2007: The year in review

One of the major projects that has made significant headway in the past year is the Dampier to Bunbury Natural Gas Pipeline (DBNGP) Expansion, with Stage 4 being completed early in the year, construction on Stage 5A commencing in February (a full update on Stage 5A is on page 134) and a further expansion to Stage 5A – Stage 5A(2) – being announced in April. The maximum full haul capacity of the DBNGP could eventually be brought up to about 825 TJ/d, including the 100 TJ/d provided by Stage 4, and the further 100 TJ/d from Stage 5A.

The Stage 5A(2) expansion will involve additional pipeline looping of approximately 140 km in total. Dampier Bunbury Pipeline will spend approximately $A245 million on Stage 5A(2) following the finalisation of contractual arrangements with shippers for additional capacity. This further expansion is expected to deliver new capacity to existing and new customers in 2009 and 2010.

During the year the 130 km Fairview – Wallumbilla pipeline – which runs from Santos’ coal seam gas site in the Fairview field to the Wallumbilla gas hub – reached completion. Construction was completed in March, with commissioning completed in April.

Also in the Sunshine State, the future of the Central Queensland Gas Pipeline has become uncertain, following the Queensland Government’s decision in June to sell Enertrade’s gas businesses. However, right of way and easement work continues.

In New South Wales, pipeline construction on the Sydney Primary Loop Project has been completed with the final weld being carried out on 31 July. The total length of pipe laid by open cut and HDD construction through the streets and parks of Liverpool, Bankstown, Canterbury and Marrickville Councils is approximately 30 km.

Hydrotesting on the Sydney Primary Loop was carried out in two sections and completed on 24 August. With the completion and hydrotesting of the pipeline, the five Automatic Line Break Valves (ALBVs) have commenced “cut in” along the pipeline. The Trunk Receiving Station and Pressure Reduction Station are in the pre-commissioning stage of construction. With the completion of the Stations and ALBVs, Phase 1 of the Sydney Primary Loop will be ready for commissioning and operation which is planned for November 2007.

In Victoria, Delco recently completed construction of the South Gippsland Natural Gas Pipeline, with final testing taking place during August. Construction on this 150 mm, 66 km pipeline commenced in April. The transmission pipeline is the main pipeline that will transport natural gas from the BassGas Plant in Nyora to the townships of Korumburra, Leongatha, Wonthaggi and Inverloch.

In August AJ Lucas won a contract with APA Group for the construction of a 58 km 500 mm gas pipeline from Brooklyn in Melbourne’s outer suburbs to Lara near Geelong – the Brooklyn to Lara Looping project. It is estimated that the pipeline will be completed by March 2008 at a total cost of approximately $A43 million.

Throughout the year, APA has continued to work on its plans to construct the Bonaparte Gas Pipeline, which will run approximately 280 km from the onshore gas plant at Wadeye to the Amadeus Basin to Darwin Pipeline. The pipeline will consist of a buried 300 mm class 900, high tensile steel pipe located in a 30 m wide corridor. In June APA issued the invitation to tender for construction of the pipeline, and pre-qualified tenderers announced in August include McConnell Dowell, AJ Lucas, Diversified and Nacap.

APA has also recently been investigating the construction of a new high capacity pipeline direct from the gas-gathering hub of Wallumbilla in southern Queensland, to Bulla Park, a compressor station on the Moomba – Sydney pipeline.

APA managing director Mick McCormack said that the Wallumbilla – Bulla Park pipeline would be part of the company’s plan to further expand its infrastructure network, to work alongside another new pipeline, announced in July – Epic Energy’s Queensland to South Australia/New South Wales (QSN) Link.

The QSN Link will extend Epic’s South West Queensland Pipeline (SWQP) to complete the final link between the Queensland, South Australia and New South Wales gas markets. Completion of the project is scheduled for December 2008.

Early in September, Epic announced that the pipe size for the QSN Link has been increased from 350 mm to 400 mm, and the company has been progressing steadily on detailed design and approvals processes in South Australia and Queensland.

Another pipeline project that has been put forward to connect New South Wales and Queensland is Hunter Energy’s Queensland Hunter Gas Pipeline. This 850 km, 508 mm diameter pipeline will run from the Wallumbilla Gas Hub in south central Queensland and connect into the existing Sydney – Newcastle pipeline at Hexham just north of Newcastle in New South Wales. It will initially source approximately 50 PJ/a of CSG for power generation and industry usage.

Hunter Energy continues to work on preparation of the final Environmental Impact Statement, which is expected to be completed in 2008. The company is also seeking approval for the NSW portion of the pipeline.

Also proposed during this year was the 630 km Great Northern Pipeline, which would run from Broome to Port Hedland in Western Australia. In July ARC Energy entered into a major Gas Sales Agreement with Alcoa for the delivery of up to 500 PJ of gas via the proposed pipeline from future discoveries on ARC’s interests in the onshore Canning Basin. Construction is hoped to commence in April/May 2009 with gas deliveries to market commencing in mid-2010. OSD Engineering is doing the preliminary engineering for the pipeline.

