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South Australian Petroleum Review – May 2020

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Introduction

The Energy Resources Division in the South Australian Department for Energy and Mining is the lead agency in facilitating petroleum and geothermal activities in the state. It has responsibility for facilitating the generation of royalty income, economic development, wealth and jobs, and the minimisation of impacts on the environment and public safety through efficient management of the state's petroleum and geothermal rights on behalf of the people of South Australia.

The right geology, together with policy innovation and excellent investment frameworks are reasons why South Australia is leading oil and gas transformation in Australia.  South Australia is widely regarded as having one of the country’s most effective upstream petroleum frameworks. It offers a supportive investment framework, a trusted regulatory framework, benefits from its central location and pre-existing infrastructure, and is a jurisdiction focused on increasing capabilities and productivity.

Petroleum exploration and production activity

ONSHORE PETROLEUM LICENSING

Petroleum Exploration Licences: Forty three petroleum exploration licences (PELs) are current over the State’s onshore petroleum prospective areas.  Nearly all of the petroleum prospective regions of the State are now under licence or application, with the total area of granted PELs covering 197,068 km2, and a further 370,828 km2 of the State under application (Figure 1).

Overlapping applications can be made over current PEL Applications (PELAs) at any time but the first PELA has priority for determination followed by successive applications.

SA tenements

Figure 1: South Australian petroleum tenements

New Cooper and Otway Basins Acreage Releases: In May 2019 the SA Government invited work program bids for five blocks in the Cooper Basin and three blocks in the onshore Otway Basin.  Bidding closed at 4pm on Friday 29 November 2019.

Work program bids were lodged for all Cooper Basin blocks and one Otway Basin block.  A total of 11 bids were received from 9 companies, including two joint ventures comprising two companies each.

SA is currently liaising with the successful bidders regarding grant of new petroleum exploration licences.  Most Cooper Basin applicants will have to conclude native title land access agreements ahead of licence grant – either via the ILUA process or the right to negotiate process (Figure 2).

Petroleum Retention Licences: An initiative in 2013 to increase the extent of retention and production licences has been very successful resulting in a 330% increase from 7,645 square kilometres in 2013, up to the current 24,457 square kilometres in April 2020.  286 petroleum retention licences (PRLs) are current over an area of 17,125 km2, with almost all of these located over proven productive oil and gas play trends in the Cooper/Eromanga Basins (Figure 2). Petroleum Retention Licence (PRL) agreements for proven oil and gas play trends in the Cooper/Eromanga Basins have to date been concluded with Senex Energy, Beach Energy, Drillsearch Energy (now a Beach Energy subsidiary) and Santos Limited (and joint venture partners with those companies).

Since the first of the PRL initiative licences were granted in May 2014 to end December 2019, 45 exploration wells have been drilled resulting in 19 new field discoveries.  A further 30 appraisal wells have been drilled (19 successful) and 5 development wells (4 successful).

Cooper Basin tenements

Figure 2: Map showing Cooper Basin tenements, drilling and seismic acquisition in 2019-20


NATIVE TITLE AND LAND ACCESS

Right to Negotiate: To date, the relevant registered native title claimants/holders, petroleum explorers and the State Government have concluded 55 land access agreements in relation to a total of 51 licence areas:

  • 7 in the Arckaringa Basin;
  • 37 in the Cooper Basin;
  • 4 in the Eromanga Basin;
  • 1 in the Officer Basin; and
  • 2 in the Arrowie Basin.

All of these South Australian agreements cover the full cycle of petroleum activities including exploration, development and production.  An additional seven PEL applications are currently progressing through the Right to Negotiate process, pursuant to the Native Title Act 1993.

Conjunctive Indigenous Land Use Agreements (ILUAs): Considerable progress has been made through constructive negotiations involving industry, the SA Government and the South Australian Native Title Services Ltd (formerly ALRM) to establish conjunctive ILUAs for the whole of the Cooper Basin.

