Territory open for business as gas developments ramp up

territoryAS Australia’s northernmost service and supply hub for offshore oil and gas operations, Darwin is a key trade gateway to Asia, and ideally positioned to cater to projects – either underway or planned – in the resource-rich region.
The imminent completion of a world-class marine supply base will solidify Darwin’s position as a major oil and gas centre, and attract new investment, with major players such as ConocoPhillips, INPEX and Shell confirming they would utilise the site for existing and upcoming projects.
Set to deliver myriad economic benefits, the marine supply base would also support the state’s onshore oil and gas industry, which has experienced a spike in exploration activity.
Darwin in focus
When construction began on the marine supply base in April 2012, Darwin was providing about $150 million in services and supplies per year to the gas industry; this figure is expected to rise to $420 million during the next 20 years.
The $110 million marine supply base, due for completion in coming months, will help businesses in the Northern Territory capitalise on the burgeoning gas industry.
A consortium between ASCO Holdings, Macmahon Contractors and Capella Capital, ShoreASCO was chosen by the Northern Territory Government to build, own and operate the marine supply base for up to 20 years.
It is being built on 8.55 hectares of vacant land adjacent to the East Arm Wharf, and will include three marine berths, hardstand and lay-down areas, warehousing, a waste management facility and office space.
The marine supply base will be capable of servicing more than 1000 vessels per annum, with a 12-hour turnaround time. Northern Territory Chief Minister Adam Giles stated that the marine supply base was expected to begin operation in the 2013 to 2014 financial year, starting with the dedicated rock load-out facility for INPEX’s Ichthys project.
“The marine supply base will be delivered with an emphasis on ensuring an effective transition of the berthing and services for offshore support vessels from East Arm Wharf,” Mr Giles said in a statement.
Construction of the marine supply base was a result of the Northern Territory Government’s commitment to developing key infrastructure while building the economy, he said.
In addition to ConocoPhillips’ existing operations in Darwin, INPEX’s Ichthys project and Shell’s breakthrough Prelude floating LNG (FLNG) development will drive much of the state capital’s growth.
ConocoPhillips
As the majority shareholder, ConocoPhillips operates the 3.7 million tonne per annum Darwin LNG plant at Wickham Point, which is fed by gas from the Bayu-Undan field.
Discovered in 1995, the Bayu-Undan field, about 500km northwest of Darwin in the Timor Sea, contains about 3.4 trillion cubic feet of gas and 400 million barrels of condensate and LPG. A 26-inch subsea pipeline connects the field to Darwin.
Joint venture partners in the project – which has been producing LNG since 2006 – include Eni, Santos, INPEX, Tokyo Electric Power Company and Tokyo Gas. The Bayu-Undan project is undergoing a third phase of development.
INPEX
Currently in the construction phase, the $36 billion Ichthys LNG project is a joint venture between INPEX (as operator), Total, Tokyo Gas, Osaka Gas, Chubu Electric Power and Toho Gas.
About 820km southwest of Darwin in the Browse Basin, Ichthys’ most likely resource estimates are 12.8tcf of gas and 527mmbbls of condensate to be produced during an operational life of more than 40 years.
Gas from the field will undergo preliminary processing on an offshore central processing facility (CPF), from which the condensate will be pumped into a floating production, storage and offloading facility, and transferred to tankers for delivery to markets.
The gas will be transported more than 885km by pipeline from the CPF to an onshore processing facility being built at Blaydin Point on Darwin’s Middle Arm Peninsula.
The project will have an initial production capacity of 8.4mtpa of LNG, 1.6mtpa of LPG, and 100,000 barrels of condensate per day at peak.
It is the largest oil and gas investment in the Northern Territory, and Japan’s biggest offshore investment in the world.
More than $5 billion is forecast to be spent in the Northern Territory as a result of the project.
INPEX celebrated a project milestone last month with the opening of stage one of the project’s accommodation village in Darwin.
Ichthys LNG project director Antoine Serceau said the Manigurr-ma Village was designed to provide a safe, comfortable and relaxed second home for the project’s necessary fly in, fly out workers.
“Building an accommodation village for this part of the project’s construction workforce makes sense, because the Darwin population is also forecast to grow during this time, with more workers and families expected to come for job opportunities on a range of different projects,” Mr Serceau said in a statement.
The 67-hectare village will be built in four stages – with the last due for completion in mid-2014 – and would house up to 3500 workers.
Of the village’s $260 million capital expenditure, about 60 per cent has beencommitted to local businesses. In addition, Mr Serceau said about 90 per cent of the village’s construction workforce was from the Northern Territory.
“With more than 400 people on site, that’s a great number of local jobs,” Mr Serceau said.
First gas from Ichthys is expected in 2016.
