KNOC joins ConocoPhillips, 3D Energi in high-stakes Otway gas push amid looming east coast shortfall

The move underscores growing global interest in Australia’s tightening east coast gas market, which is projected to face supply shortfalls as early as 2029.

Noel Newell, executive chairman of 3D Energi.

South Korea’s state-owned energy giant Korea National Oil Corporation has made its first foray into Australian exploration, joining ConocoPhillips Australia and junior explorer 3D Energi in a high-stakes drilling campaign targeting offshore gas reserves in Victoria’s Otway Basin.

The move underscores growing global interest in Australia’s tightening east coast gas market, which is projected to face supply shortfalls as early as 2029.

KNOC’s participation, subject to regulatory approvals, marks a significant strategic step as the east coast grapples with surging winter demand, constrained pipeline capacity and political opposition to new domestic gas development.

KNOC will join the ConocoPhillips-led joint venture that plans to spud exploration wells in the Otway Basin in the second half of this year. The project, located between Victoria and Tasmania, received drilling approval from offshore regulator NOPSEMA in 2023 for up to six wells across two permits. Work is scheduled for completion by 2028.

ConocoPhillips holds a 51 per cent stake in the venture and had previously agreed to carry the first $US65m ($101m) of drilling costs. The remaining interest is split between 3D Energi and, pending regulatory clearance, KNOC.

3D Energi executive chairman Noel Newell said KNOC’s entry validated the commercial and geological potential of the Otway acreage.

“It is incredibly encouraging that KNOC will join our Otway joint venture,” he said. “It supports our view of the exceptional prospectivity in our permits and the scale of the opportunity ahead. KNOC is a globally integrated oil and gas company. We … look forward to working together as we aim to become a significant east coast gas producer.”

A gas field rig in the Bass Strait. Picture: Sharon Walker

The east coast gas market – particularly in Victoria, the country’s most gas-dependent state – is under pressure as legacy Bass Strait fields decline. Victoria’s manufacturing sector remains heavily reliant on gas, while households drive sharp seasonal demand spikes during winter.

Despite this reliance, the state Labor government has adopted a cautious stance on new gas developments. In 2017, it legislated a moratorium on onshore gas exploration and has since introduced bans on new residential gas connections. The state also led opposition to gas’s inclusion in the federal government’s capacity investment scheme.

The state government has denied it is ideologically opposed to gas, arguing instead that available reserves are insufficient, and has moved instead to curtail demand by banning new residential connections.

However, the persistent cost-of-living crisis has limited household electrification and Victorian gas demand remains robust.

In addition there appears little scope to increase supplies from neighbouring states as infrastructure bottlenecks limit flows from Queensland.

Absent new discoveries, the state could be forced to import LNG, a move critics warn could elevate domestic prices further.

Manufacturers have said the viability of the industry would be thrown into question with increased costs, while a record number of households are already struggling to pay their utility bills and would struggle to bear higher tariffs.

A material discovery in the Otway could prove pivotal. If successful, the ConocoPhillips-led drilling campaign may deliver a rare injection of new supply into the market, potentially at a lower cost than imported LNG.

Yet, the commercial viability will ultimately hinge on the volume and quality of gas uncovered.

For KNOC, the venture aligns with its broader strategy to secure overseas energy assets amid global competition for transitional fuel sources. For Victoria, the results of the Otway campaign could shape the next chapter of its contentious gas debate.

Originally published as KNOC joins ConocoPhillips, 3D Energi in high-stakes Otway gas push amid looming east coast shortfall