Last year saw an increase in the number of proposed LNG projects for Australia, particularly on the country’s east coast. Companies have been proving coal seam gas (CSG) reserves in Queensland to develop LNG facilities for domestic and export use in the state, which looks set to join Western Australia and the Northern Territory as an LNG exporter.
Certainly, the growth in Australia’s LNG industry is exciting, with 16 new proposed LNG projects, including the eight east coast CSG to LNG developments. But what does this mean for the pipeline industry?
Natural gas is primarily turned into LNG for transportation over long distances. The converted liquid, which takes up about 1/600th of the volume of natural gas, can be economically transported by ship for export, or by truck for remote domestic areas where pipeline construction is not economically viable.
Here, The Australian Pipeliner looks at the relationship between LNG and pipelines and assesses whether the two industries can prove to be beneficial to one another.
Floating LNG: foe?
Recently, a number of companies with interests in offshore gas permits have been considering developing their fields using floating LNG (FLNG) technology. These companies include:
- Shell for its Prelude Gas Field located in Western Australia’s Browse Basin;
- BHP and ExxonMobil for the Scarborough Gas Field, located 280 km offshore, beyond the North West Shelf;
- MEO Australia for its Timor Sea LNG project;
- Nexus Energy for the Crux Liquids Project located in the Timor Sea approximately 600 km north of Broome; and,
- Woodside for its Greater Sunrise Development located 450 km north of Darwin in the Timor Sea.
Although FLNG technology is untested, Woodside has said that the technology has matured since 2004 and avoids sub-sea pipeline costs and challenges. The company and its joint venture partners, Shell and ConocoPhillips, have recently ruled out constructing a 184 km pipeline from the Greater Sunrise Gas Fields to East Timor due to the high technical and seismic risk associated with the pipeline, which would have to cross a 3.3 km deep trench. Instead, Shell has invited tenders for the construction of a FLNG facility for the field’s development.
When assessing the options for the Scarborough development, ExxonMobil, stated that the FLNG option was being considered because of the technical challenges of building a large sub-sea pipeline.
MEO has said that FLNG is a consideration for its offshore fields because the production concept is probably the quickest way to develop early production and cash flow for any new discovery. The company also said that commercial structures including leasing agreements allow the technical risk to be passed onto the contractor involved in constructing the FLNG facility.
Shell has said that the FLNG option is economically more viable for fields with a small gas resource as well as reducing the environmental footprint of offshore projects. In addition, a FLNG facility can be towed to a different location at the end of a field’s life, providing an easily monetised option for new offshore fields. Constructing a pipeline as part of the development of an offshore gas field does not afford this kind of flexibility. Once the pipe is in place on the seabed it cannot be moved and, in this way, pipelines are at a disadvantage.
However, a number of offshore gas developments including pipelines are still being considered. Woodside has chosen to build a pipeline for its $12 billion Pluto Gas Project, currently under construction, offshore Western Australia. The onshore LNG train will be connected by a 180 km, 36 inch diameter offshore pipeline to a platform in 85 m water depths, which in turn will be connected to five sub-sea big bore wells on the Pluto field.
Chevron has proposed pipelines for both its Gorgon and Wheatstone developments. The Gorgon LNG Development is to include a 90 km offshore pipeline running from the Barrow Island processing facility onshore to connect into the Dampier to Bunbury Natural Gas Pipeline. The Wheatstone Development is set to involve two export pipelines to transport gas from the fields to an onshore plant. The first of these lines is expected to be 220 km in length and 860 mm in diameter. The second pipeline will be laid to allow future tie-ins from other gas fields, extending from the LNG plant out beyond the depth required for stabilisation.
In addition, Inpex has said that it will connect its Ichthys Gas Field Development to an LNG facility in Darwin via a proposed 850 km pipeline. The company has said that more than $24 billion will be required to construct the offshore and onshore facilities required to produce gas and condensate from the field.
Back onshore – export: friend?
The flurry of onshore CSG to LNG projects in Queensland has certainly spurred a number of proposed pipelines linking the state’s gas fields to the Gladstone Port for export.
Santos’ Gladstone LNG Project involves a 418 km pipeline linking the company’s Greater Fairview CSG fields to a proposed liquefaction plant at Gladstone.
LNG Ltd has proposed the Gladstone “˜Fisherman’s Landing’ LNG Project, which will have an initial design capacity of 1.5 MMt/a of LNG with the provision for expansion of up to 3 MMt/a, subject to the availability of additional gas. The plant will source gas from Arrow Energy’s Moranbah Gas Processing Plant via Arrow and AGL Energy’s proposed Central Queensland Gas Pipeline (CQGP). The pipeline is set to be approximately 440 km in length.
