August 4 - 31, 2024: Issue 633

 

PEP11 Proponents File New Claim in Federal Court: 'Determine applications within 45 days'

BPH Energy Limited and Bounty Oil & Gas NL (Bounty) for the PEP11 Joint Venture announced on 5 August 2024, Asset Energy Pty Ltd (Asset) as operator for and on behalf of the joint venture partners, has filed an Originating Application for Judicial Review in the Federal Court seeking the following:

1. A declaration that the Commonwealth-New South Wales Offshore Petroleum Joint Authority has breached an implied duty by failing to make a decision under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) with respect to two pending applications relating to Petroleum Exploration Permit NSW–11 (PEP11 Permit); and

2. An order that the Joint Authority be compelled to determine the applications within 45 days.

The securities of BPH Energy Ltd (‘BPH’) were placed in trading halt on Wednesday August 7 at the request of BPH, pending it releasing an announcement. Unless ASX decides otherwise, the securities will remain in trading halt until the earlier of the commencement of normal trading on Monday, 12 August 2024 or when the announcement is released to the market.

Asset states it initially applied for federal determination in late December 2019, seeking a variation and suspension of the conditions of the PEP11 permit and an extension of the term of the permit. Asset sought further time to drill an exploration well in PEP11 and, if successful, to conduct post-well studies rather than a 3D seismic survey.

The National Offshore Petroleum Titles Administrator (NOPTA), Asset states, accepted the first application on behalf of the Joint Authority on 23 January 2020. In late January 2021, Asset applied for a variation and suspension of the conditions of the PEP11 permit and an extension of the term of the permit. The application was sought to, among other things, enable Asset further time to drill an exploration well and to invoke decision-making principles set out in the April 2020 COVID-19 fact sheet: work-bid exploration permits. NOPTA subsequently accepted the second application on 4 February 2021, BPH states

On or about 26 March 2022, the joint authority formally determined to refuse the first application. On 14 February 2023, this first application decision was set aside by Australia’s Federal Court on the ground of 'apprehended bias'.

''Between March 2023 and October 2023, Asset provided further information to NOPTA, which then made a recommendation to the joint authority with respect to both applications. To date, neither the first application nor the second application has been determined by the joint authority according to law. '' BPH Energy’s executive director, David Breeze has stated in a missal to the ASX

Asset alleges that – with it having been 1,656 days (inclusive) since the first application was accepted by NOPTA and 1,278 days (inclusive) since the second application – the failure by the joint authority to make a decision with respect to either or both applications constitutes a breach of its duty to consider them within a reasonable time.

On April 23 2024 the Hon. Madeleine King, Federal Resources Minister, announced she had recused herself and delegated her decision-making power on the PEP11 applications to the Hon Ed Husic, Minister for Industry and Science. 

However, with the changing times and government narratives about what will be supported or needed in 'Gas-fired Recoveries' and now a 'Future Gas Strategy' the shift for PEP11 proponents from drilling for oil to drilling for gas, and even a proposal of a carbon storage scheme in the PEP11 allotment, have been made in successive announcements to the Australian Stock Exchange.

In a submitted response to the 'Offshore renewable energy infrastructure area proposal: Pacific Ocean off Hunter' (windfarm) consultation in 2023, this was again stated:

'Advent Energy is committed to the decarbonisation of the global energy system, in a manner which ensures the continued supply of affordable, reliable energy to power the economy, support employment and facilitate the transition to net zero in a sustainable manner. It believes that this will be achieved through the use of a mixture of technologies, encompassing renewable resources, carbon sequestration and gas.'

NSW Bans Seabed petroleum or mineral exploration and recovery in its coastal waters

On March 12 2024 the NSW Government passed The Environmental Planning and Assessment Amendment (Seabed Mining and Exploration) Bill 2024. This amended the Environmental Planning and Assessment Act 1979 to prohibit:

  • Seabed petroleum and mineral exploration and recovery in NSW coastal waters; and
  • Other development within the state for the purposes of seabed petroleum and mineral exploration and recovery anywhere.

''These activities can have a devastating effect on our marine wildlife by releasing toxic materials, destroying habitat and creating harmful sediment levels. We must prevent this happening.'' the government said in a released statement

In February 2024 Advent (and BPH) executive director David Breeze had already vowed the company would continue to press forward with its plans to explore the permit.

