THE debate over whether the Northern Territory should choose Moomba or Mount Isa for the North East Gas Interconnector is hotting up, with South Australia having a crack at Queensland, and Santos CEO David Knox stating the “logical” case to Energy News.
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Tom Koutsantonis
While Knox put the argument to Energy News for Moomba as the preferred option, Australia’s pipeline industry group says the northern option could also provide stiff competition, with its lower costs. As the Northern Territory government decides which route to go from Darwin – through the McArthur Basin to Mt Isa or through Moomba – Knox told Energy News that the key was to ensure that whatever is done is “the most sensible thing” not just for the NT but for Australia. It’s on these grounds that he believes Moomba is the “logical” option, and he has the backing of Central Petroleum’s Richard Cottee. “We want to unlock the opportunities that exist in the NT, and Santos is very much involved in the McArthur Basin. We’re also involved in central Australia in the Mereenie area fields,” he said. “The pipeline route, if and when it gets built, I would argue that there is an obvious case to bring it to Moomba, as if you do you basically have the ‘Henry Hub of Australia’ at Moomba, from which you can get to all the cities of eastern Australia.” Meanwhile, the Civil Contractors Federation yesterday declared it favoured the $1 billion Moomba option due to the obvious economic benefits for South Australia. CCF CEO Phil Sutherland said it would gift SA the private investment in infrastructure the state has been sorely lacking of late. “Our industry is ready willing and available to build the infrastructure necessary to support the construction of the pipeline. This includes the corridor for the pipeline and the roads to provide the necessary access,” Sutherland said. “South Australia is not seeing the private investment in infrastructure we have in years gone by. The construction of a billion dollar gas pipeline through private investment would be a game changer.” This came just two days after SA resources minister Tom Koutsantonis noted that the bids for a southern route proposed by both DUET and the PetroChina-led Pipeline Consortium Partners Australia to connect the onshore gas fields in the NT to the eastern market through existing infrastructure at Moomba in South Australia’s Cooper Basin. APA Group and Jemena favour routes into Queensland. “Unlike Queensland, we will not predetermine the decision-making process of the NT government or prejudge any outcome. We will let the economic facts speak for themselves,” Koutsantonis said, and cited his “excellent” relationship with NT chief minister Adam Giles and his government. Beyond SA’s claimed benefits, Koutsantonis said the southern route provided an “all-round better solution” to achieving the NT’s objective of delivering onshore gas to south-eastern markets and supporting the supply of gas to eastern customers. “The economic benefits of the southern route far outweigh the Queensland option, which requires additional processing facilities to be constructed before NT gas can access markets,” he said. “By directing gas from through Moomba rather than Mt Isa, suppliers will be able to access the existing infrastructure within the Cooper Basin and connect more efficiently and directly to the markets in eastern Australia. “Moomba also provides producers with access to international markets for other gas products such as propane and butane through existing export facilities at Port Bonython.” Henry Hub hype It’s not that simple, though. Australian Pipelines and Gas Association CEO Cheryl Cartwright indicated that the “Henry Hub” proposition is not necessarily suited to the Australian market, given the differences in scale between the US and Australian markets. “The Henry Hub in Louisiana in the US has nine major interstate huge gas pipelines going through. It also has numerous intrastate pipelines going through it,” Cartwright pointed out to Energy News. “Australia has five interstate pipelines, and they all go to different states. We don’t have the volume to have a Henry Hub-type facility, but we have a supply hub at Wallumbilla; perhaps we could have a supply hub at Moomba, but we don’t know if that would work. “It might work in the textbooks and some people might think they can get cheaper gas that way, but it’s not a given that we would have that. “Sure, we could set it up so that some time in the future we could have major hubs in Australia, but we would certainly need to have a much larger population and more use of domestic gas, and unless that gas is coming into the domestic market, there won’t be an increase.” Cartwright stressed that APGA does not have a favoured position on the debate one way or the other. “The route of the NEGI will reflect expected plans for the future of the gas industry. The current reduction in use is possibly influenced by the short-term price hike [due to the LNG projects coming online in Queensland],” she said. While pitt&sherry’s Carbon Emissions Index had shown up until March this year that natural gas consumption outside electricity generation had been falling steadily for several years, this ended over the last quarter, particularly in Victoria. “If we’re planning for the future, that reduction is use is possibly just a response to the short-term price hike [due to the LNG projects going online in Queensland],” Cartwright added. Shale’s long shot While there has been a frenzy of M&A activity over the past month among shale players – not just Santos, Drillsearch and Beach Energy, but wildcatter Armour Energy has been the subject of competing bids between Chinese-backed WestSide Corporation and Aubrey McClendon’s American Energy Partners. Beach has the west of the Napamerri Trough, while Drillsearch has the east, but that gas would go to Moomba regardless of whether the NT government went with the northern or southern option. Armour’s assets are in the McArthur Basin would most suit the Mt Isa option, while Central could cope with either option from its Mereenie, Palm Valley and Dingo fields, where it has gas ready to go. With the NEGI pipeline likely connecting export markets in Darwin with those in Gladstone, as well as Sydney and Melbourne, four companies are engaged in the final request for proposal stage: PetroChina, APA Group, DUET and Jemena. APA and Jemena both favour a shorter 600km link between Tenant Creek and Mt Isa over a 1000km-long link between the Amadeus Basin and Moomba. Amid all this, Knox recognised that there is “a long way to go”. “We need to unlock those resources in the NT which are largely unconventional style, then we need to decide where best to run the pipe – and it’s a big pipe,” Knox said. “It’s a big investment, and in order to do that it’s going to require some very serious commercial commitments hanging off the back of that. “And the unconventionals, while exciting, are still very early days. It’s a matter of years, not months, but inside a decade I would hope we’re developing some of the resources. In the Cooper we’re doing that now because we have the infrastructure now. “But in an area where you have no infrastructure, it’s an awful lot more difficult, but it will come.” With the NT, South Australian, Queensland and federal governments involved, Knox said Santos would make the case “at the right moment in the right way to argue for the best option for the whole of eastern Australia” – but confirmed the SA oiler had not made any official overtures to any of them. “We haven’t had any direct conversations with any particular government backing a particular option, because it’s very early days,” he said. “The key thing you’ll need is commercial agreements hanging off the back of this. “You have to prove up quite a lot of shale resources to have confidence to put a pipeline in, and that’s going to take some time.” Chicken or the egg A key question, Cartwright says, is the long-term infrastructure requirements for the gas transmission market, and the fact that the southern route is more expensive and probably the more difficult to build. At the same time, the southern option would provide a more direct gas flow to Moomba that could create another gas hub like the Wallumbilla hub in Queensland. “But the question is still that, given the gas market is so small, will Australia have sufficient gas to make two hubs work? It might work in the economic text books, but we still might not have enough gas for two hubs,” she said. “The other side of the argument is that the shorter is logical because of costs, and once the gas is in the pipeline they’re all joined, so perhaps another hub can be created somewhere as well – we don’t know. “The positive argument for the northern route is that it’s less expensive and the terrain, as I understand it, isn’t quite as difficult, but I don’t know which way it would go because there are positives and negatives for both. “I understand that the northern route is where most of the shale is, but it would be some years before the shale could or would be developed. However, if we are planning for the longer-term, that’s one of the things that you’d consider. “In the longer-term, do you want to establish a system that provides the opportunity for an extra supply hub, but even with that we don’t know if there’s sufficient gas to warrant two supply hubs.”[/table] http://www.energynewsbulletin.net/S...mpaign Monitor&utm_term=NEGI debate heats up#
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Tom Koutsantonis
