News & Media

It’s a thankless time to be a gas producer.

While the popular rhetoric around the industry is all about windfall profits, tax minimisation and corporate greed, the reality on the ground at the small end of town is overwhelming regulatory processes, eye-watering drilling costs – and even a near-bankruptcy.

The likes of Shell, Chevron and Exxon can navigate the overlapping federal and state bureaucracy thanks to their vast resources.

But it is a different story for the junior explorers and producers, a sector that has drastically shrunk in recent years and includes some struggling to survive and play a part in producing a fuel that will be critical both in Australia and in Asia as the energy transition progresses.

The huge supply and price shock impacting global oil and gas markets as a result of the Iran war sharpens the context of what is going on.

Australia’s position in global LNG exports – behind only the United States and Qatar last year – underscores the important role it can play in energy security in Asia. And ample supply is key to keeping prices at home relatively insulated from the roughly doubling in LNG prices overseas.

But the difficult investment climate in Australia for gas is taking a toll. National oil and gas production fell last year to its lowest level since 2018, according to research firm EnergyQuest, with LNG shipments hitting a five-year low and the lowest oil and liquids output for seven years.

Domestic gas output also slid last year, at a faster rate than demand dipped, contributing to the competition regulator’s warning last week of potential shortages in the south-east this coming winter.

At last week’s Australian Domestic Gas Outlook conference in Sydney, the painfully slow and bureaucratic process for approvals stood out as the loudest complaint – alongside worries about the effects of a gas reservation system.

Small explorers and producers were not calling for budget-straining handouts, but rather action to reduce a massive regulatory burden that significantly inflates costs, often for questionable benefit to the environment or other stakeholders.

Amplitude Energy chief executive Jane Norman described the junior’s five-month quest for approval for an administrative tweak to the recorded amount of gas that could flow through an existing pipeline.

The capacity of the pipeline to the company’s Sole gasfield off the Victoria coast had been incorrectly recorded on the pipeline licence, so an administrative change was sought.

Complicating the picture were the several different authorities involved, given that the pipeline crossed from Commonwealth waters to state waters and then onshore.

Twenty-three steps and five months later, Amplitude was finally able to increase gas supply into the market.

“The technical evaluation took seven weeks – the rest was bureaucracy,” Norman said, showing a mind-boggling graphic of the process Amplitude went through to get its approval, a red dot bouncing around eight separate regulatory bodies, government departments and ministerial offices.

Drilling and development projects clearly require a thorough assessment, and for these, it is the duplication of Commonwealth and state regimes, often with overlapping requirements, that pose the biggest headache.

Beach Energy took four years to secure approvals to add a single well – the Enterprise well – in Victoria, said chief executive Brett Woods. The 45 regulatory approvals, permits and consents from 14 different authorities involved submitting more than 10,000 pages of documents.

In Queensland, Senex Energy chief executive Darren Stevenson also points to overlap between federal and state authorities on approvals for coal seam gas projects. He says the extra federal requirements for the drilling of bores to check groundwater – a critical issue already thoroughly covered in the state’s process – add two or three years to the approvals process and “probably about 10 million bucks”, with little to show for it.

Senex, owned by Korean steelmaker Posco and Gina Rinehart’s Hancock Prospecting, had been hopeful that reforms of the environmental protection laws would streamline the process. While that was thwarted by the specific exclusion of fossil fuel projects from a more efficient assessment, a pathway negotiated by the industry leaves it at least no worse off, Stevenson says.

3D Energi, the ASX-listed minnow that partnered ConocoPhillips in a two-well exploration campaign in offshore Victoria, said the approvals process for its environment plan took two years.

The resources of the junior – now struggling to stay afloat after being slammed by unexpected drilling costs for the wells – were already stretched by the almost 30,000 pages of documents eventually involved, including reports on some 14,000 engagements with stakeholders.

Such monumental red tape overwhelms the scant resources of small explorers, many of whom are questioning the government’s commitment to gas that was declared in its Future Gas Strategy in May 2024.

Almost two years later, the industry is still waiting for measures that would support the role of gas in the economy and the transition to low-carbon energy.

Still lacking is also a clarification promised by the government in January 2024 on who qualifies as a “relevant person” with whom a project proponent needs to engage – an issue that prompted lengthy legal challenges to both Woodside Energy’s Scarborough gas project off Western Australia and Santos’ Barossa project in the Timor Sea.