Australia's Northern Territory lifts fracking ban

SYDNEY (Reuters) - Australia’s Northern Territory on Tuesday lifted a nearly two-year moratorium on fracking to extract gas, unlocking vast onshore reserves in the resource-rich region and raising the possibility of other provinces following suit.

The Northern Territory (NT), a 1.4 million sq km (540,000 sq miles) expanse of outback extending from the center of Australia to its northern coastline, had banned hydraulic fracturing, commonly known as fracking, in September, 2016 amid concerns the drilling method could harm the environment.

It commissioned an inquiry into the environmental, social and economic risks of the extraction process and on Tuesday accepted the inquiry’s conclusion that the risks were manageable.

“The moratorium on fracking in the Northern Territory will be lifted, with strict new laws to be in place before exploration or production can occur,” Chief Minister Michael Gunner told reporters in the Territory’s capital, Darwin.

The announcement, which drew criticism from environmentalists, reopens shale gas reserves in the Beetaloo and McArthur basins for development. It immediately sent shares in commodity explorers in the region sharply higher, even though production is not expected to begin for about a decade.

It also raised industry hopes for pushing Australia, with 88 trillion cubic feet of identified unconventional gas reserves, like the United States before it towards energy self-sufficiency if blocks on fracking were lifted elsewhere in the country.

Origin Energy Ltd said it would resume plans “as soon as practical” to drill and frack the Beetaloo Basin shale gas field, which it says contains 6.6 trillion cubic feet in contingent reserves. Its shares rose 1.4 percent.

Shares of McArthur basin explorer Empire Energy Group Ltd jumped by two thirds and shares in Armour Energy Ltd, which also holds exploration acreage in the region rose 6.7 percent. The broader market edged higher.

Jemena Ltd [JEMLTD.UL], owned by China State Grid Corp Ltd [STGRD.UL] and Singapore Power Ltd [SINTT.UL], said it now intends to expand the capacity of a gas pipeline linking the Territory with the state of Queensland sevenfold.

“Given the vast geography we are talking about, some significant infrastructure investment will be needed to bring this gas to domestic and international markets,” said Andrew Koscharsky, director for energy at commodity trading house RCMA, which deals in Australian power and gas.

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Tuesday’s announcement lifted industry hopes for an end to fracking bans elsewhere in Australia, where the process has become a flashpoint between a national government desperate to quell rising gas prices and popular environmentalist opposition.

Victoria state has outlawed fracking. New South Wales and Tasmania have introduced moratoriums as has Western Australia in its gas-rich Canning Basin. In South Australia, a newly-elected centre-right government has promised a ban on fracking in the state’s gas-rich southeast.

“There’s been this cascading effect and so one place has a moratorium then the next place has a moratorium,” said Graeme Bethune, chief executive of Energy Quest, an Adelaide-based energy consultancy.

“This should cause thoughts by other jurisdictions about moratoria,” he said.

The NT government said it would tightly regulate the industry after lifting the ban. Almost half the territory will remain “frack-free”, including national parks and reserves.

Drillers will need to make wells compliant with new design codes and present plans for decommissioning and rehabilitation before production begins, it said in a statement.

But environmentalists condemned the move.

“This decision ... is a betrayal of the science and of the significant community opposition which has been expressed over the last few years,” said Lauren Mellor, a spokeswoman for environmental group Frack Free NT Alliance.

Reporting by Tom Westbrook in SYDNEY and Henning Gloystein in SINGAPORE; Editing by Michael Perry and Joseph Radford