Widening the Top End’s gateway to Asia

TWICE nearly completely destroyed, Darwin has seen its fair share of adversity. The Northern Territory’s capital was rebuilt both times, and has since developed a reputation for being one of Australia’s most modern cities.
Throughout its 137-year history, the Port of Darwin has evolved along with the city. Its unique proximity to Asia and the development of major resource fields offshore northern Australia – along with its naturally-occurring deep water, established infrastructure and Darwin’s ever-growing population – have seen the port become Australia’s second key offshore supply hub for the oil and gas industry. In fact, the port has become a focal point for some of Australia’s largest oil and gas projects and is known as ‘the gateway to Asia’.
Darwin Port Corporation (DPC) manages the port and is currently overseeing its most dramatic transformation since Cyclone Tracy struck in 1974.
Projects Major projects will be serviced by the Port, including Greater Sunrise, Blacktip, Bayu-Undan and Ichthys.
Greater Sunrise
Woodside’s $14 billion Greater Sunrise gas development is 450km northwest of Darwin in the Timor Sea.
The project area includes the Sunrise and Troubadour gas and condensate fields, and contains 5.13 trillion cubic feet of dry gas and 226 million barrels of condensate.
While Shell is currently developing the first ever floating LNG (FLNG) facility (for its Prelude project), the Greater Sunrise venture will utilise the world’s second such vessel. Blacktip Fully owned and operated by Eni Australia, the Blacktip project in the Timor Sea will deliver gas to the Northern Territory’s Power and Water Corporation.
With about 1.2tcf of proven and probable gas reserves, Eni Australia estimates that 18,000 barrels of oil equivalent will be delivered per day for a period of 25 years. Gas will be pumped from an unmanned offshore platform though 300km of pipeline to a LNG processing plant in Wadeye.
Bayu-Undan
Australia’s second LNG development, the $5.4 billion Darwin LNG project began production in 2006.
The gas is piped along 502km of subsea pipeline from the Bayu-Undan field in the Timor Sea to a two-train plant operated by the field’s discoverer, ConocoPhillips. It has one of the largest above-ground LNG tanks in the world (with a capacity of 188,000 cubic metres) and produces 3.5 million metric tonnes per year, with much of the LNG sent to Japan.
The operation comprises an unmanned platform, a floating storage and offloading facility, and a central production and processing complex.
Ichthys
The largest and most significant offshore development to be serviced by the Port of Darwin is Japanese company INPEX‘s $34 billion dollar Ichthys project. Measuring 40km by 20km, the Ichthys field has a reserve gas estimate of 12.8tcf and 527mmbbls of condensate, and represents the largest discovery of hydrocarbon liquids in Australia during the last 40 years. Despite being in the Browse Basin, offshore WA and 850km from Darwin, Ichthys will be serviced and supplied by the Port of Darwin. Local protests and reluctance by the WA Government to develop a gas hub in the Kimberley, combined with the Northern Territory Government’s eagerness to cater for LNG, led INPEX to select Darwin for its LNG processing.
Gas from the Ichthys field will be sent to a central processing facility and then piped 889km to an LNG processing plant at Blaydin Point in Darwin.
INPEX general manager for joint ventures and external affairs Bill Townsend said the territory government made the decision easy.
“At around 2008, when we were looking at the development, the Northern Territory location was the only one that was available.
It was the only place where could build at that time,” he said.
“We had the full support of the Northern Territory Government. They came to us and Darwin offered a lot of things that were not available elsewhere, including a working port, capital city, existing LNG plant, rail linkage [and a] 120,000 population.
“The Northern Territory was an attractive location, once you got over the fact that we would have to build a longer pipeline.”
Masterplan
The DPC is currently implementing a new land use strategy called the East Arm Wharf Facilities Masterplan 2030.
Involving a complete upgrade of the port plus the provision of major new infrastructure, it will require a capital investment exceeding $150 million to meet the growing needs of importers and exporters.
The East Arm Wharf