In February 2007, the Yandruwandha/Yawarrawarrka people entered into the first petroleum ILUA in the South Australian Cooper Basin over approximately 40,000 km2. This agreement also represented the first conjunctive petroleum ILUA in a productive province in Australia.

On 2 February 2012, a second conjunctive petroleum ILUA with the Wangkangurru/Yarluyandi people was registered with the National Native Title Tribunal.

SA met with representatives of the Dieri native title holders in February 2020 to initiate discussion on the development of a similar conjunctive ILUA.

To date, industry has signed on to at least eighteen ILUA’s with the Yandruwandha/Yawarrawarrka and Wangkangurru/Yarluyandi people, of which 12 related to the granting of PELs in the Cooper/Eromanga Basins.

Cooper/Eromanga Basins Aboriginal Conference: The Cooper Eromanga Basins Aboriginal Conference (CEBAC), supported by the South Australian Government, was most recently held in October 2019 and continues to bring together representatives from the Dieri, Yandruwandha/Yawarrawarrka and Wangkangurru/Yarluyandi people together with executives of oil and gas industry participants within the basins, as well as government officials in order to foster ongoing relationship building and increased Aboriginal participation in the oil and gas sector workforce.

Over the 2018/2019 period, key focus areas of the program have included developing strategies to encourage Aboriginal people to undertake pre-employment training, as well as the success in assisting to secure ten employment placements for Aboriginal people in the oil and gas industry.  Participating employers include Santos Limited, Compass Group (who provide camp and facilities services in Moomba), OZ Minerals, Schlumberger and Global Engineering.

GISERA: To foster a constructive dialogue in the State’s South East, the South Australian Government has partnered with CSIRO’s Gas Industry Social and Environmental Research Alliance (GISERA) for a three year in-depth study. GISERA have engage local stakeholders as well as industry and regulators to research social and environmental issues related to natural gas operations and reports can be accessed here: https://gisera.csiro.au/states/sa/.


DRILLING AND SEISMIC SURVEYS

Cooper Basin: In 2019, a total of 134  wells were drilled including side tracks, 103 (1 exploration, 34 appraisal, 68 development) have been cased for production (Figures 2, 3 and 4). Santos drilled 58 of the SA Cooper Basin wells, Beach Energy drilled 70 and Senex Energy drilled 6. Success rates are shown in Figure 3 and Table 1.

 New entrantsSantos Joint VentureAll
Exploration wells drilled 30048348
Commercial success rate (%) 4050 
Technical success rate (%) 4452 
Appraisal and development wells drilled270679949
Commercial success rate in appraisal and development wells (%) 8795 

Table 1: Cooper and Eromanga basins conventional oil and gas success rates, January 2002 to 23 April 2020.


Oil success

Figure 3: Oil exploration success rates for the SA Cooper region, 1962 to 2020.

So far in 2020, four exploration wells, 18 appraisal and 18 development wells have been drilled in the Cooper-Eromanga basins.

Bauer Field

Photo: Bauer Field with four active rigs (3 drilling, 1 workover) September 2019 – courtesy of Beach Energy

Otway Basin: It is business as usual for conventional oil and gas exploration in the Otway Basin in the South East, however a 10 year moratorium on hydraulic fracture stimulation is currently in place. Two exploration wells and one development well were drilled in the SA Otway Basin in 2019 and one development well (Haselgrove 4 side track) has been drilled this year.

Beach Energy are planning appraisal wells in 2020 to further evaluate gas discoveries at Dombey 1 and Haselgrove Gas field.  Haselgrove 4 was successfully side-tracked in April 2020 and will be tied into the new 10TJ/day Katnook Gas Plant which commenced operations in February 2020.

Leigh Creek Energy’s Underground Coal Gasification Project: in 2018, the South Australian Government approved Leigh Creek Energy to construct and operate a small scale, pre-commercial demonstration plant to test the commercial feasibility of underground coal gasification at Leigh Creek. Leigh Creek Energy commissioned the demonstration plant in October 2018, and decommissioned the plant in April 2019. LCK have indicated that they intend to continue exploration activities to identify and delineate potential structures, the depth of the coal seams, formation permeability and stress orientations.

