.

Iron ore billionaire Gina Rinehart also holds interests in Beetaloo acreage through her closely held Hancock Prospecting Pty Ltd. unit. Others with interests in the Beetaloo include Japan’s Inpex Corp., operator of the Ichthys liquefied natural gas plant in Darwin, and Australia’s Pangaea Resources Ltd.

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