APC was selected as the preferred developer for the Australian pipeline in April 1998 following an international competitive tender. In October 2004, APC and the PNG Gas Project participants executed a binding letter of intent that provides APC with the responsibility for designing, owning and operating the Australian pipeline, as well as securing all project approvals in Australia.

APC’s role is to build and operate the Australian component of the pipeline, starting at the Australian under-sea border in the Torres Strait. This includes all onshore and offshore pipeline infrastructure in Australia.

AGL and Petronas

APC is a 50/50 joint venture between AGL and Petronas. AGL is one of Australia’s leading energy retailers serving around three million customers. It is also the operator of electricity and gas transmission and distribution systems and electricity generation assets across Australia. Petronas is Malaysia's national petroleum corporation, established in 1974. It is an integrated international oil and gas company with business interests in 35 countries and total assets of $US63 billion.

The APC FEED study is being managed out of an office in the Brisbane CBD. The FEED team has grown from a handful of engineers earlier this year, to around 100 staff, contractors and consultants working at the APC headquarters. The team includes engineers from GHD and JP Kenny, who are undertaking onshore and offshore FEED engineering respectively.

The APC Onshore Project Director for FEED is Gary Voss, who has spent over 20 years with AGL in pipeline engineering and management. He sees this as one of his greatest challenges, after being involved in earlier attempts to bring the project to fruition in the late 90s. Mr Ali Janudin brings many years of experience with Petronas to the role of Offshore Project Director, responsible for FEED on both the Torres Strait and Gove subsea pipelines.

The APC team covers a multitude of professions, ranging from various engineers involved in areas such as pipeline design and procurement, project logistics, and environment, to others in route selection, ground truthing, land access, native title and cultural heritage, finance, accounting, marketing, administration and human resources - and this is just for the FEED study phase. Should the project proceed successfully to financial close late next year, some 1,500 full-time workers will be required to build the Australian component of the pipeline.

Project scope

The Australian section of the Project comprises around 3,800 km of pipeline (approximately the distance from Sydney to Perth) at a cost of around $2.5 to $3 billion. Total PNG and Australian Project costs are estimated at around $A5 billion. The Project will be the most significant resource development ever undertaken in PNG and one of Australia’s largest infrastructure developments.

Pipeline route

The Australian Pipeline will commence at the Australia/PNG subsea border, winding its way through the Torres Strait before reaching landfall on Cape York. The main pipeline then traverses parallel to the Queensland east coast, passing close to Townsville and then on to Gladstone. The Gove lateral will connect to the mainline east of Weipa, and will traverse west across Cape York and then the Gulf of Carpentaria. The Ballera Lateral will connect to the mainline near Townsville, traversing generally south west via Ballera to link in to existing southern Australian pipelines.

The Australian pipeline will comprise (approximately):

• 1,220 km of 600-700 mm pipeline from the Australian/PNG maritime border to the Townsville off-take; • 100 km lateral pipeline (250 mm) from the Townsville off-take to Townsville; • 700 km of 350-400 mm pipeline from the Townsville off-take to Gladstone; • 600 km lateral pipeline (350 – 400 mm) to Gove; and, • 1,000 km lateral pipeline (450 – 500 mm) to central Australia.

The ultimate pipeline configuration will be determined as markets are finalised during early 2006.

APC FEED objectives

The key objective of the project team during FEED is to provide certainty for investment decision-makers by first half 2006. The principal tasks to be completed during FEED include:

• Producing bankable designs, cost estimates and execution strategies for the project; • Achieving certainty of route and necessary environmental approvals; • Obtaining secure access to lands of all tenures; • Progressing pipeline licenses and other statutory approvals; and, • Achieving regulatory certainty.

Project progress

APC's FEED project is tracking to schedule. On the onshore engineering front, desktop route selection is complete, and ground teams have been in the field assessing constructability, environmental constraints, and construction logistics. Preliminary design of the facilities is near complete, including compressor and scraper stations, mainline valves and delivery and metering facilities.

Offshore, marine surveys have been completed across Torres Strait, and will be completed on the Gove lateral during January. Detailed design of the Torres Strait pipeline is near complete, while the Gove lateral is in the early stages of conceptual design.

Environmental studies are underway on the new laterals to Ballera and Gove, while approvals for the original east coast mainline are progressing steadily through Government. Initial discussions with landowners and Native Title stakeholders are underway, and work will commence on consolidating land access certainty early in 2006. Pipeline licence applications are being submitted progressively as routes are finalised and the necessary supporting data becomes available.

Pipe and coating procurement is well advanced, with expressions of interest called from selected suppliers late in 2005. On the construction front, discussions have been underway for some months with major local and international contractors.

In head office meanwhile, work continues on transportation agreements, project financing, and finalising the regulatory framework.

All in all, things are on track for project sanction, currently scheduled for Q2 2006, followed by financial close in the second half of 2006.

Project benefits

The PNG Gas Project will deliver substantial benefits to the economies of Australia and PNG, and to the environment.

For Australia, economic benefits will arise through increased availability of reliable, conventional gas reserves, and increased supply side competition leading to downward pricing pressure and improved gas price stability. Access to reliable, world competitive gas supplies will also encourage capital investment in both energy conversion projects and new industry.

ACIL Tasman estimates that the PNG Gas Project will boost Australia’s GDP by around $620 million by 2020 and that employment will increase by nearly 900 jobs in eastern Australia by 2020. Short-term job increases are expected to be considerably higher due to the initial construction of the pipeline and commencement of new gas based projects.

The project will also result in a very substantial injection of capital into the PNG economy. It will make a valuable contribution to PNG’s balance of trade, offer substantial employment and economic growth opportunities, and provide the opportunity for additional investment, jobs and revenue in PNG.

Environmental benefits

Electricity generation is a dominant source of greenhouse gas emissions largely due to the use of fossil fuels, primarily coal, as the main fuel source for generation. The availability of a reliable, competitive source of natural gas will encourage development of new gas fired generation projects, minimising the growth in greenhouse gas emissions which will otherwise occur in meeting the increasing demand for electricity across the east coast.

The Bottom Line

Despite a number of false starts in the past, the PNG - Queensland Gas Pipeline project is well on track to being a reality. On the current schedule with a financial close in the second half of 2006, early works will kick off in late 2006, with construction proper commencing in 2007 and first gas delivered during 2009.