Tri-star ENERGY’s Arckaringa basin exploration: Tri-Star Energy’s Statement of Environmental Objectives (SEO) for fracture stimulation in their Arckaringa Basin PEL 122 and 123 licences was approved and gazetted on 4 April 2019 following a public consultation process.  Tri-Star are currently in the process of reviewing the SEO for drilling in the Arckaringa Basin, and will not commence operations until it receives the final stage of government approvals.

Seismic acquisition: Senex’s Westeros 3D was the only conventional seismic survey acquired in South Australia in 2019. Beach acquired VSP’s in several of their wells in the Cooper-Eromanga Basin and Rawson acquired airborne gravity data over their Otway Basin acreage. No seismic acquisition has occurred to date during 2020.

Drilling statistics

Figure 4: Exploration, development and appraisal drilling statistics, 2010 to 2019.


PRODUCTION AND ROYALTIES

Cumulative petroleum production is shown in Table 2 and Figures 5-9 show sales and production trends. Detailed production data (to well and individual pool level) can be downloaded via the PEPS-SA database: http://energymining.sa.gov.au/petroleum/data_and_publications/peps-sa

Petroleum royalty payments to the State for the 2018/19 financial year were $128.0m, with estimated total product sales of $1.66b.  This brings the cumulative royalty paid since 1970 to $3.20b (2018/19 dollars) and cumulative sales to an estimated $52.52b (2018/19 dollars). Since 1991 the average royalty paid equals a globally competitive 6.75% of the sales value.

Cumulative Production
(2018-19)
5.50 TCF sales gas (since 1970), 215.03 mmbbl oil (from 1983), 88.13 mmboe LPG (from 1984), 87.11 mmboe condensate (from 1983)
Annual Production
(2018-19)
62.55 bcf sales gas, 7.2 mmbbl oil, 2.4 mmboe LPG, 2.15 mmboe condensate

Table 2: South Australian Cooper Basin production statistics

 

Royalties and sales
Figure 5: Petroleum sales and royalty payments 2009–10 to 2018–19.
   

Figure 6: Gas sales, 2009–10 to 2018–19.

Gas sales

 

Figure 7: Crude oil sales, 2009–10 to 2018–19

Crude oil sales

Figure 8: Condensate sales, 2009–10 to 2018–19.

Condensate sales

 

Figure 9: LPG sales, 2009–10 to 2018–19.

LPG sales

Gas Incentivisation

PACE GAS GRANTS

PACE Gas grants continue to support a strong and diverse portfolio of projects in the Cooper and Otway basins (Figure 10) that are expected to result in more than $223 million of industry co-investment.  The nine grants approved under the program target upside potential to unlock more than 1,950 petajoules (PJ) of South Australian gas.

Round one aimed to deliver additional gas to markets from the end of 2019, and round two by the end 2020.  PACE Gas is aimed to bring forward industry investment that would increase the supply of locally produced and competitively priced gas to South Australian markets.  PACE Gas funded discoveries and additional production will generate royalties and deliver gas from fields located nearer to markets than from interstate.

The Department for Energy and Mining continues to monitor progress and success of the existing nine PACE-funded projects.  Production results from PACE Gas supported projects include more than 1700 tera-joules (TJ) of natural gas produced for South Australian customers from February 2018 to December 2019. To date highlights include:

  • Beach Energy’s Haselgrove 3 Otway Basin gas discovery, now producing gas to the local South East market.
  • Senex Energy’s Gemba 1 Cooper Basin gas discovery, now producing gas.
  • Santos-operated Cooper Basin re-fracture stimulation and underbalanced drilling projects, now both producing gas.
  • The Senex-Santos-Beach Vanessa East Pipeline, which began delivery of gas to Pelican Point Power Station in July 2018.

