Exxon's Oz CSG venture

AUSTRALIA’S unconventional boom has attracted US supermajor ExxonMobil, with the company signing a farm-in deal to investigate coal seam gas potential in Victoria’s onshore Gippsland Basin.
Exxon's Oz CSG venture Exxon's Oz CSG venture Exxon's Oz CSG venture Exxon's Oz CSG venture Exxon's Oz CSG venture

Victoria's Gippsland Basin, courtesy of Geoscience Australia

Marija Stojkovic

The deal is Exxon’s first foray into Australia’s unconventional gas scene and comes long after a string of majors, including ConocoPhillips, BG Group and Total, have taken the plunge.

ExxonMobil Australia spokesperson Chris Welberry said Exxon had been keeping an eye on Australia’s unconventional gas scene for some time and was a big player in the unconventional gas scene overseas, while it had also been producing natural gas in the Gippsland Basin for more than 40 years.

He said the deal with unlisted Ignite Energy Resources would initially give Exxon a 10% stake in EL 4416 but in the event of success, there was an opportunity for the company to acquire a larger stake in future.

EL 4416 covers more than 3800sq.km of the Gippsland Basin in southeast Victoria and may contain as much as 35 trillion cubic feet of gas initially in place (high case) in unmineable lignite seams, more than 200m below the surface.

IER chief executive officer Len Humphreys told ENP the company had done significant work on the block and an exploration program in 2007-08 showed moveable gas.

The gas was produced to the surface and flared in sub-economic quantities.

As part of the farm-in, Exxon and IER will work together to evaluate and assess the natural gas potential in the deeper coal seams and determine whether it can be commercially produced.

IER will be the operator for the preliminary assessment phase which is expected to take a few months and will use existing geological data.

Following this, the partners plan to work with landholders and the community to identify a small number of potential sites from which core samples may be taken for further evaluation.

The joint venture hopes to gather five to seven core samples over the next 12-18 months to test the characteristics of the coal before deciding whether to proceed with future exploration.

Welberry said if the characteristics were favourable, a small-scale pilot would be carried out to see if the coal seams could be dewatered and produced.

“This first phase is really going to be very important to determine whether we can commercially produce gas from this coal or not.”

However, Welberry cautioned it would be five to 10 years before commercial quantities of gas would be produced.

In a brochure explaining the deal, both Exxon and IER stressed they were committed to working in partnership with individual landholders and the community at every stage to ensure transparency.

EL 4416 lies in a rural area where grazing and dairy farming exists.

The JV wanted to make clear hydraulic fraccing would not be used during the initial exploration phase and might not be necessary in the future to produce gas.

“Part of our evaluation of the next 12 to 18 months will be to determine the best way to produce the gas and whether hydraulic fracturing will be needed, should we proceed to gas production,” it said.

While fraccing is a pressing issue for the unconventional gas industry, wastewater and salinity are also issues that have drawn attention from industry opponents.

According to the JV, the natural gas in the onshore Gippsland Basin’s deeper coal seams was biogenic natural gas, meaning it was created by naturally occurring organisms that biologically decomposed organic matter over time.

This biogenic natural gas differs from the natural gas in Queensland and New South Wales, which is a mixture of biogenic and thermogenic natural gas.

“Because of the process through which the gas was formed in Gippsland, toxicity and salinity are not expected to be an issue from any water produced,” the JV said.

Humphreys told ENP the water that was extracted during the 2007-08 exploration was put in an open pond and was pure enough to put straight into irrigation without treatment.

Welberry said the JV was five to 10 years behind the CSG industry in Queensland and NSW.

“This is very early days, while it’s a large licence area, the early stages of exploration will be very low impact and as I say it will involve five to seven coreholes over the next 12-18 months,” he said.

“We’ve operated in this region for … 43 years, it’s a community that we’re very familiar with.

“[It’s] an area we’re very familiar with and we’re going to be open and transparent to communicate about this opportunity with the community as we take it forward.”