In response to news that NSW was introducing the legislation to ban offshore oil and gas activities, Bounty pointed out that the state of NSW and its government only have jurisdiction to control exploration and extraction in coastal waters within 3 nautical miles (4.83 km) of the NSW coast.

“PEP-11 is beyond that 3 nautical mile limit and all such matters touching PEP-11 are under the jurisdiction of the Commonwealth of Australia (i.e., the Australian Government),” an ASX release stated.

“Gas exploration operations including safety and environment are controlled by NOPSEMA [the National Offshore Petroleum and Safety Authority], a Commonwealth of Australia authority.”

Bounty also confirmed the holders of PEP-11 intend to pursue gas exploration (by drilling around 26 km offshore), well beyond the limit of NSW coastal waters.

In the first week of February 2024 BPH Energy, which holds a 35.8% stake in Advent, declared its gas interests would receive the majority of the $2.25 million it had raised with a successful placement; 'New sophisticated investors including high net worth, family office and dedicated resource funds participated in the strongly-supported raising'.

Mr Breeze said the new funding would allow BPH to 'accelerate exploration programs to unlock the potential of its gas projects – particularly in light of the current gas supply crisis'.

He said the proceeds raised under the placement provide BPH with a strong cash position to fund its hydrocarbon projects, with $1.75m to be set aside for funding for exploration and development of oil and gas investments.

On March 18 2024 BPH Energy (“BPH”) again issued a statement in response to the legislation Environmental Planning and Assessment Amendment (Sea Bed Mining and Exploration) Bill then before the New South Wales (NSW) State Parliament passing. This too was directed to the Australian Stock Exchange as an announcement. It reads;

Until the proposed Legislation actually becomes NSW law and has been reviewed by our legal advisers BPH is unable to provide any detailed comment except to say:-

PEP 11 – NSW Jurisdiction

1. The State of NSW and the NSW Government only have jurisdiction and the power to control exploration and extraction in coastal waters up to 3 nautical miles (4.83 km) offshore from the NSW coast. PEP 11 is beyond that 3 nautical mile limit and all such matters touching PEP 11 are under the jurisdiction of the Commonwealth of Australia (ie the Australian Government). Gas exploration operations including safety and environment are controlled by NOPSEMA (1 ) a Commonwealth of Australia authority.

2. The registered holders of PEP 11, including Bounty Oil & Gas NL (ASX:BUY), and the operator, Advent Energy (through Asset Energy Pty Ltd) are aware of the legislation and should it be enacted the titleholders will consider, if necessary, challenging the validity of the Bill under s109 of the Commonwealth Constitution which provides: “When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid”.

3. The holders of PEP 11 intend to pursue gas exploration (by drilling around 26 km offshore) well beyond the limit of NSW coastal waters. No “mining” or pipeline construction is proposed.

4. Bounty and BPH fully support protecting the coastal and offshore marine environment and note that in respect of PEP 11 any activity undertaken in the permit area would require specific approval of the independent regulator NOPSEMA.

Extension and Variation Applications for PEP 11 Permit to Enable Drilling of Seablue 1 Gas Well at Baleen 

In Asset Energy -v- Commonwealth Minister for Resources (Federal Court of Australia) 14 February 2023 the NSW State Government (as a member of the Joint Authority) was a Defendant and submitted to Orders directing them and the Commonwealth Minister to determine the PEP 11 extension et al applications according to law

While the applications for the variation and suspension of work program conditions and related extension of PEP-11 are being considered, Asset is continuing to investigate the availability of a mobile offshore drilling unit to drill the proposed Seablue-1 well on the Baleen prospect and is in communication with drilling contractors and other operators who have recently contracted rigs for work in the Australian offshore beginning in the first half of 2024. Further updates will be provided to ASX.

PEP 11 continues in force under the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (the Act) (Cth) and the Joint Venture is in compliance with the contractual terms of PEP 11 with respect to such matters as reporting, payment of rents and the various provisions of the Act.

The Importance of New Gas Projects and Gas Supply

Asset and its Joint Venture partner Bounty Oil & Gas NL (ASX: BUY) have continued to monitor gas market demand.

