- East coast gas prices have brought ideas such as the popular west-east pipeline to the forefront
- Sustained high gas prices make the commercialisation of under-developed regions critical to national supply
- Government-led propositions to unlock areas such as the Canning Basin for domestic gas production are gaining traction
- Black Mountain has received approval to supply gas to both domestic and international markets
- 2022 is a pivotal year for gaining access to markets
A worsening energy crisis is at play across the globe and feeling the price pressures here in Australia is no exception.
East coast gas supply issues are as bad as they have ever been and while it’s not new news at all that the energy sector has been warning of a domestic gas supply crunch for years, Government and energy producers are now seriously looking for short-term, mid-term and long-term answers – including more domestic gas production.
Increased domestic gas production looks to be the front runner to provide a solution to this crisis and provide the rest of the country with the energy needs it requires as we transition away from coal, something a sleeping giant such as the Canning Basin is ready to take full advantage of.
The Canning Basin
Exploration and development has been – and is – ready to push full steam ahead in the Canning Basin on the back of increased pressures to shore up gas supplies for both domestic and international markets.
Situated in northwest Western Australia, the 530,000 square kilometre Canning Basin is the largest under-developed onshore oil and gas district on the continent.
Now, more than ever, it has the potential to become Australia’s next big petroleum-producing region. Let’s look at all the forces in play that have the Canning Basin primed for commercialisation for developers such as Black Mountain Energy (ASX:BME).
The European Squeeze
The war in Ukraine has had a major effect on commodity trading in and around Europe – most significantly for natural gas – of which Russia had, until recently, been one of the world’s largest exporters.
Sanctions against the import of Russian gas have led to a reshaping of global energy flows and the LNG industry is now facing much higher demand as Europe displaces Asian markets as the growth driver for the sector.
While countries across the globe scramble to access new supply chain avenues, gas producers are themselves scrambling to meet the demand.
For budding developers such as Black Mountain, sustained high gas prices make the commercialisation of underdeveloped regions such as the Canning Basin much more economically viable.
An Energy Transition
For the past decade, the shift from high-polluting fossil fuels such as coal-fired energy generation toward clean energy solutions has been ramping up significantly.
However, with battery technology and manufacturing at scale yet to drive down commercial costs, energy infrastructure developers are still unable to realise the investment returns required for large-scale battery grids to help stabilise and lower electricity prices.
This means our transition to renewables will be reliant on gas to provide that stability for many years to come both domestically and internationally.
Changing of the Guard
The new Labor Government’s Federal Resources Minister Madeleine King said that while there’s little that can be done to ease gas prices on the east coast in the short term, the new Labor government is doing everything it can to burgeon the development of domestic gas supply into the future.
In an interview by the ABC last month, former WA Premier Colin Barnett (2008-2017) has re-invigorated calls for a transcontinental gas pipeline to connect west coast gas production to the rest of Australia – just one of the proposed infrastructure frameworks that would streamline Canning Basin gas production to markets.
Commercialisation
Black Mountain chairman Rhett Bennett said the rapid uptick in demand in both the domestic and international markets, as well as a pivot away from coal and towards gas as a transitional source of energy by government agencies, are all signs that the Canning Basin is about to have its moment in the sun.
“The Canning Basin is really at a tipping point for development: the moratorium on fracture stimulation has been lifted, we have support from traditional owners and the state government, the need for gas has been proven and our ability to operate is known,” Mr Bennett said.
The company’s Valhalla project is well on its way to completing all regulatory processes required for commercialisation and is working on a variety of infrastructure and transportation plans with key partners in the region.
“We recently announced positive news from our gas blending and suitability study and shortly we will also be commencing joint technical studies with potential commercial partners,” Mr Bennett said.
Pipeline infrastructure for the region would undoubtedly increase accessibility to both domestic and international markets and it will require cooperation with other operators in the region like Buru Energy with their Rafael conventional gas developments.
These developments are really starting to uncover what is ultimately going to be a large attractor and driver of accelerating infrastructure build-out in the region.
Mr Bennett said 2022 would be a pivotal year for uncovering further transport-to-market solutions for Valhalla and the region as a whole.
“Due to the potential size of the Canning gas development, large-scale commercialisation solutions need to be sought,” Mr Bennett said.
“There are two key categories for gas in the Canning Basin: what to do with the gas pre-pipeline and post-pipeline. We are acutely focused on both periods of time, which will require separate, yet complementary solutions.
It seems like a matter of when – not if – the Canning Basin’s potential will be unlocked, and Black Mountain is strapping themselves in for the ride.
Shares in Black Mountain Energy closed the day trading at 7 cents.