Peter Klinger, 29 September 2015

New Federal Resources and Energy Minister Josh Frydenberg has warned the oil and gas industry he is in favour of his predecessors’ ‘use it or lose’ approach to retention leases as he ponders whether to renew ExxonMobil and BHP Billiton’s ownership of the big Scarborough gas field.

In his first comments on the contentious matter, Mr Frydenberg said the tough approach taken by previous resources ministers Ian Macfarlane, Martin Ferguson and Gary Gray had delivered an “unprecedented” level of investment in new LNG projects, though he was mindful of the need for some flexibility.

The WA-1-R retention lease that covers the Scarborough field, discovered in 1979 about 300km west of Karratha, expired in May. The field contains up to eight trillion cubic feet of gas — but no liquids — to make it one of the biggest undeveloped hydrocarbon resources in Australia.

It is also one of the most remote, with its development made more challenging by the collapse in global oil and gas prices.

ExxonMobil and BHP applied for the latest renewal of the lease late last year but are yet to hear back from the Commonwealth.

It remains unclear whether the 50-50 partners satisfied all conditions of the expired lease, which included a $50 million work and technical program culminating in concept select work, to confirm the preferred option out of floating LNG or a pipeline to a Pilbara processing plant.

Mr Frydenberg would not comment on Scarborough but spoke of his predecessors’ “consistent approach to Australia’s valuable petroleum resources so that they are developed in a timely and responsible way”.

“This approach should be continued going forward,” the Minister, who was sworn into his portfolio last week, toldWestBusiness . “It is working effectively, as can be seen from the unprecedented investment in LNG infrastructure projects of around $220 billion.

“However, I will work with industry and my department to ensure the regime continues to achieve this goal while providing flexibility where required.”

Scarborough proves an early test of the Turnbull Goverment’s relationship with the industry, just months after former resources minister Mr Macfarlane agreed to a Woodside Petroleum-led consortium’s request for the renewal of Browse retention leases in return for pledging a $500 million work program.

The depressed oil and gas prices mean even brownfields projects such as big investments to add new gas supplies to the North West Shelf or a fourth train for the Gorgon project are under pressure.

Scarborough has been talked about as a potential source for the NWS, which needs new supplies to keep its five trains at full capacity from early next decade.

But the cost of a pipeline from Scarborough plus a lack of liquids offsets had made FLNG ExxonMobil and BHP’s preferred development option, though without any indication from either party the field would be developed anytime soon.

Extracted in full from the West Australian.

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