Just 4.5km southeast of the Darwin CBD, the East Arm Wharf is is strategically positioned at the end of the Adelaide to Darwin railway and major highways. It is the largest live cattle export facility in Australia, and the service and supply base for the offshore and onshore oil and gas industry.
The multimodal jetty has a continuous 754m berth face parallel to the main channel. As part of the development program, the berth face will be extended up to 1.5km to include dedicated berths for the oil and gas sector.
Construction has also begun on an intermodal terminal, covered storage, and dry bulk stockpiling and loading facilities. In addition, the DPC plans to add a new conveyor system to the existing bulk loader and rail dump to increase output and efficiency.
The Darwin Marine Supply Base
In order to accommodate the large increase in traffic and mining in the Timor Sea and the Browse Basin, the DPC is also building the Darwin Marine Supply Base. It will be the largest user of berth space at the East Arm Wharf and will support more than 400 vessels per year.
Comprising a dedicated marine berth and adjacent support facilities to service the offshore resources industry, its construction will coincide with the advancement of the Ichthys, Greater Sunrise and Prelude FLNG projects.
In April, former Northern Territory Chief Minister Paul Henderson said Australia’s first dedicated Marine Supply Base would also give local businesses the chance to service and supply offshore gas projects in the region.
“This marine supply base will give hundreds of NT businesses the opportunity to capitalise on the multi-million-dollar gas service industry,” he said.
“It will create an opportunity for small businesses across NT to provide everything from specialised pieces of equipment to laundry and catering services.
“To put this massive project in perspective, Darwin provides approximately $150 million in services and supplies per year to support the gas industry.
“With the help of this new base, this figure is expected to increase to $420 million over the next 20 years.”
Local company Macmahon has been contracted to build the base, which is expected to be completed in 2013.
Environment
In 2011, local media revealed that copper concentrate had been spilled while being offloaded from a ship at the East Arm Wharf and was being washed into the ocean.
The DPC was charged when it failed to report the incident and, faced with a maximum penalty of $500,000, it negotiated a $19,000 fine.
DPC chief executive Terry O’Connor said he was pleased that the matter had reached an amicable conclusion and that development of the East Arm Wharf would be monitored closely to minimise environmental impacts.
“We will continue to work closely with NRETAS [Natural Resources, Environment, the Arts and Sport] on a stormwater improvement plan for East Arm Wharf,” he said.
“We have been working since the time of the incident on the significant rectification works that have to take place on the stormwater system to change the Wharf from its original design, as a container and general cargo wharf, to allow for the bulk mineral export wharf it is today.
“The Corporation is committed to safe and sustainable environmental practices.
“These just are not empty words. We have put these commitments into action over the past 18 months with the implementation of an Environmental Management Plan [EMP] for East Arm Wharf, considerable stakeholder engagement and investment in infrastructure improvements.”
Apart from the new EMP, the DPC has also updated it cyclone management procedures.

Royalties
A major issue regarding drilling in the Timor Sea has been the distribution of resource royalties to the Timor-Leste Government, as the waters are subject to overlapping territorial claims by Australia and Timor-Leste.
The Timor Sea Treaty was signed between the two countries in 2002, and led to the creation of the Joint Petroleum Development Area (JPDA).
The treaty ensures that revenue collected from projects operating in the JPDA will be shared on a 90 per cent Timor-Leste and 10 per cent Australia basis.
There are currently eight active production-sharing contracts in the JPDA, including the Greater Sunrise gas project and the Bayu-Undan liquids and gas development.
The Government of Timor-Leste is currently pursuing up to $3 billion in unpaid taxes that it claims ConocoPhillips still owes it from the Bayu-Undan project.
In response, the company said it was up to date with its payments and was challenging the case.
The Australian Government estimates that Timor-Leste could earn as much as US$15 billion from the Bayu-Undan project.

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