By Jessica Dickers, Associate Editor, Unconventional Oil & Gas
Australia’s gas market is currently in transition, with predicted supply shortages, increased prices and gas moving away from domestic consumers and towards LNG exports. But change also brings opportunity and despite the challenges of the sector, there are many exciting projects underway or planned for the pipeline industry. Here, we look closely at the pipeline sector and consider the opportunities our changing gas supply market is providing.
Australia’s future energy security is currently under scrutiny, with most states experiencing some form of supply or price uncertainty. As increasing electricity prices and renewables disrupt the market, attention turns to gas and its importance in future energy security.
The development of a substantial gas export industry in Gladstone, Queensland, where coal seam gas is converted to LNG for supply to Asian markets, is also having a considerable impact right around the country.
In an address to the Australian Pipeline and Gas Association (APGA), APA Group Chief Executive Officer and Managing Director Mick McCormack said the gas market is a substantial way through the biggest transition it is ever likely to see – and for the market to adapt and have a continued gas supply, Australia needs reliable pipeline infrastructure.
“The most important thing that came out of the recent ACCC inquiry is that there is sufficient gas forecast to be produced to satisfy both LNG and domestic demand to 2025 – this is good news for consumers,” Mr McCormack said.
“That finding is predicated on forecast production occurring and, one would assume, on the ability for gas to get to market. That’s where the pipeline industry comes into play. Pipeline infrastructure is critical to increasing gas supply, and increasing gas supply will put downward pressure on prices.
“The pipeline industry’s success is dependent upon more supply coming into the market, and more customers having access to gas. To this end, the pipeline industry has a demonstrated record of investing and innovating to give customers the services they need to ensure gas projects proceed.”
While major gas projects over the last few years, including those at Gladstone, have already built their main infrastructure and transmission pipelines, APGA Chief Executive Cheryl Cartwright said there would always be opportunities for pipeline workers in the unconventional sector as long as there were developments.
“While there’s coal seam gas development, pipeline gathering systems will be required. Also, should there be sufficient gas in the CSG fields, it could prompt expansion of existing transmission lines or possibly even new transmission pipelines,” Ms Cartwright said.
According to Ms Cartwright, Australia needs more gas, but to achieve this, the sector must have the support of state and federal governments.
“We need governments to introduce policies that encourage the development of our valuable natural gas reserves.
“Australia has abundant gas reserves – sufficient to supply the export and domestic gas markets. We need a sensible energy policy that will see Australia reduce carbon emissions efficiently and economically, and we need the CSG moratoria to be lifted.
“Government policies can help to ensure there is sufficient gas for both the export and domestic markets by encouraging development of those reserves. Fairer treatment of natural gas in emissions reduction policies would help to increase supply in the domestic market.”
All eyes on the Territory
By far the biggest pipeline project in Australia at the moment is Jemena’s $800 million Northern Gas Pipeline (NGP), running from Tennant Creek in the Northern Territory to Mount Isa in Queensland.
The 622km pipeline will connect the Northern Territory to East Coast gas markets, and a large percentage of gas that will be supplied through the pipeline is expected come from unconventional sources.
Construction company McConnell Dowell was selected as the construction contractor for the pipeline and over the course of the project, there will be around 200 subcontracts awarded.
So far, 53 work packages have gone out to tender including engineering, procurement and preliminary construction work, and construction on the pipeline is expected to begin in early 2017, with commissioning in 2018.
Jonathan Spink, Northern Gas Pipeline Project Director at Jemena, has said the pipeline will create approximately 900 industry jobs throughout the planning, construction and commissioning phases.
“We will focus on sourcing labour from close to the project area – in the Tennant Creek and Barkly areas of the Northern Territory and Mount Isa region in western Queensland,” said Mr Spink.
“Jemena is also implementing a business investment fund to assist small and medium enterprises in the NT and Mount Isa areas, designed to build local capability and capacity, and assist those businesses to participate in the project.”
Jemena won the contract for NGP with its route between Tennant Creek (Northern Territory) to Mt Isa (Queensland) Northern Territory and Queensland, with the alternative route, proposed by both the DDG Operations (DUET) and Pipeline Consortia Partners Australia (China National Petroleum Corporation) having the pipeline run from Alice Springs in the Northern Territory to Moomba in South Australia.
