PERTH (miningweekly.com) – The Queensland government has awarded rights to explore about 900 km² of land near Surat, providing for potential new domestic gas supplies.

A 50:50 joint venture (JV) between oil and gas majors Santos and Shell has been awarded the exploration rights to a 393 km² parcel of land, while ASX-listed Armour Energy has won the exploration rights to 457 km².

In the case of the Santos/Shell JV, Santos will act as designated operator on the exploration licence, which is immediately south of the Wallumbilla hub, meaning the JV can take advantage of existing infrastructure, lowering development costs and accelerating the delivery of natural gas to the domestic market.

Santos said on Thursday that exploration in the new acreage would target natural gas in deep sandstone reservoirs of the Bowen basin, beneath the Surat basin.

If the results proved positive, the JV could potentially unlock a material new gas supply source for the Australian east coast domestic gas market, Santos said.

“As Australia’s lowest cost onshore natural gas developer, I am very pleased that Santos will be the operator to develop these blocks exclusively for the domestic market because low cost supply is the best way to put downward pressure on gas prices,” Santos MD and CEO Kevin Gallagher said.

“Santos has reduced connected well costs in Queensland by 84% and completed well costs in the Cooper basin by 50% since 2015. This has enabled us to drill a record 300 Gladstone liquefied natural gas wells in Queensland this year and 90 wells in the Cooper - the most wells in a year since 2014.”

“Drilling more wells and lowering production costs, extracting more gas for less money, is good for competition and good for consumers,” Gallagher said.

Armour Energy CEO Roger Cressey said on Thursday that the award of the exploration licence added to the company’s plans for the reinvigoration of the large Permian gas and condensate plays in the Surat basin.

Queensland Mines Minister Dr Anthony Lynham said that before exploration could begin on the tenements, the successful tendering companies would need to fulfil native title and environmental requirements and negotiate land access agreements.

Any gas produced on these latest blocks can only be sold in Australia, a Queensland innovation to deal with east coast gas shortages and high prices.

Lynham announced Australia’s first release of gas land to supply the domestic market only in February 2017, and since then, almost another 25 000 km² had been released in Queensland for gas exploration, almost a third of it for the domestic market only.

Last month, Senex announced go-ahead for its Project Atlas in the Surat basin on the first 58 km² release of land the Queensland government granted for domestic-only gas production in March 2018.

Meanwhile, Lynham on Thursday also announced the release of a highly prospective 22 km block south-west of Chinchilla, which will go to tender, with any gas produced on the block only being made available to Australia manufacturers.

“We know an industry affected by the nation’s domestic gas shortage has been manufacturing, an industry which has been crying out for a stable, reliable gas supply,” he said.

“Once again, Queensland is doing the heavy lifting on gas policy stepping up to provide a boost to our manufacturing industry by supplying gas they need.

“We continue to deliver on our election commitments to unlock gas land to ensure supply to our manufacturers, as creators of jobs and business opportunities for thousands of Queenslanders.”