After completing a degree in engineering in the mid-1980s, Mick McCormack started at an entry level position in AGL as a pipeline patroller where he had to drive up and down providing surveillance to pipelines.

Mick says that he was very fortunate to gain experience in the field on the Moonie Oil Field after leaving university.

“That couple of years I really had any delusions of grandeur knocked out of me. I learnt very quickly a lesson that has stood me in very good stead – and indeed is probably the reason why I am sitting here today in this office – how to get on with people.”

On joining APA in 2000, Mr McCormack started as the General Manager for Commercial and then became the Chief Operating Officer before becoming the Chief Executive Officer in July 2005, and then Managing Director in July 2006.

“Looking at myself, I’ve come up through the ranks in the industry, and I often tell my employees – irrespective of where they are in APA – about the tremendous opportunities that I have been given coming through the ranks,” says Mick.

“I really want to have APA employees feel that they can equally develop their careers inside a company such as ours.”

The growth of gas

Mick says that it has been exciting to see the gas industry in Australia grow over the last three decades.

“When I started, the industry was pretty much a cottage industry. That’s not to demean the technical expertise, but it was a state-based geographically diverse smallish entity, typically state-owned doing the one thing – picking up gas and delivering it somewhere.”

He says that in the earlier days of the industry most people in built-up cities or towns would consume gas via LPG or town gas. From this, Mick says that it is clear to see that the pipeline industry is vastly different to where it was in the late 1980s.

“I didn’t see the extent of how the industry would grow. The pipeline industry is the major infrastructure link in supplying a fair chunk of this country’s energy consumption.”

Today, pipelines supply 19–20 per cent of Australia’s primary energy use, and Mick says that this looks set to increase.

“I firmly believe that the best days of the gas business are in front of us, and that probably also includes the pipeline industry.”

Mick points to the Australian Government’s proposed Carbon Pollution Reduction Scheme (CPRS) as increasing the demand for natural gas.

“We’ll all have to get on board with what that legislation prescribes ultimately, and I think that for gas the impact will mean a growing demand for gas. The renewable energy target (RET) will also play a role in deciding the extent gas makes up the primary energy mix.

Taken all together I see the emissions trading scheme (ETS) and RET really driving or having an impact on much greater demand for gas used for power generation. that’s where the pipeline industry will have plenty of opportunity – to transport gas to power station sites that will need to be built to assist Australia’s transition to a carbon-light or carbon-less future.”

However, Mick says that the Government needs to focus more on Australia’s current energy mix in addition to looking into the future.

“There doesn’t seem to be sufficient debate or discussion about the here and now, which is that black and brown coal will always play a role in the energy mix, however there is an immediate source of fuel which is gas – that is the ideal transition fuel to take us wherever we want to go, whether that be solar or nuclear or something else.”

Mick says that the Government has an opportunity to encourage efficient investment in cleaner sources of energy, in particular, gas-fired power generation.

He says that he is unsure if the CPRS will impact on the way pipelines are constructed and operated, “Hopefully the only impact will be that there will be more pipelines.”

Energy Investments

APA recently established Energy Infrastructure Investments, a venture with Osaka Gas and Marubeni Corporation, into which APA has moved its Bonaparte Gas Pipeline, Port Hedland to Telfer Pipeline and Wickham Point Pipeline.

Mick says that the venture has been driven by the way APA has changed over the years.

“We have always had a focus on gas transmission and distribution. Over the last three to five years we have acquired a range of other assets and we’ve developed some that aren’t quite gas transmission or distribution, for example power stations.

“So we ended up with a basket of assets that we were very happy to own and are all very good assets. Corporately our strategy has been to grow the business, and with the assets that went into the Energy Infrastructure Investments vehicle, they are more annuity style assets with very long-term reliable and fixed revenue streams,” Mick explains.

Mick says that APA looks forward to growing its relationship with Osaka Gas and Marubeni through Energy Infrastructure Investments.

“They’re marvellous partners based on what we’ve seen to date,” he says. “We have looked at a couple of projects since we got the vehicle established in December last year, those couple of things didn’t go any further and we continue to look at assets that might fit into that vehicle with an eye to seeing it develop.”

