What does the future hold for the Australian pipeline industry? With further expansion and growth not only in gas – which is expected to be the fuel of choice in a more carbon-conscious future – but also possibly in pipelines carrying CO2, water, hydrogen and any number of other things, it is readily apparent that Australia’s pipeline network is only going to continue getting bigger and better in many ways.
Natural gas
Natural gas undoubtedly has an extremely important part to play in Australia’s energy future. As a lower carbon emission fuel source that is available now and is relatively inexpensive, the outlook for natural gas is bright.
Resource organisation ABARE has said that natural gas consumption in Australia has almost doubled since 1991 to over 1,063 petajoules, and the organisation has predicted that primary consumption of natural gas in Australia will grow by 2.5 per cent a year to almost double again by 2029.
Similarly, a June report from Pricewaterhouse Coopers, Energy and Efficiency: the changing power climate, has found that investors are increasingly turning to natural gas as an alternative energy source to coal.
According to the report, utilities companies worldwide expect wind and nuclear power to provide an increasing share of their market’s energy consumption in the next five years. However, in Australia it was revealed that utilities are looking more towards gas-fired power generation because of the country’s abundant gas reserves.
In response to the Federal Government’s announcement of a new national Clean Energy Target – which is intended to replace existing and proposed state and territory schemes – APIA chief executive Cheryl Cartwright said it was important to look beyond renewable technologies and ensure that natural gas was not disadvantaged in any new programs.
Earlier this year Federal Resources Minister Ian Macfarlane agreed that as Australia becomes more carbon conscious, natural gas will become increasingly popular as a competitive energy producer.
The Australian Petroleum Production & Exploration Association’s Upstream Oil and Gas Industry Strategy – developed in conjunction with state and federal government officials – envisages that by 2017 the upstream gas industry will be recognised as producing reliable, clean energy and substantial wealth for Australia. Specifically, by 2017:
* Natural gas for industrial use and as a competitive feedstock for resources processing will double;
* Natural gas usage for electricity
generation will represent 70 per cent of total new production capacity; and,
* LNG production capacity will exceed 50 million tonnes per annum.
Meanwhile, the ACIL Tasman Independent Market Experts Report in WestSide’s 2006 Prospectus stated that primary consumption of natural gas in eastern Australia is currently expected to grow at an average 2.6 per cent a year, with growth in demand for natural gas in Queensland expected to be 4.3 per cent a year over 25 years.
The report went on the say that of the major conventional gas centres in Queensland – the Cooper-Eromanga Basin near Ballera in the southwest, the Surat Basin around Roma in the south, and the Bowen Basin (Denison Trough) region in central Queensland – Cooper-Eromanga has been and remains the largest source of supply though it is now regarded as “˜mature’ and is forecast to decline rapidly, while the Bowen and Surat Basins are forecast to grow from 15 per cent to 27 per cent of the market.
Across Australia, the potential for different usages of gas will also be a focus in the future. Already companies have started to look into new ways of utilising gas by tapping into gas distribution networks to create localised electricity sources.
GridX Power, for one, is working to provide distributed generation solutions to customers across the residential, commercial and industrial sectors, by using natural gas to create power from local generators situated on-site where the energy is used. By capturing the by-product of electricity generation, heating and cooling can be supplied with energy efficiency approaching 75 per cent.
Australian company Ceramic Fuel Cells is another company active in the development of distributed generation through the use of Solid Oxide Fuel Cells. They currently have trials of their technology active in South Melbourne, Wellington, and in two locations in Germany.
Worldwide, natural gas cooling is also being utilised across the residential, commercial and industrial sectors, with significant advances made over the last decade in developing and producing a new generation of natural gas refrigeration, cooling, and humidity control equipment.
With electricity usage increasing over the summer months, while natural gas use declines due to more people using air-conditioning than heating it makes sense that more cooling could come from gas. In Japan in the 1980s efforts backed by the Japanese government were being made to accelerate the development of gas cooling. By 1991, nearly 30 per cent of Japan’s air conditioning was provided by gas chillers.