The analysis contained in the AEMO (Australian Energy Market Operator) report ‘Gas Statement of Opportunities’

(GSOO) has made a number of key findings.

• Despite increased production commitments from the gas industry since the 2022 GSOO, gas supply in southern Australia is declining faster than projected demand.

• As Australia transforms to meet a net zero emissions future, gas will continue to complement zero emissions and renewable forms of energy, and to provide a reliable and dispatchable form of electricity generation.

• The 2023 GSOO highlights continued risks of short-term gas supply shortfalls and long-term gas supply gaps arising from reducing production from southern Australia.

• In particular, the risk of peak day shortfalls continues to be forecast under very high demand conditions in the southern states from winter 2023.

• Short-term critical gas adequacy conditions include:

o Extreme weather conditions across southern regions that drive high coincident peak demand for gas consumption may lead to gas shortfalls, particularly if combined with high gas generation (if alternative electricity generation resources are unavailable).

o Peak day gas shortfall risks would increase if committed infrastructure developments to reduce transmission constraints were not delivered to schedule. 

The GSOO report confirms:

• Production (from existing sources) is projected to decline significantly with much of the decline occurring in the Gippsland Basin (Victoria).

• New sources of gas supply will be needed.

Future Gas Strategy submissions (DISR)3

The Australian Government’s Future Gas Strategy consultation closed on 27 November 2023, with submissions now available on the Department of Industry, Science and Resources (DISR) website. As outlined by DISR(3 ), the Future Gas Strategy aims to “provide a medium (to 2035) and long-term (to 2050) plan for gas production and consumption in Australia”.

Almost 300 submissions were made from a range of stakeholders, including industry, peak bodies, civil society, individuals and government. Submissions were provided by key gas and energy producers as well as a range of energy-intensive industries that rely on gas - including cement, aluminium and steel.

Across the submissions, there appears to be a trend that respondents– either producers or users of energy and gas – recognised the ongoing important role gas will play in providing secure, affordable energy on the road to net zero, including as a complement to renewable energy deployment.

Approximately 80 per cent of gas extracted in Australia is exported overseas where it attracts a higher price on the international market.

In February  2024 the federal government put in place its Gas Market Code, which put a price cap of $12 a gigajoule on east coast gas market contracts. This replaced the emergency measures applied to the industry in 2022 in the wake of Russia's Ukraine invasion that threw global energy markets into chaos.

This had been preceded by the Turnbull Government made the Customs (Prohibited Exports) Amendment (Liquefied Natural Gas) Regulations 2017 (the LNG Regulations) on 30 June 2017, which amended the Customs (Prohibited Exports) Regulations 1958 (the Export Regulations) to insert a new Division 6 into Part 3 of the Export Regulations.

The purpose of these amendments was to establish a framework for restrictions on the export of LNG to be imposed where the Minister for Resources (Resources Minister) determines there is a reasonable prospect of a supply shortage in the domestic market during the following calendar year (a domestic shortfall year).

This mechanism is known as the Australian Domestic Gas Security Mechanism (ADGSM). The ADGSM was developed for the purpose of securing gas supply to the east coast of Australia due to shortfalls forecast by the Australian Energy Market Operator (AEMO) and the Australian Competition and Consumer Commission (ACCC). The ADGSM was designed to be a ‘short-term and targeted’ measure that would cease on 1 January 2023.

Any extension of the ADGSM needed to be considered in the context of Australia’s commitments as a member of the World Trade Organization (WTO). WTO rules generally prohibit WTO members from introducing or maintaining any form of export prohibition or restriction other than duties, taxes or other charges, except where they have been ‘temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party’.

When introducing the ADGSM, the then Resources Minister, Matt Canavan, stated that ‘the ADGSM is a mechanism of last resort to be applied in accordance with our international trade obligations and will only be used if there will not be a sufficient supply of gas for Australian consumers’.

However, others have pointed out over many years, identified discrepancies in the structure itself. Despite the government-imposed domestic price cap, local gas now is around 400 per cent higher than before we became captive to global markets.

