Long-term domestic contracts of up to 20 years have underpinned the development of the large gas reserves and have been the mainstay of comparatively stable east coast gas markets. However, these markets are on the verge of a transformational shift as domestic and global market forces, as well as emerging technologies, create greater uncertainty and new opportunities for growth and development.
On the demand side, a number of the long-term domestic contracts are coming to an end, and three large LNG export projects are about to commence, which will potentially “˜hoover up’ a large chunk of eastern Australia’s current gas supplies. On the supply side, there is an abundance of gas reserves available throughout eastern Australia, with exploration and emerging production technologies enabling the development of new gas sources.
The rapid step-up in demand for gas in the east by the end of the year to meet LNG export requirements, particularly from the Cooper and Bowen-Surat Basins, has put pressure on traditional domestic contracts, including NSW, which are vying for supply in this new, less certain and highly competitive marketplace. The traditional “˜stable’ market is being pushed out by a more aggressive market that demands flexibility to meet both domestic and export requirements. There is a shift towards more flexible transportation contracts and services, shorter contract periods, increased capacity, bi-directional flow capability, and innovative services, such as storage and access to multi-supply sources and delivery points. Shippers want to be guaranteed a supply, but they also want to pick and choose supply points based on the best price.
Anticipating the need to aid the ongoing development of Australia’s gas markets, APA Group has recently developed the east coast gas grid, which facilitates both the supply and demand of gas by providing a 7,000 km transport network connecting all major gas production and demand centres throughout eastern Australia. In addition, it has commissioned a capital program of up to $600 million to enhance the grid’s capability to provide customers in eastern Australia with an integrated, flexible and seamless gas transport and storage services across four states and one territory.
Expansion in the south: VNIE Project
Foreseeing opportunities for gas to flow from other sources to alleviate supply pressures, APA developed a $200 million proposal to expand its Victorian infrastructure to enable more gas to flow north into NSW from southern supply basins.
APA’s proposal involves expansion of the Victorian Northern Interconnect (VNI) by looping sections of the existing pipeline to increase capacity, as well as increasing compression capacity north and south of the VNI. The VNI is a 260 km transmission pipeline running from Wollert, north of Melbourne to Barnawatha, south of the Murray River, and the expansion project involves looping 62 per cent of the pipeline.
The looping and compression project is underway and will be completed in stages, with all projects due for completion by winter 2015. The expansion projects have been underwritten by contracts with Origin Energy, EnergyAustralia and Lumo Energy, which were announced by APA in 2013. The aggregate effect of the new contracts and the related capacity expansion increases firm peak winter gas flow capacity from the Victorian Transmission System into NSW by 145 per cent.
The VNI Expansion (VNIE) Project includes three stages:
- 28 km looping from Wollert to the Wandong Offtake in Victoria – in progress and due for completion by June 2014;
- 17.3 km looping from Wandong to Broadford, and 117.4 km looping from Mangalore to Glenrowan – to be completed by May 2015; and,
- Installation of a third compressor at Culcairn, which is located in southern NSW on the Victorian-NSW Interconnect.
Additionally, a new Taurus T60 compressor with a capacity of 74 terajoules per day is being constructed on the South West Pipeline (SWP) at Winchelsea, between Geelong and Colac in Victoria, adding 21 per cent capacity to the pipeline. The SWP is the major gas supply transmission into Melbourne from the Port Campbell Injection Zone. It is also located near the Otway Basin and EnergyAustralia’s Iona Gas Storage Facility. Commissioning of the new compressor is due at the end of 2014.
The VNIE Project involves the construction of approximately 162 km of 400NB API 5L (PSL2) Grade X70 steel gas pipeline. The new pipeline will be capable of operating at pressures of up to 15.3 megapascals (MPa), compared to the existing maximum pressure of 8.8 MPa between Wollert and Euroa and 7.4 MPa from Euroa northwards. Pipeline construction techniques will be open-cut technology, with horizontal directional drilling used at more sensitive crossings. The construction works have been scheduled over spring/autumn to avoid winter rains expected in Victoria. This aids in minimising the environmental impact from the construction works, and also reduces the overall construction cost and time.
Challenges of the VNIE Project
One of the major challenges of the project is the logistics of transporting 162 km of pipe from China. This will be the first project where APA has sourced its coated line pipe solely from overseas. This pipeline will also be one of the few APA pipelines designed to an 80 per cent design factor under the AS 2885. Approximately 9,000 pipe lengths will be transported on six separate ships, requiring about 600 truckloads to transport to the Victorian sites. The first 30 km of pipe (approximately 1,660 pipe lengths) will be transported to Wallan just north of Melbourne, and the remaining 130 km will be taken to locations near Seymour and Benalla.
Another logistical challenge is accommodating the people working on each section of the looping in existing township facilities along the pipeline route. A team of up to 200 people are required for each stage of the looping project, which will be an added boost to local township economies during the construction process.
Given the size of the expansion project, major stakeholder engagement with local, state and federal government agencies has been undertaken, as has extensive environmental planning and assessments.
APA’s Group Executive for Transmission Rob Wheals said “The planned capacity increase in Victoria to flow more gas north into NSW from southern supply sources is an incremental development that further enhances the flexibility of services that our grid offers customers across the east coast. We are well placed to respond to changing supply and demand patterns of the dynamic gas markets now in play.”