Outgoing Northern Territory Chief Minister Adam Giles was a key figure in the Northern Gas Pipeline project since launching the initial tender process in October 2015.
Following recent energy shortages in South Australia, Mr Giles suggested building the second proposed pipeline route, from Alice Springs to Moomba, could help meet energy demand in the state.
“A national energy summit should consider the possible construction of a second gas pipeline from Central Australia to Moomba,” said Mr Giles.
“These can both be achieved under the Commonwealth’s agenda to develop Northern Australia.”
Mr Giles was defeated at the August 27 Northern Territory state election, and incoming Chief Minister Michael Gunner has previously announced he would put a fraccing ban in place in the territory until another review of the science behind fraccing could be carried out – effectively canning any short term plans to move forward with this second pipeline.
Australia’s unconventional core
In Queensland, there are several other pipeline projects currently underway or in planning in the country’s undisputed hub of unconventional exploration.
Queensland Gas Company (QGC) and its joint venture partners China National Offshore Oil Corporation and Tokyo Gas are creating up to 1,600 industry jobs through their new development, Project Charlie.
Project Charlie is a $1.7 billion investment in gas infrastructure located west of Wandoan within Queensland’s Western Downs Region.
In addition to the creation of 300–400 gas wells and a large field compression station, the project will involve associated pipelines including the installation of a 35km 900mm diameter coal seam gas trunkline.
“The Charlie development will help to sustain the benefits of our investment in local communities and the state, including up to 1,600 construction jobs and business opportunities during the two-year project,” said Tony Nunan, Managing Director at QGC.
“This is a vote of confidence in the secure, long-term future of Queensland’s natural gas industry, which will employ Queenslanders for many years to come.”
In addition to Project Charlie, there are a number of other energy producers proposing major pipeline projects that will provide the industry with a stream of opportunities once construction begins.
Arrow Energy currently has four proposed projects, two of which are pipelines running from the Bowen and Surat basins.
An Arrow spokesperson said the proposed Arrow Bowen Pipeline (ABP) would run from coal seam fields 38km north of Moranbah and extend approximately 430km south to the Gladstone State Development Area (GSDA).
The pipeline’s Environmental Impact Statement (EIS) received Queensland Government approval in March 2013, and environmental approval from the Federal Government in October 2014, but the project has experienced production challenges in 2016.
“Further technical work is currently being undertaken to improve production from parts of the Bowen Basin that contain deeper and tighter coals than the Surat Basin,” the Arrow Spokesperson said.
While this technical work is being completed, Arrow is continuing planning, which includes applying to the Queensland Government for a petroleum pipeline licence and Environmental Authority for the pipeline.
Arrow’s other proposed pipeline, the Arrow Surat Pipeline (ASP), received Queensland Government approval in January 2010 and has already been issued with a pipeline licence and Environmental Authority.
The pipeline will transport coal seam gas from Surat Basin to Gladstone and Arrow is continuing to progress the development, with planning underway to identify the best path to monetise the reserves.
Another major proposed pipeline that will link gas to our export markets is Blue Energy’s recently announced Bowen Basin pipeline, a 160km pipeline which will help commercialise Blue’s gas reserves and resources in the Moranbah area.
Blue Energy CEO and Managing Director, John Phillips, said Blue has undeveloped gas reserves around Moranbah and there is currently no connection between Moranbah and the southern gas market (including Gladstone), where the bulk of East Coast gas demand is located.
This pipeline will run from Moranbah to the Northern Denison Trough, linking the Bowen Gas Province to the Brisbane and Gladstone markets.
Mr Phillips said the decision to build the Bowen Basin pipeline had been largely influenced by the high demand for gas on the East Coast, which he believes is likely to continue with the ramp up of liquefaction capacity at Gladstone.
“Clearly there is a need to bring more gas to the market – the ACCC states this quite clearly in their report on the East Coast gas market released earlier this year.
Their view is amplified by the recent gas price shock in Sydney and Melbourne ($30/GJ) with the occurrence of the first real cold weather of a southern winter and the ramp up of LNG production in Gladstone.