Alarmingly, even with the cap in place, prices routinely are negotiated with industry and retailers at higher levels. According to the competition regulator, that's because the code "provides a range of exemptions from its pricing rules."

Australia once had a natural advantage for energy-intensive manufacturing, now we routinely pay more than international customers for Australian gas.

According to the ACCC, the local market is facing shortages out to the end of the decade despite being one of the world's biggest exporters.

Getting off Gas

With a vast array of our energy demand now being met by renewables, coal-fired generators are going broke and many are past their 'used by date' point. During the middle of the day, when renewables kick in and wholesale prices crash, coal generators cannot compete.

That's where gas is used as a flexible and immediate form of power generation that can be turned on and off.

A June 2023  Grattan Institute report, Getting off gas: why, how, and who should pay?, states all-electric homes are cheaper to run and better for people’s health, and that alternative technologies such as hydrogen or biomethane are too costly and too far off for widespread use in homes and small businesses.

The report calls on each state and territory government to set a date for the end of gas if Australia is to have any hope of achieving net-zero carbon emissions by 2050.

However in June 2024 the federal government again approved Senex’s stage 3 Atlas project which will involve the construction of up to 151 coal seam gas wells, as well as access roads, associated pipelines and a 300 million litre CSG brine storage facility north west of the Queensland town of Miles.

The project is expected to require the drainage of about six and a half million litres of groundwater each day as the coal seams are depressurised. This depressurisation of coal seams across Queensland’s Western Downs is causing some of the country’s best farmland to sink. 

The Independent Expert Scientific Committee on Coal Seam Gas and Large Coal Mining Development (the IESC), which provides independent scientific advice to the Australian and state government regulators on the potential impacts of coal seam gas and large coal mining proposals on water resources, stated in its Atlas Stage 3 Gas Project Advice that;

'The project documentation provided is severely limited, especially relating to adequacy of baseline data, hydrogeological analysis and presentation of conceptualisation, and the conclusions drawn by the proponent. This substantially constrains the assessment of impacts to surface and groundwater resources, GDEs and other third-party users and the assessment of potential cumulative impacts.'

More in: 

Albanese Government Approves Gasfield In Koala Habitat Until 2080: Thereby Cancelling Its Own 'Net Zero By 2050' Spin Show Permanently

Nevertheless, the federal government keeps making 'net zero' statements.

MP for Warringah Zali Stegall said on August 8;

''The PM promised that PEP11 would be dead under a Labor govt. I have now tabled Stop PEP11 for ever again this term and call on the Albanese Govt to kill PEP11.  For once I agree with BPH, a decision is long overdue. And it’s time to stop PEP11 for ever. Every community from Manly to Newcastle values our coast line, our ocean and thriving local communities, and we all reject this licence. 

Prime Minister, it's time to keep your promise and make PEP11 dead in the water.''

Mackellar MP Dr Sophie Scamps, stated;

''It’s time Asset Energy Advent Energy & Bounty Oil & Gas and BPH listened to the people of northern beaches and Central Coast. We DO NOT want drilling for oil or gas off our pristine coastline. We’ve fought this for decades and will continue to fight it.

It’s time to say NO to this project. It’s environmentally risky and NSW has already moved to ban any onshore gas facilities.

PEP-11 needs to buried once and for all!''

PEP11 (Petroleum Exploration Permit 11) is a licence to explore for fossil gas in our oceans. If renewed, it would allow drilling off the coast of New South Wales.

The proposed area of PEP11 covers 4,500 square kilometres of ocean, spanning from Manly to Newcastle.

It covers a portion of the offshore part of the Sydney Basin – a proven hydrocarbon basin in which the Hunter coalfields are located. Prior to December 2010, no offshore exploratory wells for petroleum had been drilled in the Sydney Basin. However, over 70 wells had been drilled in the onshore sector, almost all of which had found gas. 

PEP 11 was first surveyed in 1981. A recent survey involved the construction of an exploratory well by Advent Energy, which  was drilled in December 2010, 61km east of Newcastle. In late December, Advent Energy released an independent report which concluded that PEP 11 may be covering a 'potential Giant Gas province'. However, on 29 December 2010, Advent Energy announced that the exploratory well had failed to find gas. Advent Energy plans to drill more exploratory wells in the near future.

Previously