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Liquefied natural gas in Queensland - where will the gas come from?


The production of liquefied natural gas (LNG) from Australia has become an important export industry. Sales from three existing LNG projects (the North West Shelf, Darwin LNG and Pluto LNG) earned $14.3 billion in export revenue in 2012-13, according to the Bureau of Resources and Energy Economics (BREE). Increased global demand for gas is driving investment in Australia to open new LNG projects, exploiting gas resources offshore from Western Australia and the Northern Territory. In addition, onshore coal seam gas (CSG) resources will be used to develop at least three (and possibly up to seven) new LNG projects at Gladstone, in Queensland – but where will all the gas come from?


New and existing LNG projects in WA and the NT extract gas from large, conventional sandstone reservoirs. These contain very large amounts of gas and are tapped with just a few wells, which produce gas for several decades (the Gippsland fields have produced gas and oil for over forty years). In contrast, Queensland’s LNG will be drawn from thousands of CSG wells, which produce gas at a much lower rate and only for about 15 years. So how many CSG wells will be needed to support the new LNG plants?

That depends on the number of plants. Three will open between late 2014 and 2016: Gladstone LNG, Queensland Curtis LNG, and APLNG. Once operational, these plants will produce 25.3 million tonnes of LNG annually (Australia produced 23.9 million tonnes of LNG in 2012-13). This gas will be sourced from CSG fields in the Bowen and Surat basins in Queensland, with the potential for extra gas to be purchased through the connected Eastern gas market.

Each tonne of LNG contains around 54.4 gigajoules (GJ) worth of gas. The process to liquefy the gas also requires energy, which is derived from the gas. Estimates for gas lost in the liquefaction processes vary between 5-10%. Using a conservative value of 5%, this means that each tonne of LNG requires 57.3 GJ of gas to be delivered to the LNG plant.

It’s not straightforward to know how many wells are needed to produce all of this gas. Well production data is commercially sensitive and not readily available, but we have calculated using raw data from this 2008 article from the Petroleum Exploration Society of Australia (PESA) that well production averages between 198-1185 gigajoules per day. If we take a figure on the high side, and assume an average production of 1,000 GJ per well per day, each well can be responsible for 17.5 tonnes of LNG per day, or 6,374 tonnes per year. Therefore, to sustain LNG production of 25 million tonnes per year, 3,969 constantly producing wells are necessary.

 However, it is unlikely that most CSG wells produce 1,000 GJ per day. The actual production of CSG wells varies according to the local geology and other factors (like well spacing). Accordingly, the total number of wells will depend on how productive these wells turn out to be – recent media reporting suggested that drilled wells are performing more poorly than expected. Publicly available estimates on production rates vary; this 2007 article suggested that 1000 GJ per day was the exception rather than the rule, and this source from the United States suggests production there averaged about 170 GJ per day.

This means that the number of wells required for the three LNG plants could range from around 4,000 wells (if each produced 1,000 GJ per day), to somewhere in the range of 20,000 (if wells produced only 200 GJ per day). The 2008 PESA article predicts around 4,000 wells will be needed, although a different PESA article from 2010 predicts that 7,000 wells will be drilled between 2010-2014.

Official figures from the Queensland Department of Natural Resources and Mining show that 3,983 production CSG wells have been drilled to date, but this also includes all of the wells that supply Queensland’s domestic demand. The Australian suggests that the three LNG projects have probably only drilled about half of their required wells, assuming they will need only 4,000 wells in total.

Even once the full complement of wells for the LNG projects has been drilled, the projects will need to continue drilling wells to replace those with declining production (as CSG wells have relatively short working lives); the 2008 PESA article placed this figure at around 400 per year, or 10% of the total number of wells.

This means that the drilling of CSG wells in Queensland is likely to continue well into the future. Should the production of CSG from Queensland not be enough for the LNG plants, additional gas may need to be purchased on the Eastern gas market, further adding to reported price pressures. All of this means that the CSG debate is not likely to subside any time soon.

Map of Australia showing gas basin, gas pipelines and gas markets. Overlayed with convential gas resources, coal seam gas resources and gas already produced pie charts


Image source: Parliamentary Library, source data courtesy of Geoscience Australia