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Lakes calls for lift on Victorian moratorium

Company calls on state government to lift onshore conventional ban and cooperate to ease supply shortages

Australian company Lakes Oil has offered to drop its litigation against the Victorian government if a ban on conventional exploration is dropped, while it is also seeking a low cost loan from the government.

Lakes is challenging the Victorian government’s current ban on onshore conventional exploration, believing current legislation means it cannot apply to exploration commitments under existing permits and retention leases.

A court date is currently set for March, however, confident that it will be given permission to resume drilling, it has offered the government the chance to avoid court action and let it resume its conventional gas operations.

“Lakes Oil considers it preferable that these activities be expedited, through cooperation between itself and government, in the interests of all Victorians, rather than delayed until the conclusion of the court proceedings,” Chairman Chris Tonkin said in a letter addressed to the Victorian Resources Minister.

If it is allowed to continue its activities in the state, Lakes believes it could help Victoria avoid the gas shortage it is currently facing.

Among Lakes Victorian prospects is the Wombat gas field which it believes could be brought online quickly and supply roughly 10% of Victoria’s gas needs, producing up to 20 petajoules of gas per day over a minimum 20-year period.

In his letter, Tonkin said the cost of producing gas from the Wombat field, which lies near existing pipeline infrastructure, would be lower than the cost of offshore resources or the cost of piping gas from interstate.

The company has also highlighted another prospect in its portfolio, the Portland Energy project, which it estimates to hold 3 trillion cubic feet of gas, enough volume, it says, to meet the state’s gas needs for 15 years.

In the event Lakes is able to confirm commercial volumes of gas at its projects it has also requested the Victorian government provide assistance in getting the gas quickly to market.

It is proposing the Victorian government provide it with a 10-year loan facility at an interest rate reflecting the government’s cost of capital.

The proposed loan will be used for the installation of gas production and processing facilities and only be established once gas reserves are confirmed and it will be secured by third party gas sale agreements.

Lakes has also committed to paying a percentage of gas sales revenue to landowners in addition to royalties to be paid to the government if it is allowed to proceed with its developments.

It estimates its proposed projects will net the government A$1.7 billion (US$1.3 billion) in royalties over 15 years, or A$69 million per year.