Esso commits to $400m expansion of Gippsland Basin JV
Esso has committed to a $400m expansion of its Gippsland Basin JV in a bid to shore up gas supplies for Australia’s southeast.
Esso Australia has pulled the trigger on a $400m investment in expanding gas development in the Gippsland Basin in a move aimed at shoring up supplies for Australia’s southern states.
Esso, a subsidiary of US oil and gas giant ExxonMobil and operator of the offshore Gippsland Basin Joint Venture (GBJV), will expand gas development from the project’s Kipper field while also investing in upgrades to “optimise production” from the Turrum field.
The investment is expected to deliver an additional 200 petajoules of gas in the five years from 2023 to 2027, with about 30 petajoules due to come online in 2023.
Esso said the project would provide critical gas supplies and help avert the winter supply risks forecast for Australia’s southern states in the Australian Energy Market Operator’s Gas Statement of Opportunities report released last year.
While the report offered an improved outlook for gas supply until at least 2026, it warned that “southern supply scarcity risks have emerged for winter 2023 under certain conditions’’.
“These southern supply scarcity risks appear one year earlier than projected last year, due to more rapid decline in producers’ forecasts of maximum daily production from legacy southern fields in Longford, Victoria,” the report says.
“Development of all remaining anticipated projects on schedule, including Golden Beach and new fields in the Gippsland Basin Joint Venture, would build resilience to unexpected events.
“This would help manage operational risks associated with unplanned outages, or project delays in either the gas or electricity system, and defer projected gas supply gaps until the end of this decade.”
The ageing GBJV, operated by Esso in a 50/50 partnership with BHP, has been the largest supplier of gas to southeast Australia for over 50 years.
But with supply from the Bass Strait oil and gas fields in decline, concerns around potential supply shortages have increased in recent years.
Esso expects that by the end of the decade the Gippsland Basin will continue to have the potential to supply one third of southeast Australia’s domestic gas demand.
Last year the company commissioned the $400m West Barracouta project, one of the largest domestic gas projects this decade.
ExxonMobil Australia chair Dylan Pugh said that while the latest investment decision would secure much needed supply for the domestic market, there was a need for further investment to avoid shortages facing customers in Victoria.
“Our ongoing investment and commitment to supplying Australian customers means that the Gippsland Basin remains the largest single source of natural gas for Australia’s east coast,” he said.
“There is still plenty of gas remaining in Bass Strait and we are working hard to unlock its full value. More investment will be required for Victoria to maintain its reliable supply of natural gas, especially during winter.”
In its latest quarterly gas report released last month the Australian Competition & Consumer Commission found gas prices had increased from $6 to $8 a gigajoule in late 2020 to $7 to $9 a gigajoule by late last year, as the supply outlook looked increasingly tight.
Australian Petroleum Production & Exploration Association (APPEA) chief executive Andrew McConville said Esso’s expansion would help to meet the demands of Victoria’s residential and industrial energy users.
“Victoria, in particular, has the highest domestic use in the country as well as an expanding manufacturing base so today’s news will help feed that and shore up east coast supply,” he said.
“The cheapest gas is the gas closest to the customer.”
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