The domestic gas market could be set for a major upgrade if APA Group’s plan to connect its Northern

Game-changer: APA looks to link domestic gas markets

The domestic gas market could be set for a major upgrade if APA Group’s plan to connect its Northern Territory and east coast assets with a major gas pipeline goes ahead.
If the proposed link proves viable it would create an interconnected system of over 9,000 km of gas pipelines, which would join APA’s two existing Northern Territory (NT) pipelines to its east coast grid.
APA first announced the concept in February and while it is still in the feasibility stage, which covers route selection, engineering and commercial viability at a cost of $2 million, three different potential pipeline routes are currently being considered.
APA Group Executive – Transmission Rob Wheals said fly-overs for possible routes have commenced, along with the evaluation of environmental considerations and project construction cost estimates.
A potential NT Link provides a number of benefits to various gas market stakeholders.
“By linking APA’s Northern Territory assets with our eastern Australian gas grid, it encourages exploration and production of new gas sources to meet growing demand,” said Mr Wheals.
“A 9,000 km seamless transport system between the Timor Sea, Bass Strait and Sydney would provide all stakeholders with flexibility and additional security of supply, especially over the coming years.”
APA has assessed several routes, taking into account considerations such as environmental issues through to whole of project (including expansion of existing infrastructure) construction costs.
Flyovers have commenced to gather more information on the various routes that are being investigated. At this stage three pipeline routes have been modelled, while others will be evaluated, and the infrastructure requirements are in the process of being defined.

APA is in early stage discussions with large downstream users on East Coast as well as in exploratory discussions with major upstream producers and juniors/explorers.
The first possible route flagged was a 620 km pipeline from Tennant Creek to Mt Isa for an estimated cost of $900 million, including upgrades to existing infrastructure.
The second proposed route runs for 1,100 km between Alice Springs to the Santos-operated Moomba gas plant in South Australia for an estimated cost of $1.3 billion, also including upgrades to existing infrastructure.
The most recent route option discussed was a 700 km pipeline connecting the NT pipeline to the Carpentaria gas pipeline.
Feasibility studies for the proposed route are expected to be completed in the 2015–16 financial year, and APA says that it is maintaining ongoing and open dialogue with the Federal, State and Territory governments.
The east coast gas market is set for a significant transformation towards the end of 2014 with the first of three LNG export projects due to commence operations in Queensland.
While Queensland’s CSG resources will be the major source of supply for these LNG projects, some of the gas required is likely to come from the Cooper Basin and other regions, which have historically been a significant source of supply for the domestic market.
It is possible that the Gladstone LNG projects may further de-risk gas supply from their CSG developments by contracting additional third party gas if available.

On that basis it is likely that these projects will remain in market for volumes longer term to maximise capital efficiency, if this is more cost effective than developing their own resources.

Government support

Indeed there are many in respective government circles who are very keen to see the major pipeline routes linked.

The NT’s Chief Minister Adam Giles is very keen to see the continuing development of the Territory’s gas resources, and has met with industry leaders to ensure investment in the Territory continues.
“We want to unlock the potential of the North and are working with the Federal Government to make this happen but private capital will be critical to getting projects off the ground,” said Mr Giles.
“My clear message in that the Territory is open for business and corporate Australia has the opportunity to invest.”
It is understood that Mr Giles and his South Australian counterpart Jay Weatherill have been involved in keen discussions about the potential of an Alice Springs to Moomba pipeline, indicating that an agreement to develop the pipeline could be signed in the coming months.
There are also promising signals being sent out by the Federal Government with Minister for Industry Ian Macfarlane announcing in August that he is determined to create a national gas market.
The Minister has highlighted the potential benefits of being able to send gas from the Browse Basin in Western Australia (WA) to Sydney, which is expected to experience a shortage of gas and price rises in coming years.

Mr Macfarlane threw his support behind the NT to east coast pipeline link declaring that it was “more than a vision” and said talks between Mr Giles, the New South Wales (NSW) Energy Minister Anthony Roberts and the industry were underway.
The current construction of a 900 km pipeline from the Browse Basin to Darwin would mean that, with the potential NT to east coast link, there would be a continuous gas network from WA to the east coast, meaning gas from the Browse Basin could be sold domestically as well as overseas.
Mr Macfarlane also highlighted the importance on ensuring the gas supply to eastern states, particularly NSW who he warned could face significant gas supply shortages.
“Even if we see major progress there in the next 12 months, because of all the time that has been lost in NSW there is no way that will provide a solution to NSW’s impending gas shortage and higher prices which will really start to come into being in the winter of 2016 and then 2017,” said Mr Macfarlane.
“The only solution to the gas supply problem in NSW appears to be an interconnection.”
Despite this, Mr Macfarlane has said that the Commonwealth was not considering funding the potential interconnection, but has not ruled it out in the future.
APA Group has stated its focus is to identify the most efficient and commercially viable link with the east coast grid, and with infrastructure sized to meet demand, they will continue work with upstream and downstream parties to best understand the likely gas path.
The proposed pipeline link would be an open access pipeline that could be accessed by any producer, retailer or gas user.