Beach to suspend Katnook Gas Plant operations

OPERATIONS SUSPENDED: Beach Energy regional manager Jon Conti said the Katnook Gas Plant will be suspended later in the year as a result of field decline from existing connected wells.

By Raquel Mustillo

BEACH Energy will indefinitely suspend operations at the recently redeveloped $22m Katnook Gas Plant next financial year following declining gas volumes at its Limestone Coast wells.

In a statement to shareholders, Beach said production in the South Australian Otway Basin had decreased by 23pc – 57 thousand barrels of oil equivalent (kboe) – with shares plummeting 24.1pc pc to $1.28 on Friday – the lowest since November last year.

The gas plant, which was funded by a $6m contribution from the Federal Government’s Gas Acceleration Program, was commissioned in January last year and processes raw natural gas from the nearby Haselgrove-3 well.

Located on the decommissioned Katnook Gas Plant site near Penola, the facility has an operational capacity of 10 terajoules of natural gas into the South East Pipeline System for local industries and domestic distribution.

Beach Energy regional manager Jon Conti told The Border Watch field decline from existing connected wells meant production from Katnook Gas Plant would be suspended later in the year while the company explores nearby opportunities.

“In order to do this, we have plans to undertake the Dombey 3D seismic survey in the region during FY22,” he said.

“This survey follows our consultation from last year, and will be undertaken while adhering to strict environmental and safety protocols.”

In August 2020, Beach started consultation on a statement of environmental objectives and environmental impact report that addresses future geological activities in the South Australian Otway Basin, including seismic surveys.

According to the company, while the main objective of a seismic survey is to better image the geology and reduce subsurface uncertainty, a key environmental outcomes is that seismic surveys help to minimise the number of potential future wells being drilled in a region.

Mr Conti said the company’s commitment includes supporting the local economy and business chain, with Beach investing more than $12m with over 45 local companies in the Limestone Coast.

“Beach remains committed to delivering local gas for the South East, and to date, has produced over 2000 terajoules of gas via the plant since it was commissioned – the equivalent of half the region’s gas supply,” Mr Conti said. 

“Importantly, this gas helped supply local industry, including Kimberley Clark during the unprecedented activity during COVID-19.” 

A Kimberly-Clark spokesperson said the suspension of Katnook would have “no impact” on the business and the Millicent Mill “will continue to import energy as per current arrangements.”

The impending halt on operations follows the announcement of a $1b Federal and State Government energy deal, which sets a gas target of an additional 50 petajoules per year by the end of 2023 and a stretch target of 80 petajoules per year by 2030.

Last year, Resources and Water Minister Keith Pitt said the redeveloped Katnook Gas Plant would help energy security in the region.

“The redevelopment of the Katnook Gas Processing Facility is a great regional example of the outcomes provided through the Commonwealth’s Gas Acceleration Program,” Mr Pitt said at the time.

“SE South Australia is an important regional manufacturing area which needs reliable and affordable supplies of natural gas to maintain and grow its local industries.

“The Hazelgrove-3 discovery and other work onshore in SE South Australia is also demonstrating the expensive folly of unscientific bans and moratoria just across the border in Victoria.

“While Victoria is sitting on undeveloped gas, South Australia is moving ahead to protect its jobs and industries.”

The federal cash splash followed Beach pocketing $13m from the former Labor State Government to drive gas production and exploration projects in the Penola and Nangwarry area.

Beach Energy’s production was down 5pc across all of its sites compared to the previous quarter and 15pc lower than the third quarter of FY20.

Beach attributed the decrease to reduced reservoir performance and natural field decline, predominately from the Cooper Basin Western Flank oil fields.