For more information: http://www.energymining.sa.gov.au/petroleum/latest_updates/pace_gas

PACE Gas Projects

Figure 10: Location of PACE Gas grant projects



AUSTRALIAN GOVERNMENT GAS ACCELERATION PROGRAM

The PACE grant program was followed nationally in 2018 with the Australian Government’s Gas Acceleration Program (GAP) which aims to stimulate new gas supplies into the eastern Australian market. Successful projects must deliver gas to markets by 30 June 2020. In 2018 Beach Energy received a $6 million GAP grant to co-fund construction of the new $22 million 10TJ/day Katnook Gas Processing Facility (Figure 10), to bring this and other potential new sources of gas to customers.  The first export of gas to the local Southeastern SA market began on 10 February 2020.

Katnook gas plant

Photo: Katnook Gas Plant under construction, December 2019

The Roundtable for Oil and Gas in SA

The Roundtable for Oil and Gas Projects in South Australia was formed in 2010 and currently comprises over 2279 members from over 1233 organisations comprising industry, governments, peak representative organisations for industry, environment protection and aboriginal people; research institutions & individuals.  The aim of the Roundtable is to provide a forum for members to help inform the South Australian Government on the key priorities that will underpin the Roadmap of Onshore and Offshore Oil and Gas Projects.

At a meeting of the Roundtable held on 11th November, 2019 – attended by 161 members, a series of Renewed Working Groups (WGs) were convened to identify key priorities that will shape planned directions paper, oil and gas strategy and expanded Roadmap for Oil and Gas Onshore and Offshore Projects in South Australia. Roundtable Renewed Working Groups are:

1 Environment and Water
2 Supply Chain and Markets
3 Knowledge
4 Infrastructure
5 Legislation / Regulation

You are welcome to attend the next meeting of the Roundtable for Oil and Gas Projects in South Australia:

When: Monday, 30th November 2020
Where: National Wine Centre of Australia, Corner of Botanic and Hackney Roads, Adelaide SA 5000.
For details: http://www.energymining.sa.gov.au/petroleum/roundtable_for_oil_and_gas

Roundtable 2019

Photo: Barry Goldstein addressing the roundtable meeting in November 2019 at Adelaide Oval.

Regulatory compliance

The Petroleum and Geothermal Energy Act 2000 is designed as an effective, efficient and flexible regulatory system for all exploration and production activities for petroleum, gas storage and geothermal resources onshore in South Australia, as well as the construction, operation and technical regulation of high-pressure transmission pipelines.

Key objects of the Act include:

  • protecting the public and the environment from risks inherent in activities regulated under the Act,
  • establishing appropriate consultative processes, both with people directly affected by activities regulated under the Act, and the general public, and
  • ensuring appropriate levels of security of natural gas supply.

DEM Energy Resources Division prepares an annual compliance report to report on the administration of the Act and the regulatory performance of the industries covered by the Act. Current and previous reports can be accessed here.

Significant SA petroleum anniversaries in 2020

50th anniversary of the discovery of Cooper Basin oil at Tirrawarra Field

In July 1970, Bridge Oil announced a gas flow from the Patchawarra Formation and light crude oil in the Tirrawarra Sandstone in Tirrawarra 1 exploration well - the first oil to flow to the surface in the Cooper Basin. Flooding in the region slowed appraisal of the discovery. When floodwaters receded in 1970-71, a new phase of exploration got underway and led to gas discoveries at Big Lake, Coonatie, Dullingari, Burke, Brumby and Kanowana and oil and gas discoveries at Fly Lake and Moorari.

Don Dunstan

Photo: Premier Don Dunstan at Tirrawarra 1 with Paul Strasser, one of the Directors of Santos Ltd (courtesy of The Advertiser, DEM Photo no. 042774)

You can read more about over 150 years of petroleum exploration and production history in South Australia here.

For more information, contact:

Elinor Alexander
Director Geoscience & Exploration Branch
Energy Resources Division

+61 8 8429 2436
elinor.alexander@sa.gov.au