In addition to proposing the development of the CQGP, Arrow is investigating an option for developing a 400 – 500 km pipeline from its Surat Basin tenements to Gladstone, as part of its CSG to LNG Project with Shell.
BG Group and Queensland Gas Company (QGC) have proposed the Queensland Curtis LNG Project, which involves the connection of CSG fields in the Surat Basin to the Gladstone Port via a 380 km pipeline.
Jemena has announced that it will expand the Queensland Gas Pipeline’s capacity via compression between Rollerston and Banana and looping between Moura and Bell Creek. The project shows that the increasing investment in LNG in Queensland has spurred the expansion of existing pipelines as well.
In addition, Energy World Corporation has announced plans to establish LNG plants of 1 – 5 MMt/a at Abbot Point and Hay Point in Queensland with connecting pipelines to exploit gas reserves located in ATP 549 and the Gilmore Gas Field in PL 65 in the Eromanga Basin. The company said a pipeline will be built to connect Abbot Point and Hay Point to the Bowen Basin and eventually through to the Cooper Basin. A spur gas pipeline can also be added to collect gas from the Surat Basin.
A spokesperson for EWC said that the gas pipeline will give the company an opportunity to develop and utilise its gas resource and for many other gas exploration companies in the Bowen Basin and the Cooper Basin to deliver their gas to a strategic location, have it liquefied and sold into the Asian market.
Recently, Origin Energy and ConocoPhillips also formed a joint venture to develop Origin’s CSG reserves for export as LNG. The venture has not announced a proposed pipeline as part of the development as yet. Similarly, Canadian-based LNG Impel have proposed the Southern Cross LNG Project to be located in Gladstone, however no pipeline has been announced.
In Western Australia, the Federal and State governments’ proposed common-user LNG hub that will create many pipeline possibilities for companies that will connect their gas fields into the site located in the Kimberley.
Domestic LNG: mixed reception?
Bow Energy has recently proposed two small-scale domestic LNG plants that will use gas from its Canaway Ridge and Don Juan CSG prospects in southwest Queensland.
Bow has cited domestic LNG’s appeal because of its potential for higher margins as the wellhead to customer supply does not require third party pipeline or compression tolls. For this reason, it is expected that the company, which is currently undertaking feasibility studies for the plants, will not announce pipeline components for either project.
In Tasmania, Liquefied Natural Gas Refuellers, a consortium comprising seven Tasmanian transport operators, has entered into an agreement with industrial gas company BOC, for the supply of LNG fuel over 120 natural gas-powered heavy vehicles.
BOC is to build and operate a new 50 TJ/d micro-LNG plant near Westbury, which will include an offtake pipeline from the Tasmania Gas Pipeline. The company will also design and construct the supply chain infrastructure for LNG Refuellers, including LNG road tankers and six refuelling stations.
LNG: in the pipeline
The LNG industry is just beginning to ramp up. Former Australian Petroleum Production & Exploration Association Chairman Colin Beckett outlined aspirational targets for the industry including an increase from 2008’s 20 MMt/a LNG production target to at least 50 – 60 MMt/a over the next decade. It is important that the pipeline industry can contribute to the development of this growing industry.
While FLNG options may be considered for some offshore gas fields, currently, the conditions under which the technology is chosen remains subject to company preference and field location. As such, each project is assessed individually regarding the benefits of FLNG over a pipeline. For example, developments such as Chevron’s Gorgon LNG Development are located near existing infrastructure making a tie-in via pipeline a more viable development. However, as FLNG technologies become more established, it is possible that more companies with offshore gas fields will choose the FLNG option.
It is possible that where a pipeline is not deemed as feasible for the delivery of gas, LNG projects may be considered. In the case of Bow Energy’s domestic LNG projects, the location of the company’s gas fields in central Queensland and its ability to construct LNG facilities close to the source indicates the practicality of then trucking LNG to markets rather than constructing a pipeline to transport the gas.
However, not every company has the opportunity to develop a project in this way. LNG Refuellers, for example, while only including minimal pipeline construction as part of its project, is to use capacity from the Tasmanian Gas Pipeline, demonstrating the need for a pipeline component as part of LNG projects where facilities are not located close to the original gas source.
As seen in the case of proposed onshore developments for Australia’s export market, LNG projects often spur a pipeline component and, as in the case of projects on the drawing board in Queensland, the pipeline components can be quite large.
Pipelines can play an integral part in transporting gas from its original source to processing LNG facilities. In this way, as the LNG industry grows, so too will the pipeline industry. Both sectors will support each other as more gas reserves are developed and transported for processing into LNG and onto markets.
The flurry of onshore CSG to LNG projects in Queensland has certainly spurred a number of proposed pipelines linking the state’s gas fields to the Gladstone Port for export.