While the Queensland Government has already committed to increasing its percentage of electricity generation from natural gas from 13 per cent to 18 per cent by 2020, this year-round warm weather state would benefit from using gas cooling as well. The State Government is already offering a Gas Installation Rebate of up to $500 to Queensland residents installing gas appliances in existing homes, so there is every chance a similar system could eventually be instigated for cooling.
Gas transmission will, of course, be set to grow with an increase of natural gas use. Additional looping and expansion of existing pipelines is likely, with the ongoing expansion of the Dampier to Bunbury Natural Gas Pipeline and also development of new pipelines such as Epic Energy’s QSN Link.
VenCorp has outlined a number of capacity enhancements that need to take place over the next five years – including a recommendation that the 40 km of 150 mm pipeline between Mt Franklin and Ballan be duplicated with 300 mm pipe prior to winter 2010 – in order to supply sufficient gas throughout Victoria.
Major expansions that have been proposed include the possible further expansion of the Goldfields Gas Pipeline (GGP), compression and looping to expand the Queensland Gas Pipeline – taking the pipeline an installed capacity of approximately 49 PJ/a – and the addition of a mid-line compressor station to the Eastern Gas Pipeline at Mila in New South Wales, as part of the first stage of expansion of the pipeline. When complete, the capacity of the Eastern Gas Pipeline will be 93 PJ/a, an increase of more than 25 per cent from its current capacity of 73 PJ/a.
With the QSN Link set to connect the Queensland, South Australia and New South Wales markets, the potential exists for other connecting pipelines to work alongside this one. The Wallumbilla – Bulla Park Pipeline and the Queensland Hunter Gas Pipeline are the two current proposals alongside the QSN link.
The future could also see the realisation of the long mooted Trans-Australian Pipeline. The ambitious plan was famously advocated by Rex Connor in the 1970s but today more level heads still consider a pipeline linking Western Australia to the eastern states as a long-term option. Similarly, the linking of the Amadeus Basin – Darwin pipeline into eastern states via Moomba has been proposed.
Discoveries in fields distant from current producing fields could also require pipelines to bring gas to market. Exploration is now being undertaken off the coast of New South Wales in the previously untested area, and exploration licences have been granted off the west coast of Tasmania, and several other areas that are remote from infrastructure.
Coal Seam Gas
While coal seam gas (CSG) developments have been heralded as being part of a new era of Australia’s gas industry, CSG’s rise has provided both positive and negative impacts to the pipeline industry. While CSG has seen the development of a number of new pipelines to bring gas to the transmission pipeline network, its rise was also a major reason behind the suspension of the PNG Gas Project that would have seen PNG gas piped to Queensland.
There is little doubt that CSG developments will continue to gather pace in Queensland, with CSG supplying an increasing proportion of gas to the Queensland market. According to the Queensland Government, by 2010 about 70 per cent of Queensland’s gas market will be supplied from CSG.
According to figures from RLMS, at the end of 2006, the QLD gas market stood at 150 PJ/a, with CSG making up 86 PJ/a of that. RLMS also stated that approximately 60 per cent gas supplied to the eastern Queensland market was CSG.
According to RLMS figures on the east Australian market, 2P conventional gas reserves stand at 10,826 PJ while 2P CSG reserves stand at 5,667 PJ (as of 31 March 2007). ACIL Tasman paints a similar picture with 2P conventional gas reserves at 11,500 PJ and 2P CSG reserves at 4,500 PJ.
On the positive side for the pipeline industry, CSG continues to present commercial quantities with now proven technology. In addition, the continuing increase in volumes have created a need to get that gas to additional markets via such projects as the QSN Link that will interconnect the Queensland market with the rest of the eastern states.
CSG fields that are more remote also have the potential to create demand for pipeline development in order to get that gas to existing transmission pipelines or demand centres. This was the case with the development of the pipeline linking the Moranbah Gas Project with Townsville. Future options of a similar nature include a pipeline of around 300 km to transport CSG from the Gunnedah Basin in NSW to an expanded Bayswater Power station.