APA developments

Mick says that all of APA’s wholly-owned assets continue to grow. “One of the real strengths of APA as a business is that because our assets are spread across the country, they are hooked up to local economic conditions.”

Mick explains that in the last seven to ten years the Goldfields Gas Pipeline in Western Australia has grown at a fast rate due to the global demand for Australian commodities. Over the last year Mick says that this growth has tapered off, however this has been offset by growth in southeastern Australia, driven by the development of new gas-fired power stations.

“Collectively we see the business continuing to grow and on a year to year basis we’re not too concerned about where that growth will come from.

“That’s not to say that we’re not pursuing any opportunity to grow revenue, we operate on the basis that there is plenty of gas available in Australia together with a growing demand for gas because of the ETS and the demand for gas-fired power generation. Given APA’s business is transporting over half the country’s gas, we must be in a good position to capture a bit of that growth.”

In regard to future development, Mick says that it is hard to predict if there are going to be any greenfield developments because they require a new load somewhere that is not currently hooked up to a pipeline.

“The amount of pipelines in Australia is now far in excess of what they were 20 years ago, there is a real system developing. I can’t see major new greenfields developments happening any time soon. However having said that, I’m not privy to what some of the major miners might be thinking.”

He does see much brownfield development required to feed gas into power stations, however, which could see APA expand existing or purchase new assets.

“Any opportunity that needs gas and needs a pipeline or a distribution system that fits APA strategy – we’ll certainly look at it. Nothing is set in concrete at the moment, and I think over the next year or two, it will be particularly telling of how the future landscape of the energy market in general is going to be played out.”

Mick points to APA’s acquisition of the Central Ranges Pipeline as an example of looking to the future opportunities in the industry. He says that the pipeline has strategic value in delivering New South Wales coal seam gas (CSG) to the market and will be able to support developments such as Eastern Star Gas’ Narrabri CSG Project.

In addition, Mick notes that an opportunity exists for the development of a major pipeline if the proposal to construct an LNG plant at Newcastle comes into fruition.

Managing pipeline risk

Mick says that everything APA does in a construction and operating sense has a great deal of oversight from a risk management perspective, whether through HAZOP studies on plant, general risk assessments or on activities or processes being run.

“I think it’s fair to say that APA has a fairly safe environment and indeed that’s a testament to the broader industry. This industry is by any reasonable measure very safe,” Mick says.

“Risk management is one of those areas that we all practice, and until such time as some major event happens – and we trust that it never happens – that’s when you really test your risk management strategies.”

Mick points to APA’s experience with stress corrosion cracking (SCC) on the Moomba to Sydney Pipeline, as testing the company’s risk management strategies.

“It’s existed for quite some time generally and in various old pipelines in the United States for around 50 years. Unfortunately it was first found on the Moomba to Sydney Pipeline by way of a rupture in the early 1980s.”

Mick says that it is only due to recent advances in intelligent pigging technology in the last four to five years that APA have been able to accurately assess the extent of SCC and the nature of it on the Moomba to Sydney Pipeline.

Mick says that this puts APA, and also other companies, in better position to assess, repair and mitigate the effects of SCC on pipelines. Having said this, he notes that SCC shouldn’t be an issue in new pipelines because the phenomena can be engineered out using modern technology and design.

“Any new pipeline, by and large, can be designed and constructed so that you won’t have SCC issues. That’s a combination of steel quality and also coating. So we’re dealing with first, second generation pipeline through the Moomba to Sydney Pipeline. In third generation or current generation pipelines SCC is simply not a factor.”

APA, however, owns some of Australia’s oldest pipelines – the Roma to Brisbane Pipeline just celebrated its 40th birthday and the Parmelia Pipeline in Perth is coming up to the same age.

Mick says that these older pipelines require more involved risk management processes than newer pipelines.

“It’s also a case of ensuring that we have modern surveillance and modern operational technology applied to those pipelines.

“From an engineering perspective I could probably argue that the engineering types would probably prefer to work on an older pipeline than a newer pipeline just by virtue, because there is more to do on an older pipeline,” he notes.

Mick is excited about the future of the gas and pipeline industry in Australia, strongly believing that the industries’ best years are in front of it. He looks forward to growing APA as new opportunities become available.