There are currently seven projects that have been proposed for development at or near the port of Gladstone. The Queensland Government has said that, should all of these projects be approved and reach full capacity, approximately 3,250 PJ/a of CSG, or 59 MMt/a of LNG, would be produced.
Queensland Treasurer Andrew Fraser says that the growth of Queensland’s LNG industry has the potential to require up to $40 billion investment and create thousands of new jobs.
“Poised to take advantage of Queensland’s vast natural gas supplies, this is an industry with the potential to create 18,000 jobs, contribute some $3 billion to the Queensland’s gross state profit, and return a further $850 million worth of export royalties,” he says.
The projects
QGC/BG Group have proposed the $8 billion Queensland Curtis LNG Project, which will include a pipeline to link QGC’s Surat Basin tenements to a site on Curtis Island. The $12–14 billion project is set to have an initial production capacity of 7.4 MMt/a from two LNG trains, with a provision for a third train and an ultimate total production capacity of 12 MMt/a.
QGC plans to commission the first train in late 2013 and the second train approximately six to twelve months later. Bechtel is contracted to complete front-end engineering and design (FEED) for the LNG plant.
The pipeline component of the project includes a 200 km collection header pipeline to collect gas from centralised compressor facilities for delivery to the 380 km export pipeline, and potentially a 150 km lateral pipeline enabling the connection of additional CSG fields to the export pipeline.
QGC has said that design for the full three-train capacity in the mainline will be provided by a larger diameter pipeline, looping or the addition of intermediate compressor stations.
Two companies have been shortlisted for the export pipeline construction contract – Nacap and McConnell Dowell.
Subject to approval of the environmental impact statement (EIS), construction of the project is set to commence in the second quarter of 2010, with commissioning of LNG to start in the third quarter of 2013 and LNG production to commence in 2014.
As part of the GLNG Project, Santos and Petronas will construct a 35 inch diameter, 450 km pipeline linking a compressor station at Santos’ Fairview CSG Field to a 3–4 MMt/a liquefaction plant at Gladstone. A final investment decision (FID) for the $7.7 billion project is expected by the end of 2010, and first LNG cargoes are expected early in 2014.
The pipeline is expected to parallel Jemena’s Queensland Gas Pipeline route from the northern end of the Arcadia Valley to Gladstone. Further route refinement studies will be undertaken during the FEED, currently being undertaken by GHD, to confirm whether potential alternative deviations will be selected.
The pipeline is to cross Port Curtis between Friend Point (on the mainland) and Laird Point (on Curtis Island), and will be trenched below the seabed then backfilled with sand and rock in order to avoid the risk of boat anchors damaging the pipe.
A second train at the liquefaction plant is expected to commence operation one year after the first GLNG train. Santos has also identified three other sites within the proposed GLNG precinct for the development of additional LNG trains. The site could contain up to five LNG trains if required. Santos has said that maximum potential production from the project is 10 MMt/a.
Fluor has been announced as the preferred upstream engineering, procurement and construction (EPC) contractor for the project. This will comprise all CSG and associated water gathering and processing infrastructure for both the Fairview and Roma fields.
In May 2010, the Queensland Government granted environment approval for the GLNG Project. Santos is now awaiting Federal Government environmental approval it will also have to obtain other environmental and production licences and safety approvals as required under state laws and as conditioned by the Co-ordinator-General before construction can begin.
Joint venture partners Origin and ConocoPhillips are developing the Australian Pacific LNG Project (APLNG), which will utilise Origin’s Queensland CSG reserves and resources. The project will involve a four-train LNG plant.
The four trains, to be constructed using Cascade technology, will have the capacity to produce up to 18 MMt/a of LNG. The project includes the construction of an approximately 450 km gas transmission pipeline from the Surat and Bowen basins to a proposed LNG processing site located at Laird Point on Curtis Island.
A 42 inch diameter, 362 km mainline will begin in Wandoan, and travel north, veering east during the latter stages. Existing easements will be used, and the route deviated wherever possible to lessen environmental impacts. The project will comprise two lateral pipelines, 44 km and 38 km in length, connecting the Condabri and Woleebee developments with the main pipeline.
