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South Australian Gas Incentives

Goal: South Australia to source and use more South Australian gas to generate its own electricity, increasing the state’s self-reliance.

A range of measures is being introduced to incentivise exploration for gas.


Sourcing more local gas 

To meet the increasing level of gas-fired generation, the State Government is investing to unlock more of South Australia’s abundant gas resources. 

South Australia has vast untapped gas resources. It is estimated the Cooper Basin alone could potentially supply Australia’s energy needs for more than 200 years. 

The Plan for Accelerating Exploration (PACE) grant-supported projects are estimated to generate $198 million in prospective expenditure. 

The State Government will immediately provide an extra $24 million for a second round of funding to incentivise companies to extract even more gas and create more jobs. This new round will open immediately. 

This will increase the supply of South Australian gas into the local energy market. South Australian energy generators, industry and households will have first offering. 


Royalties for landowners 

A new PACE Royalties Return Scheme will provide 10 per cent of royalties to landowners whose property overlies a petroleum field which is brought into production, opening up new exploration across South Australia.


The recipients of the first round of PACE Gas Grants have been announced today, with five exploration and development projects to share in $24 million in State Government funding.

The grants will generate up to $174 million in new investment by oil and gas companies in local production projects.

Gas extracted through the grant scheme will be offered to South Australian electricity generators first, increasing the affordability of supply and putting downward pressure on power prices. On Tuesday the State Government announced it will run a second $24 million round of PACE Gas grants.

The State Government will also offer a new exploration licence for five blocks in the Otway Basin in the South East, through a competitive bidding process to be finalised by the end of the year. The exploration area will not include the Coonawarra wine region.

The State Government’s royalty sharing program, announced on Tuesday, will first apply to this new exploration area.

The five PACE Gas Grant projects comprise:

  • $5.82 million for the Senex-Santos Cooper Basin pipeline project
  • $6 million for the Beach Energy Otway Basin exploration project targeting conventional reservoirs
  • $3.96 million for the Santos Cooper Basin re-fracture stimulation project
  • $6 million for the Santos Cooper Basin underbalanced drilling project
  • $2 million for the first phase of the Strike Energy Cooper Basin deep coal project

Supply of gas is currently tight across the nation due to large amounts of LNG being exported overseas and gas bans and moratoria in Victoria, New South Wales and the NT. AEMO has forecast that this supply shortfall will result in an electricity supply shortfall in SA, NSW and Victoria in 2018-19 unless gas supply is boosted and bans and moratoria lifted.

Steven Marshall has promised to impose a 10-year unconventional gas moratorium in the South East, an area of vast gas reserves, if he wins the next election.


PACE Gas Results

Following a thorough assessment of the applications received for PACE Gas grants, a panel of experts, including independent advisers, recommended five successful recipients.

Under the conditions of the grants the gas produced must first be offered to electricity generators operating in South Australia. The State Government will now run a second $24 million round of PACE Gas grants.


New Exploration Tenement

The new exploration licence for the South East will be auctioned as one tenement of five exploration blocks. It will not include the Coonawarra wine region.

The Otway Basin consists of deep shale gas, located far underground. This type of gas can be extracted with far fewer well heads compared to coal seam gas, which is located much closer to the surface.


Royalty Sharing

On Tuesday the State Government announced a new royalty sharing program for landowners. The PACE Royalty Return program will first apply to a new exploration licence in the South East, with a competitive bidding process to be finalised by year-end.

Federal Liberal Energy Minister Josh Frydenberg has publicly welcomed South Australia’s new royalty sharing scheme.