Lakes Oil asks Victoria to get on-board with onshore gas
Summary: LAKES Oil has taken an extraordinary proposal to the Victorian Government that the gas company says could solve the state’s gas shortage.....
The publicly listed company, part owned by Gina Rinehart, believes it could recover $700 million worth of onshore conventional gas a year from three Victorian sites if it was permitted to undertake works and was provided with a Government loan.
The state has a moratorium on conventional onshore gas exploration until mid-2020.
But Lakes Oil, which holds several exploration licences, believes it could provide new gas into the state’s network within 18 months.
It has written to the resources minister proposing a deal, which would see:
LAKES Oil permitted to drill for conventional onshore gas at four well sites in Gippsland and in South West Victoria;
LANDHOLDERS paid a 1 per cent royalty, in addition to a 10 per cent royalty paid to the Government, for any gas recovered by Lakes Oil;
VICTORIAN consumersand industry given priority access to the gas produced by Lakes Oil;
THE State Government provide an-at cost loan to speed up the gas works; and
LAKES Oil surrender exploration permit PEP 163, which covers the Surf Coast region, near Geelong.
The company has told The Weekly Times it believes it could recover $700 million worth of gas a year from its Wombat-5, Otway-1, Greenslopes-2 and Portland Energy-1 wells.
“Our central estimate is it would pay $70 million per annum to Government a year in royalties,” Lakes Oil chief executive Roland Sleeman said.
“It could be more, it could be less.”
The unusual request comes less than a week after Resource Minister Wade Noonan resigned from cabinet and just days after Victoria’s Coalition Opposition announced a new onshore gas policy in a bid to address rising gas costs.
The Coalition proposal would permit private companies to drill for conventional gas onshore, on the condition it was reserved for Victorian customers first; that farmers that own the land receive a portion of the Government’s royalty; and had the right to veto the company.
Mr Sleeman said Lakes Oil was unaware of the Opposition’s policy when it took its proposal to the Government.
“The Coalition never discussed it with us,” Mr Sleeman said.
Mr Sleeman suggested the Wombat gas field in Gippsland could provide up to 20 petajoules of gas per year for the next 20 years.
“That’s about 10 per cent of Victoria’s demand and would probably solve, or go a long way, to solving the current problem,” he said.
Describing the Gippsland resource as “low-hanging fruit”, Mr Sleeman said it would be the quickest site to access new onshore gas reserves in Victoria.
“We could have Wombat online within 18 months … It could get Victoria out of a jam”.
Mr Sleeman said Lakes Oil could provide enough gas to meet the state’s requirements for 15 years if allowed to drill its Portland Energy Project.
“The game changer, we believe, is the Portland Energy Project (PEP175), which could have several trillion cubic feet of gas … we estimate it could recover 150 petajoules a year.”
Mr Sleeman said it would take longer to recover gas from Portland, but existing infrastructure and gas network meant it could be delivered cheaply.
He said the site had been drilled safely in the past when oil, not gas, was targeted.
“The time is right, Victoria is coming under immense pressure, for a problem of its own making,” he said.
“They can’t blame other states for this.
Lakes Oil sent a letter to shareholders this afternoon explaining its proposal.
The company is also undertaking legal action against the State Government, claiming the moratorium and a ban on fracking are illegal.
The Government maintains there are no proven or probable onshore gas resources in the state, and has allocated more than $40 million for a study of gas resources by the chief scientist.