“It is therefore vital that Blue’s gas, and gas within the Bowen Gas Province, be fast tracked into the southern market to ease supply pressure and stabilise prices,” Mr Phillips said.
Blue Energy is currently in discussion with several construction companies to build the pipeline, and Mr Phillips said once they were chosen and gas buyers were established, he expects the construction time to be between 12-18 months.
“Several other activities (regulatory approvals and field development) will have to occur in parallel with this to meet the gas demand timeframe of the potential buyers,” Mr Phillips said.
“I expect the planning, approval processes and investment decisions required to happen prior to any actual construction, which at the moment is at least two years out from now.”
Mr Phillips said that the current state of pipeline infrastructure in Australia is undergoing significant change.
“As the demand centre has shifted to Gladstone, from Sydney and Melbourne, those pipelines constructed to supply that demand centre are and will continue to undergo ownership changes.
“Flow directions on the major pipelines have also commonly reversed nowadays to give that supply flexibility.
“Who would have thought that Gladstone would be getting some supply from Victoria?”
Mr Phillips said that while the challenge is keeping those big pipelines full, of equal importance is ensuring that new gas provinces are discovered and can be economically developed with infrastructure a timely manner.
“This requires collaboration between explorers, producers, pipeliners, gas end users and regulators, to ensure we avoid duplication or wastage, and supply efficient low cost energy to the nation in a timely manner.”
The shift in gas demand from Sydney and Melbourne to Gladstone has created new opportunities for pipeliners in other states as well.
The changing market led APA Group to expand its East Coast network through the Victorian Northern Interconnect Expansion (VNIE), supporting gas flows around Eastern Australia.
The extension involves looping sections of the existing APA owned DN300 Wollert to Wodonga Pipeline (Victoria) and DN300 Young to Wagga Wagga Pipeline (New South Wales).
The extension is currently being undertaken by Spiecapag Lucas, a joint venture between Lucas Engineering and Construction and Spiecapag Australia.
Spiecapag Lucas is constructing 165km of pipeline across Victoria and New South Wales, which is further broken down into seven loops.
The extension is scheduled to be complete by February 2017 at which point the pipeline will be fully looped from Wollert to Barnawatha and from Wagga to Young.
Extension on the horizon
In Western Australia, the Dampier to Bunbury Natural Gas Pipeline (DBNGP) is the state’s critical transmission pipeline, stretching around 1600km from gas fields in the Carnarvon Basin to Bunbury in the state’s south-west.
A plan to extend the pipeline further down to Albany has often been discussed, without progressing any further.
However, Western Australian Minister for State Development, Bill Marmion, recently announced that the Government had received a private bid to build the pipeline extension which is now under consideration.
“We have received a strong, unsolicited proposal to build the pipeline, which is currently being examined and assessed. Obviously, it has to be assessed, but it is very good news,” Mr Marmion said.
“The proposal is being assessed for cost, specifications of the pipeline — the route, and also the commercial viability. It is a very good proposal and we are very optimistic that it can be delivered.”
Mr Marmion would not reveal the name of the bidder, but media reports from July said Western Australian Premier Colin Barnett confirmed energy infrastructure company ATCO submitted the bid.
If accepted, Mr Marmion said the new gas pipeline extension to Albany would deliver industry jobs during the pipeline’s construction as well as jobs from new investment in the area.
“Many south west towns will end up being reticulated on to gas, which will save a lot of energy costs. Some of the businesses that might be attracted by lower costs of energy include viticulture, agriculture, mineral industries and timber industries.
“Having cheaper energy in the south west is also likely to encourage new business and new capital investment in the region,” Mr Marmion said.
What needs to happen next?
APGA Chief Executive, Cheryl Cartwright, said that while the pipeline industry is prepared for whatever the future will bring, the best way forward is to have strong policies behind the industry.
“We need policies that encourage the development of natural gas as part of the energy future. Gas, with renewables, will help to reduce Australia’s carbon emissions,” Ms Cartwright said.
“A technology-neutral carbon-reduction policy would help to encourage investment in natural gas, as it would recognise the value that gas brings to the economy, particularly for electricity generation.
“The pipeline industry stands ready with high-quality workmanship to design, construct and operate gas transmission pipelines wherever the demand occurs.”