In Papua New Guinea, Ok Tedi Mining Limited in early September made the official announcement that it will fund a 130 km waste pipeline running from Ok Tedi’s mill at Folomian to Dome in PNG’s Western Province, with preliminary works – including materials procurement and site preparation work – having commenced in June. The pipeline will be 250 mm in diameter and will be constructed by Perth-based International Pipeline Company, with support from a number of suppliers including KT Pty Ltd and Dredeco. Queensland-based Sun Engineering will build a processing plant associated with the pipeline at Ok Tedi’s mill facilities.

February saw another potential Papua New Guinea development, the PNG – Queensland pipeline, stall after Oil Search and its partners suspended work on the PNG Gas Project, ending months of speculation. At the time, Oil Search’s managing director Peter Botten said, “Oil Search and its partners have dedicated considerable time and effort to fully evaluating the PNG Gas Project.

“The project participants sought expressions of interest from pipeline builders/owners for construction of the revised configuration and received a positive response. The submissions confirmed Oil Search’s belief that the PNG Gas Project is an attractive investment option, based on appropriate cost control and continued strong market support. Nonetheless, it is clear that the alternative development options, including LNG, petrochemicals and other in-country options, which were not present two years ago, are now demonstrably more attractive and cannot be ignored.”

Since the pipeline development was suspended, several joint ventures of companies with PNG interests have begun to investigate options for developing LNG projects in PNG. ExxonMobil and Oil Search are in pre-FEED for an LNG project based on the Hides/Angore fields, while Oil Search is also investigating, with the BG Group, a potential project using gas from the Kutubu field. Meanwhile, Liquid Niugini Gas and LNG Limited are also, separately, looking into other possible LNG developments.

In other LNG developments, Woodside Petroleum’s Pluto project was given its final go-ahead recently, with Woodside planning a single LNG production train with forecast production of 4.3 MMt/a. The train will be connected by a 180 km, 36 inch offshore pipeline to a platform in 85 m of water, which in turn will be connected to five subsea big bore wells on the Pluto field. Woodside gave the project the green light in July and in August the West Australian Government gave its conditional approval. At the same time Woodside sealed a multi-billion dollar export deal for the sale of LNG from Pluto to Japan.

On another LNG project – the North West Shelf’s fifth LNG Train – progress has been made throughout the year, with engineering and procurement activities completed in July. All prefabricated modules were received in Karratha by July and hook-up and commissioning was underway throughout the following months. The project remains on schedule for first LNG by the end of 2008.

In Gladstone, Queensland, two different LNG proposals were put forward during the year, with Santos proposing the construction of an LNG facility that would see 170 to 220 PJ/a of coal seam gas (CSG) from both the Bowen Basin and the Surat Basins processed and sold into export markets. In July, Santos’ proposed LNG facility, which includes a single processing train of 3 to 4 MMt/a LNG capacity, was granted significant project status by Queensland Premier Peter Beattie.

Also in Gladstone, LNG Ltd is investigating another LNG project, after signing an Heads of Agreement with Arrow Energy in July to supply of 55 PJ/a of gas over 12 years, as feedstock for the planned 1 MMt/a LNG plant at the Port of Gladstone. The first supply of LNG from LNG Ltd’s Gladstone project is targeted for late 2010, subject to financial close in the third quarter of 2008.

Arrow is also involved with the development of a 100 tonne/d LNG plant at its Daandine CSG field. In April, Arrow and Liquegas Energy – who will build and operate the plant – reached an agreement for the supply of CSG from Daandine to the LNG plant, which will be built on land currently owned by Arrow.

There have also been several developments concerning gas plants throughout the year.

Commissioning of the Woodside-operated Otway Gas Plant near Port Campbell, Victoria, started in late July, and the plant begun exporting gas in September. Meanwhile, the BassGas project was officially opened late in 2006, with Origin reporting that the project achieved its daily production target of 67 TJ/d in its first month.

A gas-fired power generation project that has experienced ups and downs throughout the year is Horizon Power’s West Kimberley Power Project (WKPP), which will supply power to five communities in the Kimberley – Broome, Derby, Fitzroy Crossing, Halls Creek and Looma. Despite increases in capital costs and delays in construction, contractor Energy Developments has said that completion of the WKPP in line with the revised schedule and capital estimates announced in early August is expected. The company continues to expect commercial operation of the LNG-fuelled power stations in October and November. Power supply to the diesel power station in Looma changed over in June 2007 and has been in continuous operation since then.

CSG has been an area that has had significant growth throughout the year, with major companies such as Santos announcing that CSG will be a particular focus. In April, Santos projected that its CSG production will grow by approximately 200 per cent over the next five years, and the company also completed an $A150 million expansion of its Fairview CSG field.

Sunshine Gas’ Lacerta CSG project helped the company towards its transformation from gas field explorer to developer during the past financial year. The company’s work on Lacerta during the year, including a continuing exploration and appraisal program aimed at delineating the Walloon CSG Fairway, resulted in a certified reserve statement.

Sunshine entered into a Memorandum of Understanding to supply Hunter Energy with 8 PJ of gas a year from 2010 in late May, and Chairman James McKay said the company is negotiating with a number of parties with nearer-term demand.

