Beach willing to pay royalty for gas access
Despite hitting out at the opposition shown by hobby farmers and vineyard owners to the onshore oil and gas industry, managing director Reg Nelson said he would be "amenable" to such a royalty if it were demanded by former workplace minister Peter Reith in his report for the Victorian government.
Mr Reith has been reviewing the industry and how it could affect farmland and groundwater systems in Victoria.
He is expected to recommend the advancement of the industry so long as there are controls and royalties for landowners.
The policy is similar to the situation in US states such as Texas, where landowners can strike lucrative deals with oil and gas companies that work on their land.
Speaking at the Melbourne Mining Club, Mr Nelson said royalty payments would be acceptable so long as they were not prohibitively high. "I'm amenable to any solution that the government thinks can facilitate things," he said.
"The main thing is to not impose a royalty that is punitive because that will discourage people from investing if they have better opportunities elsewhere."
The comments came after the NSW government earmarked 2.8 million hectares of land, including vineyards and horse studs, for special protection under new protocols for onshore oil and gas development. The situation is even more restricted in Victoria, where a ban prevents any unconventional oil and gas production until the government receives and digests Mr Reith's report.
While Gippsland is expected to become a battleground for the onshore oil and gas debate, Mr Nelson said the deep gas in the state's south-west near Warrnambool and Port Campbell could be a "much bigger prize".
While studies are still embryonic, Mr Nelson said the region could be as lucrative as South Australia's Cooper Basin, which dominates the gas supply for Australia's east coast. "These are areas where potentially good ground is really locked away and, I think, for no good reason," he said.
BG Group chairwoman Catherine Tanna also weighed into the debate yesterday, saying the gas was there if people were willing to pay enough for it.
On the international stage, Mr Nelson played down the threat that the US shale boom could pose to Australia's LNG export market in Asia, saying that any excess gas in the US was likely to flow to Mexico.
Mr Nelson said offshore Africa and Canada posed a bigger threat to Australian producers.
Frequently Asked Questions about this Article…
Beach Energy’s managing director Reg Nelson said the company would be "amenable" to paying a royalty to Australian landowners if the imminent Peter Reith review of the industry required it — provided any royalty wasn’t prohibitively high or punitive and didn’t discourage investment.
According to Beach Energy, a reasonable royalty could be accepted as part of facilitating onshore gas development. However, Nelson warned that punitive or overly high royalties would discourage investment and could reduce returns, so investors should watch royalty levels set by policymakers.
Former workplace minister Peter Reith is reviewing the onshore oil and gas industry in Victoria, focusing on impacts to farmland and groundwater. He is expected to back industry advancement only if controls and royalties for landowners are in place — and Victoria currently has a ban on unconventional production until his report is considered.
The NSW government has earmarked about 2.8 million hectares, including vineyards and horse studs, for special protection under new onshore oil and gas protocols. Victoria has taken a more restrictive approach: a ban prevents unconventional oil and gas production until the government receives and reviews Mr Reith's report.
Beach Energy says Gippsland is likely to be the focus of debate because of potential deep gas resources. Reg Nelson noted deep gas near Warrnambool and Port Campbell could be a "much bigger prize" and — while early-stage — might be as lucrative as South Australia’s Cooper Basin if exploration proves up resources.
BG Group chairwoman Catherine Tanna commented that the gas is there, but availability is linked to price — essentially saying gas resources exist if buyers and markets are willing to pay enough for them.
Beach Energy’s Reg Nelson played down the risk that the US shale boom will displace Australia’s LNG exports to Asia, saying any US excess gas is more likely to flow to Mexico. He suggested that offshore producers in Africa and Canada pose a larger competitive threat to Australian producers.
Investors should monitor the release and recommendations of Peter Reith’s report, any government decisions on royalties and controls in Victoria and NSW protections, exploration results from Gippsland (Warrnambool and Port Campbell), and comments from companies like Beach Energy and BG Group about pricing and market competition.
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