APA has entered into a Heads of Agreement with the Northern Territory Government and Power and Water Corporation (P&WC), establishing a framework for the development of the new gas pipeline.
At an estimated cost of $A130 million, the pipeline will run from Eni’s proposed onshore gas plant at Wadeye to the Amadeus Basin to Darwin Pipeline, with construction set to begin in 2008. Based on preliminary work by P&WC, the pipeline will initially deliver approximately 30 PJ/a, and will take gas from the Blacktip field, which is located approximately 100 km to the west of Wadeye in the Bonaparte Basin, and contains 2P reserves of approximately 1.2 Tcf.
The agreement commits the negotiation of a Gas Transportation Agreement for the development of the new pipeline and the transportation of gas for a 25 year period commencing in 2009.
“We’re committing to negotiating a 25 year gas transport agreement by the end of this financial year and we are well on track to achieve this. Our arrangements with the P&WC flow out of similar arrangements that P&WC signed with Eni to purchase gas from the Blacktip gas field late last year,” said APA Chief Executive Officer Mick McCormack.
APA has indicated that whilst the project will be a mid-sized pipeline, the real value of the pipeline would be the additional opportunities arising from the development to grow its Northern Territory business.
“This agreement for a major new pipeline development is an important step in realising APA’s long-term vision of bringing northern gas into Australia,” said Mr McCormack.
Stephen Ohl agrees. “With our interest in NT Gas and the Darwin gas distribution system APA has been a long term supporter of gas developments in the Territory. With this new pipeline and the prospect of access to additional gas supplies we expect that our existing business will grow and that new opportunities will arise…these may include some pipeline construction,” he said.
Mr Ohl highlighted the growth potential for the pipeline, saying “We’ve operated in the Territory for a long while and we believe there’s potential for good growth in that gas market and for it to become a bigger gas hub in the future. We believe that over time we should be able to attract other customers for this new gas supply in the Northern Territory.
“At the moment we’re planning for construction to commence in 2008 and our immediate task is to finalise the gas transportation agreement with P&WC and the range of approvals required. We’re aiming to deliver first gas in January 2009.”
A pipeline licence is yet to be secured for the project, but work towards gaining one is well underway.
“The pipeline process in the Northern Territory is consistent with that used in other jurisdictions with the environmental approvals needing to be completed prior to the issue of the licence. We have commenced the route definition and basic engineering activities needed to submit the application for the licence,” Mr Ohl said.
Mr Ohl said he was confident that the cost of the project will be able to be contained.
“APA has been in the business for a very long time and we have an established reputation for delivering projects like this on time and on budget. We’ve also demonstrated our reputation is second to none in the area.”
APA will be the pipeline developer and the majority owner, but how the capital will be raised is yet to be decided.
“The major capital investment for this pipeline will not be required until 2008. APA has a number of options available to raise any capital needed and the actually process used will be determined closer to the time that the capital is needed,” Mr Ohl said.
The project could also see indigenous landholders taking a stake in the pipeline.
“We will definitely be discussing the opportunity with the traditional owners for the opportunity for them to participate in the project,” said Mr Ohl. “This is consistent with our approach in the Territory and these discussions may include an equity offering.”
APA has acknowledged that there is a significant approval process to be undertaken, consulting with landowners, indigenous groups and other community stakeholders before construction can commence.
“There is a fairly significant approval process we need to work through. The main approvals are land access, environmental approval, cultural heritage clearance and receiving the pipeline license. We will have extensive dialogue with the indigenous groups and other community stakeholders in the Territory.
“The negotiation of all the activities needed to move the project forward is our immediate principal focus,” said Mr Ohl.
The new development will take the place of the proposed Trans-Territory Pipeline, which was designed to transport gas from Blacktip to the Alcan Gove Alumina Refinery. In June 2005, the Gas Sales Agreement between the Blacktip joint venture and Alcan dissolved due to a dispute over gas price. Negotiations for the new project will not be carried over from TTP, as APA will renegotiate the project from scratch.
“Apart from the first 70 km of the route, this project bears no resemblance to the TTP project. This project is all about ensuring that the Northern Territory has an affordable and secure energy supply from 2009 onwards and as such is being managed as a new pipeline project,” Mr Ohl said.
APA views the Wadeye Pipeline as an opportunity to move forward from the cancellation of the TTP.
“APA was only one of many the parties affected by the cancellation of the TTP project and nothing can offset past disappointments and the money lost by all parties involved in the TTP process. APA has a long term presence in the Territory and this project is an opportunity to build on this presence and grow our business.
“As this pipeline is a smaller project than TTP then the gas reserves and throughput required to justify the project is considerably less than what would have been required to justify the TTP project,” he said.
APA has not yet decided who will operate the pipeline.
“As it is over two years before the pipeline commences operation it is too early to say who will operate this pipeline,” said Mr Ohl. “APA has a business model which includes the contracting out of major service activities and I would expect that the operation of this pipeline will be managed by APA consistent with the business model in place at the time.”
The tendering process and contract structure for the project is also yet to be decided, although the timeline for the project is becoming clear.
“We are targeting the dry season of 2008 for the pipeline construction with first gas by 1 January 2009,” said Mr Ohl.
“Unfortunately it is too early to say what will be the project execution process. We will be looking at this and the tendering process as part of our basic engineering studies. These basic engineering studies are due to commence shortly.”
Although precise technical details of the pipeline are yet to be finalised, preliminary studies have given an idea of what type of pipeline it is likely to be.
“Based on our preliminary work and subject to the outcome of further studies the pipeline looks like being a 300 NB, Class 900 with provision for future compression.”
As several other major undertakings, including the DBNGP looping and PNG-Queensland Pipeline will potentially be happening at the same time, there could be problems with issues such as materials and labour supply.
“APA recognises that there is the potential for this project to have some overlap with these other major projects. However, given the timing of this project and its modest size, I am confident that we will be able to manage such issues as materials and labour supply,” said Mr Ohl.
It is uncertain as yet how the Blacktip gas will be transported to shore, but APA is clear about the parameters of its role in the project.
“APA is only involved in the development of the onshore pipeline and the transport of gas from the outlet of the Eni Wadeye gas processing plant to an inlet on the Amadeus Basin to Darwin pipeline.
“I understand that Eni are considering further exploration activities in the area … we are optimistic regarding the prospect of additional gas supplies becoming available,” Mr Ohl said.
APA envisions several other greenfields pipeline developments for Australia.
“APA is obviously keen to see the PNG pipeline project go ahead and has a right to acquire 20 per cent of this project. We are also investigating with Epic the development of an interconnect pipeline from Ballera to transport gas into the Moomba to Sydney and Moomba to Adelaide pipelines. This interconnect will allow Queensland CSG to access southern markets.
“Another area of potential greenfields pipeline developments is in the resources sector where APA is well placed to build off its existing pipelines, particularly in Queensland and Western Australia. With the high demand for iron ore, gold, nickel, etc there is a lot of activity investigating the expansion of existing mines and developing new mines. This combined with the high price of liquid fuels means that a lot of these possible projects are considering using gas as their main energy source and they will obviously need pipelines to transport this gas,” said Mr Ohl.
Final route and capacity requirements of the pipeline are scheduled to be agreed upon by the end of the financial year.