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Clear Skies ahead for hydrocarbons in Australia’s “Sunshine State”?

Queensland is fast emerging as a new frontier for oil and gas, with USD 65 billion worth of extraction projects already under construction in the region. The sunniest place in Australia is spearheading an unprecedented gas boom, shifting towards becoming a major hub for various service providers and energy project developers. The influx of tourists flocking to the state might soon be rivalled by the increasing number of investors tapping into the booming gas market landscape.

Its capital, Brisbane, is at the epicenter of the surging business developments for various upstream and downstream companies. Home to an educated and culturally diverse population with world-class universities, the city is unarguably a fertile environment for growth which can support research and development in the industry. The Queensland Minerals and Energy Academy and Queensland Center of Advanced Technologies are two of the renowned institutions at the forefront of innovation. CEO of GE Mining, Geoff Knox boasts that “Brisbane cannot be underestimated as a city from which to conduct business globally”, which rings especially true for the energy and resource sector that is driving substantial growth for the region.

At the crux of this paradigm shift lies three underlying distinctive elements that makes Queensland a favorable landscape – proximity, proliferation and profitability.

Proximity: The Port of Brisbane is the closest major Australian capital city to Asia. This strategic location places it at a formidable advantage as an increasingly strong Southeast Asian energy-based economy is starting to emerge. Untapped oil and gas bounty in countries such as Indonesia, Vietnam, Malaysia, Brunei, and the Philippines are forecasted to bring future dominance in the field; thus creating a well-positioned momentum of opportunity for Brisbane-based companies to cater to the growing needs of the Asia Pacific region.

Proliferation: The prospective plans to build the North East Integrator (NEI) is an instrumental proliferator to making Queensland-based products commercially viable and accessible. Interests in building infrastructure to facilitate transport for shale and coal seam gas across the north east region is peaking amongst juniors who are deeply invested in the opportunities that are surfacing. Access to unexplored areas remains the priority given the spatial dispersion of the reserves, thus necessitating associated technologies and infrastructure to build a foundation for the market. A multifaceted collaboration amongst members of government, associations, and the business community is imperative in order to create a stronger commercial traction for the products.

Profitability: Coal seam gas (CSG) is at the heart of Australia’s gas sector boom. With 92 percent of CSG resources localized in Queensland, the region holds a nexus of competencies that could elevate the economic potential of CSG to becoming a dominant source of natural gas production. The CSG production process presents paradoxical complexities in that while they are shallower and cheaper to drill, CSG wells have lower permeability rates and can only access smaller volumes of gas. Profitability margins are therefore typically thin in this market, yet the CSG production in Queensland is able to generate higher revenue due to heightened expertise, optimized operating costs and a highly-proficient mining culture which compliments its operations.

However, the clouds remain in the horizon for the energy sector of Australia’s sunniest state. Exploration activities are at an all-time low due to factors such as the decline in global oil prices, lack of acreage prospects, capital constraints, data gaps and well as green tape environmental concerns.  Exacerbated by the widespread shift from construction to operational phases that causes reduction in the labour force, the overarching energy crisis conveys an inexorably gloomy reality for the industry as a whole.

Nonetheless, many initiatives for CSG developments remain unhindered as Queensland’s competitive advantages outweigh current skepticism in the long-term vision. APPEA’s Director for Queensland remarks that “it is vital that Queensland has a vibrant and active exploration sector” in order to maintain is innovative and competitive disposition in the global milieu. He also asserts that the state’s energy sector is “an essential ingredient for future employment and business growth.”

The barometer for a definitive forecast on the energy sector remains undecipherable as the industry continues to be gripped with a plethora of uncertainties. What remains to be true is that Brisbane, and thus Queensland as a whole, with its insurmountable amount of resources and talent, will continue to propel innovation and push for brighter days ahead.

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