Two routes are being considered for the NEGI interconnector.
Ministers in Australia’s Northern Territory (NT) have fast-tracked plans to commercialise the region’s substantial onshore gas resources by building a pipeline that would link the country’s northernmost grid with eastern and southern markets for the first time.
The pipeline could see export markets in Darwin connected with those in Gladstone, as well as Sydney and Melbourne.
The North East Gas Interconnector (NEGI) project, which has a mid-2018 start date, could help alleviate future gas shortages in eastern Australia caused by falling upstream investment in the state and rising demand from LNG exporters in Queensland.
“The construction of this gas pipeline is an infrastructure project of national significance. It’s also a matter of urgency for the eastern states, which are fast approaching an energy security crisis,” NT Chief Minister Adam Giles said in a statement. The minister’s office declined to comment further on the project when contacted by Interfax.
NEGI has backing from the Council of Australian Governments – the highest intergovernmental forum in Australia – which said last October that “connecting these markets is the next step to developing a national gas grid”.
Energy consultants EnergyQuest believe the pipeline is “highly likely” to go ahead thanks to a A$5 billion (US$3.86 billion) loan facility announced by the federal government to promote infrastructure investment across northern Australia.
In anticipation of NEGI’s construction, Central Petroleum has signed an agreement with fertiliser producer Incitec Pivot to supply its Queensland facilities with 15 PJ per year from Central’s fields in the Amadeus Basin around Alice Springs. Central also has a joint venture with France’s Total Oil to explore for gas and oil in the South Georgina Basin.
Speaking in April, Central Chief Executive Richard Cottee said NEGI “will directly link the NT’s budding gas fields, including Central’s Palm Valley and Dingo fields, to the huge domestic demand centres of southeastern Australia. The effect will be to create the backbone for a domestic gas market”. Vast shale potential
The NT is estimated to hold more than 5.66 trillion cubic metres of unproven gas in six onshore basins – potentially enough to power Australia for more than 200 years – and over 820 billion cubic metres offshore.
“This project will help unlock those onshore and offshore gas assets,” Giles said. “The first tranches of gas for this pipeline are expected to come from existing offshore and onshore fields, giving us the time to get the regulatory environment right for an expanded industry into the future”.
NEGI could also encourage investment in NT’s shale gas reserves, which are estimated at more than 5.66 bcm in the greater McArthur Basin. Australia’s Origin Energy and Santos, Japan’s Inpex, Norway’s Statoil and others have expressed an interest in exploiting the reserves.
But Glen Gill, managing director of Innovative Energy Consultants, labelled as “interesting” attempts by the NT government “to try to substitute commercial decisions with government initiatives”.
“The NT could not solve the lack of gas supply to Rio Tinto Alcan’s alumina smelter at Gove, which is a very large gas demand if oil was displaced in that operation, and yet they pretend to be the saviours of the eastern Australia gas shortages generally and shortages to NSW in particular,” Gill told Interfax.
In response to strong private-sector interest, the NT government has launched a competitive bidding process for NEGI.
Four companies have been shortlisted to submit final proposals to build, own and operate the link: APA Group, Duet’s DBP Development, Merlin Energy Australia and Jemena.
France’s Engie (formerly GDF Suez), Japan’s Marubeni, Macquarie Capital, Berkshire Hathaway and Canada’s Enbridge also bid, but were not selected for the request-for-initial-proposals stage, which is due to be completed in late September 2015.
Two routes around 1,000 km long are being considered for NEGI, which NT Deputy Chief Minister Willem Westra Van Holthe has described as “a game changer” for the state because of the level of inward investment it will attract.
The Queensland option would cost around A$900 million and run from Tennant Creek to Mount Isa via the Georgina Basin. The South Australia option would cost upwards of A$1.3 billion and connect Alice Springs with Moomba via the Amadeus, Warburton and Cooper Basins.
APA is believed to back the Queensland route and is “most likely to be the successful bidder” because of its experience with the Amadeus and Bonaparte pipelines, EnergyQuest said, adding NEGI could be supplied with surplus government stock from the offshore Blacktip field via the Amadeus pipeline.
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Two routes are being considered for the NEGI interconnector.
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