At The Narrows, between Kangaroo Island and Curtis Island, a marine crossing is to be constructed. The joint venture hopes to use horizontal directional drilling to complete the crossing, but is also considering joining with other LNG project proponents in a ‘bundled’ crossing to minimise the environmental impacts of multiple crossings.
A joint venture between McConnell Dowell and Consolidated Contractors Company has been contracted to build the mainline. Construction is expected to take approximately 18 months and is proposed to begin by mid-2012.
The APLNG joint venture has said that the pipeline may be co-located with other CSG pipelines for more than half its length, including along land gazetted by the Queensland Government within the Callide Infrastructure Corridor State Development Area (SDA) and the Gladstone SDA.
A draft EIS for the project has been lodged with the Queensland Government and will be assessed for compliance with the terms of reference set by the Co-ordinator-General prior to its release for public consultation at a future date.
A final investment decision for the project is expected at the end of 2010, with first gas expected by late 2014.
Shell and Arrow Energy are planning the Shell Australia LNG Project (SALNG), which will involve the construction of a pipeline linking Arrow’s Surat and Bowen basin tenements with an initial 3 MMt/a LNG train.
The project is expected to produce up to 16 MMt/a of LNG, involving phased construction of up to four LNG processing trains, with CSG drawn from acreage jointly owned by Shell and Arrow Energy in central and South East Queensland.
The Queensland Government, as a shareholder of the Gladstone Ports Corporation, has approved the sale of 160 hectares of land on Curtis Island to Shell CSG Australia for the project. Shell expects approval of its EIS sometime in 2011–12.
As part of the project, Arrow will develop the proposed 467 km, 660 mm diameter Surat to Gladstone Pipeline.
At the time of writing, a joint venture between Shell and PetroChina (CS CSG) has proposed a takeover bid for Arrow under which it would wholly-acquire Arrow’s Australian CSG and LNG interests. The Arrow takeover has been recommended by the directors of Arrow Energy, and has been approved by one of Arrow’s biggest shareholders, New Hope Corporation, as well as the ACCC and the Australian Foreign Review Board. If the takeover is successful it is expected that gas from current Arrow tenements will solely supply the SALNG project with CSG.
Arrow was originally to supply LNG Limited’s 1.5 MMt/a Gladstone ‘Fisherman’s Landing’ LNG Project with CSG from its Surat Basin tenements. In February 2010 Arrow signed a Heads of Agreement (HoA) to wholly acquire LNG Limited’s subsidiary Gladstone LNG, and therefore theGladstone ‘Fisherman’s Landing’ LNG Project, including the processing plant and associated infrastructure.
Since CS CSG’s takeover bid for Arrow, an extension of the HoA has been signed, and LNG Limited is free to explore project options with other parties.
LNG Limited has said that it is now progressing talks with other potential gas suppliers. The company must procure a gas supply feedstock for the project by 1 July 2011 as part of a newly signed lease agreement with Gladstone Ports Corporation.
The project will be developed using LNG Limited’s optimised single mixed refrigerant liquefaction technology. The train site and design will provide for an additional LNG train of 1.5 MMt/a, subject to the availability of further gas. SK Engineering Company is progressing FEED for the second train.
Early site works, including civil works and deep soil mixing to prepare LNG tank foundations, have commenced at the LNG plant site at Fisherman’s Landing.
The project was recently granted an Environmental Authority by the Queensland Department of Environment and Resource Management.
As part of both the SALNG and Fisherman’s Landing projects, Arrow had proposed to construct the 467 km Surat – Gladstone Gas Pipeline. The pipeline would extend northwest from Dalby to Chinchilla before travelling north to Gladstone. Expected to have a diameter of 660 mm, the $500 million pipeline would have the capacity to deliver approximately 90 PJ/a of CSG.
