Real Energy looks to alleviate east coast gas crisis

Real Energy ASX RLE east coast gas crisis
A supply shortfall is forecast for Australia's east coast gas market over the next five years.

While gas buyers in the east coast market fret over looming shortages and rising prices, emerging gas developer Real Energy (ASX: RLE) has welcomed the opportunity to offer a solution.

The company today released an operations update for its Windorah gas project in Queensland, where it is hoping to unlock a potential 3C resource of 672 billion cubic feet of gas from its Tamarama and Queenscliff discoveries.

In the update, Real Energy said gas and frack fluids have continued to flow to the surface from the recently fracture stimulated Tamarama-2 and Tamarama-3 wells.

According to the company, both wells “at this stage appear to be performing better than Tamarama-1”, which was the first well drilled on the project and has been flowing gas since 2016 at variable rates of up to 2 million cubic feet per day.

Once the frack fluids have been recovered, Real Energy can then begin tests and pressure build-up surveys on the wells with results expected to take about four weeks.

East coast gas crisis

There have been plenty of reports circulating about Australia’s east coast gas crisis, with a short supply forecasted for the next five years.

Gas is not only draining from the domestic market due to the growing demand for liquefied natural gas exported outside of Australia, but also due to moratoria and regulatory restrictions blocking onshore gas exploration and development in many areas of the country, particularly Victoria and New South Wales.

“There’s no new gas coming to market in those states even though both of them would have gas under the ground that could be developed,” Real Energy managing director Scott Brown told Small Caps.

“With the Victorian offshore gas decreasing at such a rate, the only areas where there is new supply seems to be either Queensland or South Australia. Hence that’s why gas prices have been going up on the east coast and they’re not likely to go down any time soon,” he said.

Mr Brown said while it’s a crisis for gas buyers, “it’s fantastic if you’re a gas producer or emerging gas developer”.

“Crisis and opportunity is the same symbol in Chinese. We see it as a great opportunity to supply gas at a high price,” he said.

Real Energy believes it can benefit from the situation with its wholly-owned Windorah gas project being in close proximity to major energy players in the Cooper Basin and having easy access to gas plants and major pipelines connecting to domestic markets.

Last month, the company locked in deals with Santos (ASX: STO) and Beach Energy (ASX: BPT) to process its Windorah gas at the majors’ facilities in Moomba, South Australia.

Mr Brown said the signed binding agreements potentially added “considerable value” to the company as well as being a major de-risking event for the Windorah project.

Real Energy intends to tie its three Tamarama wells into Santos’ Cooper Basin gas gathering network at Mount Howitt, before raw gas is processed into sales gas at Moomba for distribution to the east coast gas market.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.