Buru Energy to keep 15% of Canning gas for Western Australia market
Sydney (Platts)--7Nov2012/429 am EST/929 GMT
Explorer Buru Energy and its partner Mitsubishi Corp have struck an
agreement with the state government of Western Australia, under which 15% of
any gas they discover in the remote Cannning Basin is reserved for domestic
use before it could be delivered to an export-oriented LNG project.
The US Energy Information Administration last year estimated the Canning
Basin's unconventional gas resources at about 229 Tcf, and Buru has been in
the habit of calling the area a "superbasin."
The state agreement provides for the joint venture's five permits in the
Canning Basin to be exempted from the periodical relinquishing of 50% of
their area until January 31, 2024, subject to meeting exploration, appraisal
and development obligations, Buru said in a statement. The agreement is
targeting the delivery of at least 1,500 petajoules of gas into the domestic
market over 25 years, with Buru and Mitsubishi required to submit a proposal
for the development of a domestic gas project and pipeline by June 30, 2016.
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The agreement provides additional security of tenure for the joint
venture's 17,000 sq km (1.7 million hectares) of acreage, Premier and State
Development Minister Colin Barnett said in a statement Wednesday.
The agreement will facilitate further targeted gas exploration to
support the Canning Basin domestic gas project and the development of a
pipeline to the state's Pilbara region and existing industrial areas in
Western Australia, Barnett said. It also provides for potential future supply
of gas for export as LNG once the domestic gas project is under development.
The deal with the Canning joint venture "ensures gas discoveries are
rapidly brought into production, and that gas is delivered to the state's
domestic gas network, before any is exported," according to Barnett. "If
commercially viable gas resources are discovered, by mid-2016 the partners
will be required to submit a plan for construction of the domestic gas
project, including a pipeline connecting to the existing state gas network in
the Pilbara."
Buru and its Japanese partner have been exploring the Canning Basin for
the past three years, identifying potentially world-class gas resources, a
significant new oil field, and a trend of oil prospectivity, said Buru
Executive Director Eric Streitberg.
"The state agreement provides a mechanism for us to continue to explore
and develop our acreage in the most efficient way," he added. "Our goal is
the development of a domestic gas project delivering gas into the existing
domestic gas network in the Pilbara, promoting long-term energy security for
Western Australia. The state agreement facilitates this."
The Canning Basin is in northern Western Australia's remote Kimberley
region. Only around 250 wells have been drilled in the basin, which is nearly
three-quarters the size of Texas.
Buru has ambitions to become the biggest domestic oil and gas producer
in Western Australia and is planning for its Canning operations to be
supplying around 200,000 Mcf/d of gas, or about 20% of the state's domestic
market, and 10,000 b/d of liquids by 2014. In the longer term, Buru is eyeing
a 5 million mt/year LNG project, should it firm up the 4 Tcf of gas needed to
underpin a development.
Western Australia also has a 15% domestic gas reservation requirement
for new offshore conventional gas projects which are being developed to
underpin LNG export facilities.
Natural gas provides about 50% of the state's domestic electricity
generation, and contributes to the production of key resource exports
including iron ore, alumina, base metals and gold. The state's domestic
market is currently about 1 Bcf/day.
--Christine Forster, christine_forster@platts.com
--Edited by Geetha Narayanasamy, geetha_narayanasamy@platts.com