NSW CSG
Location
Gunnedah Basin, north-west slopes and plains, New South Wales.
Santos NSW CSG investment promises substantial benefits for state
Santos’ plans to develop the coal seam gas reserves of north west New South Wales could deliver a $15.2 billion boost to the state’s economy and see the creation of 2,900 ongoing full-time jobs.
Local communities in the north-west region would receive the greatest economic benefits from the industry, with over 40% of the benefits accruing directly back to the communities of Boggabri, Coonabarabran, Gunnedah, Muswellbrook, Narrabri, Quirindi, Scone and Singleton.
NSW Legislative Council inquiry into CSG
The General Purpose Standing Committee No. 5 is conducting an inquiry into the environmental, health, economic and social impacts of CSG activities. The role of CSG in the NSW energy mix will also be examined.
Overview of Gunnedah Basin Gas Exploration Project
Santos has interests in nine Petroleum Exploration Licenses (PELs) in the Gunnedah Basin, and operates six. In 2008, the company began an 18-month exploration program for coal seam gas (CSG). In 2010, a second phase of exploration and appraisal began, and will involve drilling of additional core holes and operation of pilot wells for testing purposes.
Explorers have searched for CSG in the Gunnedah Basin since the 1990s. Santos’ exploration program is spread over a larger area than any previous programs, with Santos operated permits covering approximately 22,000 sq km. The area includes the Gunnedah, Coonabarabran, Scone, Quirindi and Boggabri districts.
Exploration activities identify and test coal deposits, but the target is viable coal seam gas resources, not coal. To extract coal seam gas, mining is not required and other surface operations can continue with minimal disruption.
Exploration and Appraisal 2010-12
Santos plans to start constructing two pilot testing areas for its first pilot tests in the Gunnedah Basin late in 2010. Each pilot area will hold up to 5 small sites on which well heads and surface installations will be built. They are in PEL 1, as shown on the map (below), and both are on privately owned property.
The Glasserton pilot test area will be drilled and constructed in the Caroona area, targeting the Hoskisson seam expected at 315m below the surface. The Kahlua pilot test will be in the Mary’s Mount area, also targeting the Hoskisson seam expected at 250m.
Exploration 2008-10
The exploration program, which commenced in May 2008, involved the drilling of exploration core holes and seismic exploration (carried out mainly on roads). Baseline studies on the local environment, including groundwater, also commenced. The first phase of exploration showed results that indicated a second, two-year phase of exploration and appraisal was warranted.
Before coal seam gas could be commercially extracted in the Gunnedah Basin area, several more years of testing, analysis and planning would be required. At the moment, Santos only has NSW Government approval to explore for coal seam gas. No approval has been sought for commercial extraction of gas.
Partnerships
Santos has farm-in agreements with Australian Coalbed Methane Pty Ltd and Macquarie Energy Pty Ltd. Farm-in agreements allow Santos to earn part-ownership of Petroleum Exploration License (PEL) areas by operating exploration activities on behalf of the titleholder.
On 2 July 2009, Santos announced the next major step in its Australian CSG strategy with the acquisition of significant additional acreage in the Gunnedah Basin in northern New South Wales and an investment in leading local CSG company, Eastern Star Gas Limited (ESG).
Key elements of the $476 million transaction include:
- the acquisition by Santos of Gastar Exploration Limited’s 35% interest in various Gunnedah Basin exploration permits and production areas operated by ESG for $300 million
- the acquisition by Santos of a 19.99% interest in ESG from Hillgrove Resources Limited for $176 million
Santos and ESG’s combination of operated CSG permits in the Gunnedah Basin will cover a total area of approximately 63,000 square kilometres. The combination will consolidate the leadership position of both Santos and ESG among the 15 companies active in CSG acreage in NSW.