Continued CSG production may also spur the need to expand existing pipelines to handle the additional gas volumes being transported.
However CSG also has the potential to have negative impacts on the pipeline industry. Most notable are situations where gas-fired generation is being developed close to CSG fields and with energy being taken long distances to market as electricity, rather than piping the gas to generation assets closer to the market.
In addition, there is also the potential for continued CSG to “˜scuttle’ other conventional gas developments, that may have required pipelines to bring gas to market, because of increased CSG supply driving lower gas prices than would have otherwise been seen.
While CSG development and production has largely focussed on Queensland and New South Wales to date, exploration is underway across the country in various areas. These potential developments, if successful, will further add to the coal seam conundrum.
LNG
Another form of gas that looks set to make radical changes to the industry in Australia is LNG. A recent Australian commodities report from ABARE predicted that in 2007-2008, the value of Australia’s LNG exports will to increase by 8 per cent to $5.7 billion.
This growth in LNG exports could have significant consequences for the gas pipeline industry. Although small pipelines are associated with LNG projects – for transporting gas to the production plants – LNG pricing is set by world demand, which has lead to developers favouring LNG projects over projects that supply domestic gas, potentially hampering the expansion and development of Australian pipelines.
Such issues have already posed problems in Western Australia, and it can be expected that concerns will continue to arise.
A domestic gas reservation policy was introduced by WA Premier Alan Carpenter last October, under which offshore developers are required to set aside 15 per cent of available gas for domestic use. At the time, Mr Carpenter said “Domestic gas reservation has underpinned our export gas industry since its inception in the early 1980s and there is no reason why it should be abandoned. It has been proven over the years that the LNG export industry can work co-operatively and effectively with the domestic gas industry.”
However, companies including Alcoa, NewGen Power, Synergy and Perth Energy have formed the DomGas Alliance in response to continuing concerns about the availability and competitiveness of gas supply to the WA domestic market.
A report commissioned by the Alliance found the state to be in a gas supply “crisis”, with current gas users and project developers being unable to secure new supplies of gas. However, it remains to be seen how the gas supply situation in WA will pan out.
With LNG developments now being mooted in Queensland – such as proposals that will see CSG converted into LNG, particularly in Gladstone – the conflict between LNG and domestic gas could also have an impact on the eastern markets.
Hydrogen
Much fuss is made of the future “˜hydrogen economy’, and the role hydrogen as an energy source may play.
Hydrogen can be produced for use as an energy source from a variety of means, both renewable and non-renewable. Hydrogen can be extracted from natural gas, carbon monoxide (via the use of water) and coal. It can also be produced renewably from water by a number of methods – biologically in an algae reactor, through the electrolysis of water, and by thermo-chemical processes, such as the sulfur-iodine cycle.
The potential uses for man-made hydrogen are many, but however the hydrogen is used, there will be circumstances where hydrogen needs to be transported from the site at which it is produced to the site at which it will be opening the door for pipelines as a means of transport.
The transport of hydrogen via pipeline is a sector of the industry in its infancy, but a number of pipelines of significant length and capacity are already operational around the world. The concept of liquid hydrogen pipelines is also currently being examined.
The potential for the development of hydrogen pipelines in Australia will ultimately depend on the growth of hydrogen as an energy source and the locations of hydrogen developments.
In 2003 a National Hydrogen Study commissioned by the Federal Department of Industry, Tourism and Resources found that while at present hydrogen represents a minute share of energy consumption, it is likely to grow, provided technologies can overcome the relative efficiency and cost barriers currently faced.
The study also found that in Australia, the main potential uses for hydrogen would be burning it in high efficiency gas turbines to provide electricity, and potentially piping it to customers for use in vehicles and distributed generation plants.
CO2
If the pipelines industry is to see widespread development of pipelines transporting carbon dioxide for long term storage it will ultimately depend a number of issues including government policy, capture technology and financial factors.
Geosequestration comprises four main steps. First, CO2 emissions are captured at their source – typically a power plant or industrial facility. The second step, and the one of most interest to the pipeline industry, is the transport of the captured CO2, typically via a pipeline, from the source to a suitable geological storage site. The CO2 is then injected deep underground into the storage site and stored in the geological reservoir.