Mr McKay said the company is also considering a number of other commercial operations, such as the sale of gas for use in power generation and the production of LNG.

QGC, Beach, Molopo, Origin and AJ Lucas are just some of the other companies that have worked towards further development of their CSG prospects during the year, with Lucas and Molopo in September commencing drilling and construction at the Gloucester Basin’s Stratford Pilot.

QGC managing director Richard Cottee has said this has been a year in which the CSG industry has been accepted as a fairly reliable source of energy. “In our first full year of production, QGC has become a market leader in CSG and proved that we are well-positioned to take advantage of expected growth in the Australian gas market,” he said.

In August QGC announced that it had achieved gas reserves of 1,120 PJ, which were 12 per cent above the company’s target. Mr Cottee highlighted the success of the Berwyndale South development, with 46 wells on production and a current capacity of over 37 PJ/a.

There have been many interesting activities taking place within the corporate realm of the pipeline industry this year. In April, APA Group entered into an agreement with Origin Energy to purchase the Origin Energy Networks assets for $556.5 million, including Origin Energy Asset Management, a 17 per cent stake in Envestra and a one-third interest in the SEA Gas pipeline. This followed the company’s acquisitions of GasNet and Allgas, resulting in APA Group having significant operations in every Australian mainland state and territory.

Another major acquisition that came to fruition during the year was the takeover of Alinta by a Babcock & Brown/Singapore Power International (SPI) consortium, with SP AusNet in September agreeing to acquire the Alinta assets being purchased by its parent company SPI, including the Eastern Gas Pipeline and the Queensland Gas Pipeline. SP AusNet will acquire the assets for $8.142 billion.

In addition to the Eastern Gas Pipeline and the Queensland Gas Pipeline, SP AusNet will acquire the New South Wales Gas Distribution Network, Alinta’s Victorian Electricity Network, the Eastern States Asset Management business, the VicHub, a 34.1 per cent stake in the United Energy Distribution Network, a 50 per cent stake in the ActewAGL distribution joint venture, and a 7.6 per cent stake in TransACT. The acquisition followed months of bidding and speculation from all corners of the industry.

In another complicated deal finalised throughout the year, the acquisitions of Smorgon Steel and Smorgon Steel Distribution businesses by OneSteel and BlueScope Steel respectively were completed in August.

There has also been a flurry of activity in the water pipeline sector recently, to add to an already exciting year. In December 2006, the final length of pipe was laid on the 218 km Burdekin to Moranbah pipeline in Queensland, and in August 2007 the first stage of the Western Corridor Recycled Water (WCRW) Pipeline was completed. One 7.3 km pipeline and one 9.6 km pipeline have been completed as part of the WCRW’s Stage 1A, with a total of 200 km of pipeline to eventually be constructed.

The WCRW Project is being delivered by five Alliances in partnership with Western Corridor Recycled Water Pty Ltd. The Eastern Pipeline Alliance – consisting of AJ Lucas, Transfield Services, GHD and Sunwater – constructed the 9.6 km pipeline, which runs from the Goodna Wastewater Treatment Plant (WWTP) to the Bundamba Advanced Water Treatment Plant (AWTP), and will also be responsible for linking other WWTPs and AWTPs; the Western Pipeline Alliance – consisting of McConnell Dowell, Abigroup and GHD – is responsible for delivering an 81 km section of pipeline and pumping system from Bundamba to Caboonbah near Lake Wivenhoe via the towns of Borralon, Lowood, Coominya and Esk. This section is proposed to be completed by April 2008.

The Southern Regional Water Pipeline (SRWP) Alliance – KBR, McConnell Dowell and Abigroup – had, by the end of September, completed just over 42 km of the SRWP, with construction due to be complete in 2008. The SRWP Alliance was also responsible for construction of the 7.3 km section of WCRW pipeline, linking the Bundamba AWTP to the Swanbank Power Station, as both the WCRW and SWRP share a common section and were constructed at the same time.

Also in Queensland, work was stepped up on the Northern Pipeline Interconnector in January, and parts of the pipeline – along with parts of the Eastern Pipeline Interconnector – were declared critical infrastructure by the State Government in July, providing a fast-track for construction.

In Victoria, the Goldfields Superpipe project has been of particular interest this year, with first pipe being delivered in February and water flowing through the 46.5 km Bendigo link by September. The first sod was turned on the 110 km Ballarat section of the pipeline in July, and this section is scheduled for completion by mid-2008.

Also in Victoria, construction commenced on the Wimmera Mallee Pipeline Project in November 2006, and reached 1,000 km of steel, PVC and polyethylene pipeline in the ground in late August 2007. See the Wimmera Mallee update on page 132 of this edition for more information.

As “last year’s words belong to last year’s language” – according to T.S. Eliot – so last year’s pipes belong to last year’s pipelines (and to asset managers). And “next year’s words await another voice” like next year’s projects await another approval. And to make a pipeline is to make a beginning. So, the remainder of 2007 and the whole of 2008 promise to be a time of many beginnings.

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