GOT GAS: Offshore permits a step in the right direction

Offshore permits are being finalised for Esso and Beach in the east coast
Chevron, INPEX, Melbana Energy and Woodside to be handed permits offshore WA
Permits could help secure Australian gas supplies into the future

In a clear sign of the need to rouse up more gas for Australia, the Federal government is moving to hand out a slew of new offshore exploration permits.

Over on the east coast, permits are being finalised for Esso (ExxonMobil) and Beach Energy (ASX:BPT) in the Otway and Sorrell Basins, while Western Australia will see permits for Chevron, INPEX, Melbana Energy (ASX:MAY) and Woodside Energy (ASX:WDS).

Minister for Resources and Northern Australia Madeleine King certainly isn’t pulling any punches, saying in her statement that gas is required to firm renewables as Australia transitions to clean energy and that supply challenges could persist into the mid-2030s unless new sources of gas are found.

While gas demand is expected to gradually fall as the energy transition accelerates, the current state of affairs places us at precarious state where supply declines as demand increases to make up for the shut-down of coal-fired power.

Should no new supplies come on line, this faster supply decline will continue into the future. That’s why both the Australian Energy Markets Operator and the Australian Competition and Consumer Commission have warned of energy shortages.

The hot take on permits

So just what does the move to issue offshore exploration permits mean?

While King noted in her statement that the finalisation of the offshore exploration permits doesn’t automatically allow for new offshore gas production to occur, it is all but certain that approvals will be forthcoming if there is a visible need for new supply.

The Federal government may still believe that renewables would eventually supplant fossil fuels, however it has demonstrated that it is at least aware that gas supply still needs to be secured and propped up with the release of its Future Gas Strategy.

There are a couple of points that are worth noting.

Firstly, the award of offshore exploration licences may be aimed at securing future supplies, but they will play no role in meeting nearer-term supply needs.

By their very nature, offshore gas exploration takes time and the same is true for developing any resources that are found.

As such, these licences are a way for insuring the future, making sure that there are supplies available when we hit the 2030s or beyond.

Someone more cynical might say that this move neatly answers critics who say the government isn’t doing enough to secure gas supplies, while actually giving enough lead time that there might not actually be a need for any gas discovered further down the line.

Secondly, offshore gas permits in federal waters neatly sidesteps any concerns about states deciding to butt in with their own regulations and beliefs.

This is best highlighted by New South Wales, which banned offshore fossil fuel extraction, typically stretching out three miles (4.8km) from its coast.

All things considered – including our little bit of cynicism, the move goes some way towards securing gas supplies.

There are other factors involved of course, chief of which is whether exploration will even be successful, but it is certainly a step in the right direction.