Shell
Also in the Browse Basin, Shell’s FLNG facility will be used to process gas from the Prelude and Concerto fields, 475km northeast of Broome.
Gas from the fields, which are estimated to contain 3tcf of liquids-rich gas, will be processed into LNG at the site and offloaded into LNG carriers for delivery to markets worldwide.
Because of the fields’ remote location, pumping the gas to shore for processing via a pipeline was not economically viable. As new technology, FLNG would enable ‘stranded’ gas reserves to be developed, and is considered to be an industry game-changer.
According to Shell, FLNG would reduce project costs and the environmental footprint of an onshore LNG development, as there was no need to construct infrastructure such as pipelines, compression platforms and jetties, or perform near-shore works such as dredging.
The FLNG facility will be the largest floating offshore structure ever made at 488m long and 74m wide, and is being built at multiple locations around the world.
First steel for the FLNG facility was cut in October 2012 at the Samsung Heavy Industries Geoje shipyard in South Korea – one of a few places in the world with a dry dock big enough to accommodate the FLNG facility – and construction is progressing to schedule.
First gas from the project – in which INPEX, CPC Corporation, and Kogas also have stakes – is expected for 2016.
Fellow gas giant Woodside selected Shell’s FLNG technology to develop its Browse LNG project, after scrapping plans to build onshore gas facilities at James Price Point in WA’s Kimberley region. The project comprises three fields about 425km offshore Broome, which are estimated to contain combined contingent volumes of 15.9tcf of dry gas and 436mmbbls of condensate.
State of play
While Darwin buzzes with industrial activity, the rest of the Northern Territory is moving forward with an unprecedented level of oil and gas exploration. According to Northern Territory director of energy Alan Holland, the main area of interest in the state’s onshore oil and gas industry was unconventional gas – namely shale.
“We don’t have CSG opportunities in the Northern Territory, so it’s all shale at the moment – that’s an important difference compared to the east coast,” Mr Holland said.
For unconventional gas, he said there were three main basins of interest: Macarthur, Beetaloo and the Southern Georgina.
“Each of those are in the seismic come-very-early drilling stages for unconventional oil and gas; there’s intense interest and activity at the moment with seismic and some quite large seismicprograms going ahead,” he said. “However, in the next year or so, there’s going to be significant levels of drilling. We’re only talking about 10 or 12 wells, but for the Northern Territory that’s a significant start to [exploring] the unconventional shale.”
The hunt for unconventional shale gas in the Northern Territory is being led by a range of players including Armour Energy, Beach Energy, Falcon Oil & Gas, Pangaea, Santos, Statoil, and Tamboran Resources.
“There’s been five wells drilled in the past for unconventional gas, but in the future I can see that doubling and tripling in the next year or so,” Mr Holland said.
Once the state’s unconventional oil and gas resources are fully explored, Mr Holland said a major flow-on growth aspect would be an increase in infrastructure, such as new pipelines and roads in rural and remote areas.
“That’s the exciting time for the Northern Territory; it’s just started. In the cycle of unconventional gas exploration, from exploration to discovery, you’re still looking at 5 to 10 years – I think we’re three years down that cycle, so I think in the very short term future there’s going to be great [prospects] for Territorians in remote and rural areas, where most of the shale is found,” Mr Holland said.
However, the future of the Northern Territory’s unconventional oil and gas industry is not without challenges. A lack of infrastructure and pipelines through specific, known oil and gas areas; access to exploration areas; water; a ready market; and a shortage of drilling equipment and crews are all issues the government is working to resolve. “The industry needs water. We have a significant amount of it in basins and aquifers, but we need to know exactly what’s there and what effect that will have in the long term. The government is working very hard to find that data,” Mr Holland said.
“[Also] we’re very keen for our pipeline system to become part of the eastern coast and the southern coast system, so linking the pipeline systems together will enable us to supply a local market rather than an export market.
“The Northern Territory doesn’t have a general domestic market for gas; we don’t need heating, or we don’t have a large major industry that needs gas, so we do need gas markets. We could do that internationally or look at the coasts. There are some opportunities for us in the future.”
In addition, the Northern Territory Mines and Energy department plans to complete an independent review of its onshore oil and gas regulations with a full Petroleum Act legislation review next year.
“Hopefully that will bring our whole regulation and legislation regime up to the most contemporary level it can be,” Mr Holland said.
“We recently had an independent review of our…regime on how it meets unconventional gas requirements for exploration and production.
“Our regulations were shown to be adequate, but it gave us 26 recommendations which we’ve enacted… that’s brought our regulations well up to par with leading practice regulations of the international field,” he said.
The legislation would address aspects such as well integrity, water and waste management, chemical use, land use, environment use, and cultural heritage use.