The Intergovernmental Panel on Climate Change found that the capture technologies involve the highest costs associated with carbon capture and storage but that over the next decade, the cost of capture could be reduced by 20 – 30 per cent.
Suitable storage sites are currently being assessed by the CO2CRC. Over 100 sites have already been assessed for suitability, with the majority found to be potentially suitable. Further, more detailed evaluations are underway at the Otway, Perth and Bowen-Surat Basins.
Between these three locations, there is a multitude of sites at which CO2 emissions could be captured, then transported to and stored. Santos has also raised the possibility of storing CO2 in depleted Cooper Basin reservoirs which would come from Queensland, New South Wales and South Australia. Obviously such a project, if ultimately progressed, would require massive pipeline infrastructure.
The distance CO2 can be transported economically – and therefore the scale of pipeline projects likely to be involved in this area – will largely depend on the price placed on carbon emissions, which will not be determined until at least the introduction of an Emissions Trading Scheme.
A number of other projects looking into the potential for geosequestration are also underway around Australia.
ZeroGen is currently testing the potential to store CO2 emissions in the Northern Denison Trough in Central Queensland. While still in the early stages, ZeroGen estimates that the project could involve a construction of a 220 km CO2 pipeline – a significantly sized project in any pipeliner’s books.
And while it may not involve pipeline construction on such a large scale, the potential to inject emissions at project sites is also being investigated – in particular at the Gorgon Gas Project, where a reservoir CO2 injection system under the project site is being established as part of the environmental conditions imposed on the project.
Water
Moving away from the energy sector entirely, another major feature in the future of Australian pipelines will be water. Projects such as Queensland’s Western Corridor Recycled Water Pipeline and Southern Regional Water Pipeline, and Victoria’s Wimmera Mallee Water Pipeline and Goldfields Superpipe are leading the way in creating water security in Australia.
In 2006 the Australian Bureau of Statistics estimated that major urban areas in Australia will see population growth of over 60 per cent between 2006 and 2050. This growth will place further pressure on existing water supplies with a number of different types of water pipelines being considered around Australia as part of the response.
While Australians appear to continue to have an aversion to domestic use of recycled water pipelines, piping recycled water for use in industrial situations such as in power plants is one method of freeing up freshwater for domestic use. The proposal of piping of treated water from Melbourne’s Eastern Treatment plant to the Latrobe Valley for use in power stations, along with a new pipe connecting Blue Rock Dam in Gippsland to Cardinia Reservoir to return water for domestic is one such example.
In other areas, creating and linking water networks is favoured, such as in Queensland, where the Gladstone Area Water Board is working towards construction of the 115 km Gladstone – Fitzroy Pipeline Project to deliver raw water customers in Gladstone. Also put forward has been a cross-border plan from Federal Environment Minister Malcolm Turnbull to relieve southeast Queensland’s water crisis by piping water from New South Wales, which could see up to 400 km of pipelines built.
Of course, very ambitious schemes have also been mooted, as happened earlier this year when former Queensland Premier Peter Beattie revived a proposal from the 1930s, known as the Bradfield scheme, that would divert water from Queensland’s north to the Murray-Darling system, possibly including a 400 km pipeline.
Another ambitious scheme proposed in recent times has been to pipe water from Tasmania to Victoria through a 450 km pipeline. A consortium known as Bass Pipelines has said that it is designing a pipeline that would take water from northwestern Tasmania to Flinders in southern Victoria. A secondary proposal is the construction of two pipelines from northwestern Tasmania to Port Campbell.
In Victoria, Wannon Water has proposed a pipeline from the Curdie Vale bore field to Warrnambool as the preferred solution to augment the Otways supply system, because demand is predicted to exceed supply in the region by around 2042.
Desalination plants, which are currently being built or are planned in a number of states also will require substantial pipeline infrastructure. In Victoria the construction of a $A3.1 billion desalination plant and the 85 km pipeline to Melbourne is expected to begin in 2009.