Underground Gas Storage: Issues Beneath the Surface

Abstract

Abstract The storage of natural gas by re-injection into the surface has become quite commonplace in various developed countries around the world. It is a relatively new phenomenon in Australia, and issues, not yet resolved, remain. The ability to store gas underground has enormous implications for the competitiveness of the gas market in Australia. Underground storage allows producers effectively to manage their gas flow in times of high and low demand. For gas users, underground storage has the potential to increase the choice of suppliers. For gas commodity traders, underground storage provides increased ability to hedge gas contracts which in turn will help to foster a strong spot market for gas in Australia. As a result of the increased interest in, and the development of, underground gas storage facilities in Australia, most of the relevant petroleum legislation in each State and Territory in Australia has been amended, or is currently being reviewed, in order to deal with the legal and technical issues that arise with underground gas storage. Some of the issues that arise, and yet to be finally resolved from underground gas storage include: Who owns the re-injected gas? The Crown or the producer? This is particularly relevant to avoid the double payment of royalties. The issue becomes quite complex where processed gas is injected into a partially depleted petroleum reservoir.What regulatory regime should regulate underground gas storage?Who is responsible in the event that liability arises from the underground storage of gas?What rights do the owners of land affected by an underground gas storage facility have to the underground gas? Our paper discusses these issues and provides a brief overview of the current legislative regime regulating the underground storage of gas in specific Australian jurisdictions.