Red tape will delay fracking in the Northern Territory by at least another year despite last month’s reversal of a ban on the controversial gas extraction technique, one of the key players has told investors.

Blue Energy (ASX:BUL), which owns a number of permits in the Territory’s Greater McArthur Basin, this week “welcomed” a decision to reverse the 18-month fracking ban, saying it was “based on science”.

But the explorer grumbled about the accompanying 135 conditions and the fact that half the Territory (for example national parks and tourist attractions) would remain off limits to the shale gas industry.

The Territory’s chief minister Michael Gunner announced the ban reversal last month but warned explorers a “complex regulatory framework will take time and no hydraulic fracturing of unconventional reservoirs will occur until a required regime of recommendations has been implemented”.

A plan is due in July.

Fracking or hydraulic fracturing is the process of injecting special fluids into cracks to force them to open, making oil and gas easier and cheaper to extract.

How gas fracking works. Graphic: Getty
How gas fracking works. Graphic: Getty

Opponents of fracking (sometimes called fraccing) say it wastes water and causes environmental damage and even earth tremors.

Bue Energy rejects such arguments.

“It is passing strange that for a technique which has been used in this country for the last 50 years (Cooper and Amadeus Basins) with no instances of verifiable environmental damage under existing legislation (either for conventional or shale gas exploration), that we now need more regulation to ensure the risks are managed properly.

“The detail of the legislative changes needed to incorporate all 135 recommendations is yet to be seen, and therefore the impact on the industry from an additional time and cost perspective is as yet unknown.”

No fracking before mid-2019

It was “unlikely that any meaningful exploration activity can be undertaken in the NT before the 2019 dry season [May to October]”, Blue Energy told shareholders this week.

The red tape would also force up gas prices, Blue Energy said.

High gas prices were partly to blame on “the impost of additional government regulation mandated by Inquiries such as the [fracking] Pepper Inquiry“.

Blue Energy also noted that Victoria’s offshore gas production was “declining faster” and a gas shortfall in that State was expected by 2022.

Victoria last year placed a permanent ban on onshore unconventional gas exploration methods  including fracking and coal seam gas.

Despite the red tape, Energy Blue said it was “in continued discussions with multiple parties” for the commercialisation of its gas resources in the Bowen Basin.

Energy Blue had $3 million in cash at the end of March including $2 million raised in a share placement in January.

Other NT unconventional gas explorers in the same boat include Empire Energy Group (ASX:EEG), Armour Energy (ASX:AJQ) and Baraka Energy (ASX:BKP).

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