It had been anticipated that construction of the pipeline would start in 2011, with first gas supplied to the proposed Fisherman’s Landing project in late 2012. However, the pipeline has been put on hold following the announcement of CS CSG’s takeover bid for Arrow.
The Government’s response
The Queensland Government stresses the importance of planning to make sure that pipelines that are constructed to transport the CSG to the LNG plants have as little impact as possible on the community, affected landowners and the environment.
A spokesperson from the Department of Infrastructure and Planning (DIP) said “The state and local governments have undertaken extensive and well-defined strategic planning to provide infrastructure to existing industries and those yet to be established in Gladstone.
“DIP has encouraged the LNG proponents to co-locate their pipelines in purposefully created corridors; the Callide Infrastructure Corridor SDA and a soon to be finalised corridor within the Gladstone SDA.”
One major point of consideration in the allocation of pipeline routes, for proponents and the Government, is how proposed pipelines will cross to Curtis Island. The DIP is encouraging proponents to use a shared right-of-way to minimise disruptions to the area.
“DIP is currently working with the LNG proponents to identify a suitable co-located underground pipeline corridor within the Gladstone SDA, which will cross The Narrows to Curtis Island,” the DIP spokesperson said.
DIP is working with the proponents regarding a licence agreement and pricing arrangements for pipeline alignments within these corridors. The department is also preparing the Queensland Co-ordinator-General’s response to proponents’ EIS applications.
The LNG Industry Unit
The Queensland Government has established the LNG Industry Unit to deal with the challenges faced by the emerging LNG industry in Gladstone.
Queensland Treasurer Andrew Fraser says “In order for a new industry like LNG to become successful, it must first have a policy framework within which development can take place. That’s where the LNG Industry Unit comes in.
This Unit, headed by Mal Hellmuth, set up specifically to facilitate the industry, covering land tenure, planning, pipeline corridors and common user infrastructure.
“A multi-faceted approach to industry development is required, and a dedicated LNG Industry Unit can ensure that all facets of development are working cohesively,” says Mr Fraser.
The challenge
The Federal Government’s proposed Resource Super Profits Tax (RSPT) has implications for the development of Queensland’s LNG industry.
Queensland Minister for Mines and Energy Stephen Robertson has said that the Queensland Government is working to have the RSPT profit threshold raised to at least 11 per cent from the Federal Government’s proposed 6 per cent. Mr Robertson said he was concerned about the impact on Queensland’s LNG industry, where a number of proponents are due to make FIDs about proposed projects in the near future.
A recent report by Deutsche Bank, Australian Energy Sector: Implications of the Henry Tax Review, stated that CSG to LNG projects are the potential “biggest losers”.
The report states that “projects such as Santos’ GLNG and Origin’s APLNG could suffer up to a 2 per cent internal rate of return impact, resulting in up to a 40 per cent decline in project net present value. However, the ultimate impact will depend on whether wellhead or LNG facility profits are the basis of taxation.”
Origin Chief Executive Officer Grant King and Santos Chief Executive David Knox have both voiced concerns over the RSPT’s potential effect on their respective projects.
Pipelines of promise
Despite the RSPT, the outlook for Queensland’s LNG industry continues to be bright. The LNG process is a profitable method of commercialising gas reserves, as it reduces natural gas to 1/600th of its original volume, allowing larger quantities of gas to be readily transported by specially-built LNG tankers to markets all over the world.
The LNG industry also provides opportunities for the pipeline industry, as pipeline infrastructure is integral for the development of the many proposed LNG projects.
Shell has said that new pipelines are necessary as currently there is no infrastructure with sufficient capacity to transport required volumes of gas from the Surat and Bowen basins to Curtis Island.
“This is understandable because the gas volumes the foundation two LNG trains of the SALNG project will take are approximately double the total current Queensland gas market demand,” the company said.
Arrow has also stated that an advantage of building pipeline infrastructure is that “building our own pipeline allows full control of the delivery of our gas”.
It is likely that details for these proposed pipelines associated with LNG projects in Queensland will alter as LNG proponents move toward FIDs, but the opportunities for the industry are undeniable.
