Report shows 2013 oil production at lowest since 1970

Australian oil output has slumped to the lowest numbers by
the barrel since 1970.

The latest Energy Quarterly Report from Energyquest shows
that Australia’s output had plunged 18.6 per cent from the previous year to
just 71.9 million barrels in 2013, making a fairly disappointing comparison to
65 million barrels in 1970.

Gas figures are at record highs for volume, with a 3.1 per
cent rise to 2214 petajoules in 2013, but the sluggish performance of oil has
dragged down overall production figures in the petroleum sector.

Total output of oil equivalent also dropped down 1.4 per
cent from 521 million barrels (MMboe) in 2012 to 513.8 million barrels in 2013.

The Energy Quarterly report also notes that it was a poor
year for Australia in replacement of petroleum reserves (the gap between
petroleum produced and discovered), with 41 per cent of gas reserves replaced
with new discoveries, and oil and liquid crashed to -16 per cent.

The Australian Bureau of Statistics has also shown shrinking
in the petroleum sector in the Mineral and Petroleum Exploration report for
December 2013.

The trend estimate for total petroleum exploration
expenditure fell $33.4 million or 3.1 per cent to 1052 million in the December
quarter 2013, although expenditure on production leases rose 2.2 percent or $7.3
million.

Expenditure in all exploration areas other than production
leases fell 4.6 per cent or $34.6 million.

On the other side of the coin, it was a very good year for development
spending on oil and gas projects, topping out at 60 billion, helped along by Surat
Basin and Curtis Island LNG infrastructure projects in Queensland, as well as
Gorgon in Western Australia.

Spending has jumped 29 per cent from what was already a
record development expenditure of $46.4 billion.

However, Energyquest suggests that some such projects are
beginning to suffer from cost and schedule creep, and that spending probably
peaked last year and will taper off as construction projects move into their
commissioning phase.

Energyquest also said that the upside of huge development
spending is an expected doubling in Australian petroleum production, with new
output in the order of 665 MMboe attributed to the new LNG and oil projects.

EnergyQuest CEO Dr Graeme Bethune warned eastern Australia’s
coal seam gas-based LNG projects faced a mammoth task over the next 18 months
as they dewater wells, complete surface facilities and begun to ramp up maiden
production.

“There is little sign yet of spare gas to assist the LNG
commissioning phases and the need for third party gas to assist in this process
is growing,” Dr Bethune said.

“The potential for east coast gas prices to spike as a
result is real, and there is potential for gas shortfalls on the east coast in
2015, 2016 and 2017.

“This situation is also driving east coast gas buyers into
taking options on gas exploration in the Cooper Basin in outback South Australia,
an extraordinary situation.

“Put simply, gas buyers perceive looking for gas in the
Cooper Basin as being lower risk than signing up for gas from NSW.”

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