SOUTH Australia’s government has called yesterday’s award of preferred tender status to Jemena for construction of the North-Eastern Gas Interconnector “silly” – a far cry from Queensland and the Northern Territory’s predictably more buoyant label of “historic”, while Central Petroleum is excited and Santos is philosophical.
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Richard Cottee
South Australian resources minister Tom Koutsantonis has warned that the Mount Isa option will mean higher gas prices for gas users in the south-east, and his sour note has been echoed by Australian Industry Group chief executive Innes Willox. The men say putting the gas into Queensland puts barriers in the way to getting it to New South Wales where it is most badly needed. Some sources claim that the northern route will increase the cost of gas into NSW by about $1.40 per gigajoule, however the Mt Isa option’s backers say it will free up gas in Queensland for use in NSW. SA Premier Jay Weatherill says he will continue to push the case that the southern option is the best as it would "provide the best long-term benefits" to all parties. One of the earliest beneficiaries of NEGI, Central Petroleum boss Richard Cottee, said the decision to award Jemena the contract to build the 622km-long pipeline to Mount Isa was “a huge step forward for the Territory gas industry and the development of a more competitive gas supply into a critically tight Australian domestic gas market”. Cottee, who personally favours the NEGI route to Moomba, told Energy News that he would not be surprised if the Moomba option could still be picked up at some stage if exploration success follows. The man who developed Queensland Gas Company and set off the Queensland CSG-LNG sector in the first place said he had quickly realised what impact the LNG trains would have on the domestic gas market, not just for power generation but for all the other industries which have no substitution options available. “There has been a lot of travesty around this. Obviously, I knew these trains in Qld were coming and there would be issues that the ramp gas phenomenon was just delaying the inevitable,” he told Energy News. That’s why he repositioned Central’s focus from oil to gas, to benefit from domestic gas contracts not linked to oil or exchange rates, and he is now tipping that NEGI will redraw the map for northern Australia. “Clearly, from my experience creating a market for QGC gas by helping the demise of the PNG gas pipeline, that exploration will be turbo-charged," he said. “I think there is going to be a lot more interest in looking for gas in the north, as far away as our JV with Total in Queensland.” Of course the magic of NEGI is that Central needs to undertake very little investment in exploration, because the Meerenie field can effectively meet 45 terajoules per day already, for at least 2-3 years of the contract. “There’s no pressing capital ask for us,” he said. “We have Orange and Ooraminna, etc, but we will focus close to infrastructure and grow from there, spreading like a cancer. “At Mereenie we already have wells that have been drilled that were plugged because they had this annoying thing called gas, and many of the flow lines are already there.” He maintains that the southern option through the Moomba gas hub would have provided greater gas security to manufacturers in the southern half of the east coast, as well as improved competition generally. However, Cottee says the northern option will see the company in production earlier than would be the case, bringing forward profitability from the Amadeus Basin fields, and spurring Central on to further exploration in its leases. Central has already received several expressions of interest for the sale of all of its gas into the east coast market, and should provide more than half of NEGI’s initial throughput. Santos, a gas producer in its own right and JV partner with Central, also warmly welcomed the announcement, and a spokesperson said the company would continue to support the development of the Northern Territory’s significant natural gas resources. “A pipeline linking gas resources in northern Australia to markets in the east is a welcome development, but the total cost of transporting gas to east coast demand centres must be competitive to realise the full benefits of this development,” the spokesperson said. “It must also be supported by a robust, stable regulatory regime that enables the development of onshore gas resources.” Incitec Pivot has executed a foundation gas supply agreement for its Phosphate Hill manufacturing plant in North West Queensland, using gas from NEGI. The 10-year deal, with Power and Water Corporation, will allow the company reduce its gas costs by $55 million per annum by using gas from Blacktip and Dingo, assuming the gas is not needed in the NT. The chemical firm is still to assess its options for gas between December 2016 and the pipeline start-up in 2018. Australian Pipelines and Gas Association CEO Cheryl Cartwright welcomed the NT government’s decision to choose an option that would not require government funding to underwrite the project. “Since privatisation many years ago, no government funding has been required to build and operate this critical gas transmission infrastructure that provides as much energy to the economy as electricity infrastructure,” Cartwright said. “This is clearly one of the major reasons for choosing the northern route for the pipeline. “With the delays in developing gas reserves in New South Wales and onshore Victoria, opening up supplies from the Northern Territory will help to ease pressure on gas demand in eastern Australia,” she said. “Gas has a role to play in power generation, manufacturing and in the home. It is a critical part of the energy mix as we move towards lower emissions. “The NEGI will also help to encourage development of shale gas fields in the NT and provide a boost to initiatives to further develop Northern Australia.” Australian Petroleum Production and Exploration Association CEO Malcolm Roberts said it was an important milestone for the Top End gas industry, which has long been isolated from the east coast gas markets. “By the time it is built, we are likely to see some tightening of supply on the east coast so the timing is very good,” Dr Roberts said. Dr Roberts hailed a recent study by Deloitte Access Economics showed that developing the Territory’s shale gas resources, in particular, could drive significant long-term economic growth. The Deloitte study found a shale gas industry supplying the NT, eastern and export markets could provide a $22 billion boost to the Territory’s GDP by 2040, generate up 6,300 new jobs and increase taxation revenue to the NT Government by up to $460 million a year. “The NEGI is a pipeline of opportunity,” Dr Roberts said. The Queensland Resource Council described the vital shot in the arm for jobs and economic development in the North West. QRC CEO Michael Roche welcomed the infrastructure announcement that would fill an important missing link in the Northern Australia gas market, and he expects to see a “domino effect” that will stimulate new projects and more jobs in the region. “The cost and reliability of energy into the state’s North West minerals province has long been a constraint on regional growth and a barrier to new projects and local investment. “Connecting gas to Mount Isa will uncork the growth genie and create a broader economic benefit for industry, and with it, new job opportunities.” Queensland Premier Annastacia Palaszczuk described it as "a coup” for Queensland.[/table]
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Richard Cottee
