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  • A key gas blending study from the Australian Gas Infrastructure Group (AGIG) showed Valhalla gas is suitable for integrating with existing infrastructure.
  • Black Mountain is targeting between 200TJ/day and 600TJ/day of production for the Valhalla project
  • Critical environmental studies are already underway at Black Mountain’s Valhalla project
  • Valhalla has gained approvals to sell to both domestic and export markets
  • The upcoming Federal Budget has committed a $50.3 million boost in funding to domestic gas projects and infrastructure

The not-so-secret news is that Australia is experiencing a decline in domestic gas supplies and now, coupled with the phasing out of coal-fired electricity production to meet our carbon emissions targets, faces potential gas supply shortfalls. This is helping speed up prospective gas producers such as Black Mountain Energy’s journey to commercialisation.

While there are some that question the role gas plays as the rise of renewables continues, investors that take a closer look at the factors of energy production in Australia will understand that natural gas is crucial for consistent and affordable energy supplies as the world transitions towards net zero-emissions.

But what does this look like?

To meet global emissions-reductions targets, the International Energy Agency has highlighted natural gas as having a much larger share in the future global energy mix, as the relative share of oil and coal falls back and renewables ramp up strongly.

For Australia, this transition to renewable energy production and the transition away from our coal-fired generation (which currently produces about 60 per cent of our electricity) requires gas-fired generation to fill the gaps between intermittent renewable energy supplies that cannot be economically met by batteries and other energy storage solutions.

This is where an increase in domestic gas supply comes into play – however, there’s a catch.

Shortages

Australia is suffering from domestic gas supply shortfalls because, even as one of the world’s leading producers of LNG, current large-scale producers have long-standing export contracts – meaning our vast gas-rich onshore and offshore basins aren’t adequately addressing our nation’s domestic requirements.

In one of his final public speeches for the Australian Competition and Consumer Commission (ACCC), outgoing chairman Rod Sims was to the point regarding domestic gas shortages at a recent Australian Domestic Gas Outlook conference back in March.

“Given how tight the supply outlook is, it’s critically important that LNG producers continue to supply gas into our domestic market,” Mr Sims said.

“LNG producers have been supplying less and less gas into the domestic market for the last five years, and the downward trend is concerning.

“In 2022, the expected domestic supply from the LNG producers is about 50 per cent less than actual supply in 2017 and 2018.

“There’s alternative supply that could be brought online, but [many] sources are more speculative and haven’t yet been approved for development.

“These projects will need to overcome a range of barriers, and there will need to be significant infrastructure investment to bring the gas to market.”

Government Recognition

It didn’t take long for the Federal Government to also highlight the pivotal role natural gas will play in our energy future as it announced one week later a further $50.3 million of investment for gas supply infrastructure as part of its 2022-23 Federal Budget.

Under budget guidelines, it promised to accelerate priority gas infrastructure projects that would protect Australia from potential energy shortages, keep pressure on prices and create jobs in regional Australia as part of its energy production plans.

The funding will come through the arm of the government’s Future Gas Infrastructure Investment Framework’s Expression of Interest (FGIIF) process launched last year, primarily for investment in domestic gas projects and key carbon capture and storage infrastructure.

The FGIIF is a national funding scheme that assists industry in accelerating projects to put downward pressure on gas prices and alleviate forecast gas supply shortfalls.

These assistance measures come in the forms of:

  • Funding for pipelines, storage, compression technology and investments to drive support for cleaner energy in gas networks.
  • Support for hydrogen and/or carbon capture opportunities associated with mid-stream gas infrastructure projects and storage in gas networks.
  • Removing red tape for private investment into gas projects to proceed for the aid of Australia’s energy security.

Minister for Industry, Energy and Emissions Reduction Angus Taylor said the government was working with industry to accelerate priority projects to ensure Australia does not experience the devastating impacts of a gas supply shortfall, as seen recently in Europe.

“The ACCC and AEMO have made multiple warnings of the forecast gas supply shortfall in the east coast market as early as this decade”, Mr Taylor said.

“This, along with the energy crisis in Europe, should act as a warning of what could happen in Australia if there is not enough investment in the gas sector at home.”

At the State level, Black Mountain is just the second company in WA to be awarded a domestic gas export ban exemption since policy changes in 2020. This means they are able to supply both domestic and export markets.

These sentiments are major incentives for up-and-coming gas developers such as Black Mountain, which is looking to advance its Valhalla onshore gas project in northern WA’s Canning Basin.

Breaking barriers to commercialisation

This is great news for the Valhalla project. Black Mountain recently consulted the Australian Gas Pipeline Infrastructure Group (AGIG) to conduct a qualitative gas composition analysis of the anticipated Valhalla gas if injected into the existing infrastructure in the Dampier region.

The AGIG report provides important baseline data on the specification of the gas that would be available for export. AGIG analysed results for when Valhalla produces between 200 and 600 terajoules per day, thereby demonstrating outcomes for potential gas supply to both exports and domestic markets.

This report comes on top of other recent news that major project developments, such as the completion of critical heritage and environmental surveys and significant progression in the environmental permitting process.

In 2021, Black Mountain completed extensive heritage, flora and fauna surveys, as well as a detailed baseline study collection regime. That data has already been collated and lodged with the Environmental Protection Authority, enabling the company to move into the next phase of the environmental permit process.

Black Mountain Energy founder and CEO Rhett Bennett said the AGIG report was another major milestone on the pathway to production.

“Our next steps will be shooting through the 2D seismic surveys and further delineating the resource which we’ve already defined with our initial drilling results which shows that Valhalla will produce in the order of 11 TCF,” Mr Bennett said.

“It’s a really world-class resource and is going to be globally relevant coming from the Canning Basin, so we’re excited to get [the project] to commercialisation.”

The export exemption provided by the Western Australian Government allows Black Mountain to pursue LNG sales, but is conditional on also entering into long-term domestic gas supply agreements – another sign that the government is eager to see more domestic gas supply lines come online.

Black Mountain Energy Commercial Advisor Greg Denton said that finding potential domestic gas off-takers and opportunities in the export market was the goal over the next 12 months.

“It’s quite exciting because we received an export exemption in October last year and now have confirmed we have a product we can export. The potential now is to connect Valhalla to already existing pipelines in WA and from there we can sell to the domestic market as well,” Mr Denton said.

BME shares opened trading at 15 cents.

BME by the numbers

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