When gas turns to hot air

By ALEX NELSON

 

Gas promises are a hardy perennial for Territory pollies but since the building of the Palm Valley to Alice and Darwin pipelines they have amounted to little more than hot air.

 

The latest promises come from Chief Minister Adam Giles who told the Estimates Committee he had requested the private sector to produce financial modelling for a pipeline to South Australia’s gas fields at no cost to the government.

 

He said connecting Alice Springs to the 832 km pipeline would be a major investment for the Territory: “It is highly visionary and allows the Northern Territory to become a supply base of gas into the national market.”

 

Mr Giles said the proposal to connect the Territory to the national grid was initially based on the idea of a pipeline from Tennant Creek to Mount Isa. The NT Opposition was not to be outdone: Shadow Primary Industry Minister Kon Vatskalis said he was the first politician to raise the proposal and still stood by it.

 

The claims made by both politicians are factually incorrect, as the story attests which was published in the Centralian Advocate more than 40 years ago: “An oil industry leader has called for the establishment of a natural gas pipeline grid to link Australia’s gas-producing areas with the major centres of industry and population.

 

“The first step would be the linking of the Moomba natural gas field, in the north-east of South Australia, with Sydney. This pipeline, 850 miles long, would cost about $100 million.

 

“The call for the pipeline grid was made recently by the managing director of Santos Ltd, Mr A. J. Knights. Santos has a 50 per cent interest in the gas reserves at Gidgealpa and Moomba.

 

“Mr Knights proposes that the Moomba-Sydney pipeline would be followed by an expansion of the grid to link Melbourne, Adelaide, Sydney and Brisbane.

 

“At a later stage Palm Valley should be linked with Moomba. Mr Knights estimated that Gidgealpa and Moomba should be able to supply the SA market for at least 20 years.”

 

Mr Knights’ proposal in 1970 to link Moomba with Sydney didn’t take long to eventuate – the gas pipeline commenced construction in 1974 and began operation in 1976.

 

However, the history of the Palm Valley-Mereenie gas fields in Central Australia took a very different turn. Initially the early known limited extent of the reserves discouraged any major developments although a proposal to build a gas pipeline from Central Australia to the Gulf of Carpentaria was assessed in 1972 for potential export as LNG to Japan.

 

The future energy needs of the Northern Territory were a major theme of the politicking leading up to the Legislative Assembly elections in 1980. The CLP government’s Minister for Mines and Energy, Ian Tuxworth (Member for Barkly), announced that coal, imported from interstate, would be used to provide for the future energy needs of Darwin.

 

The Labor Opposition leader, Jon Isaacs, condemned the decision: “The NT Government has firmly locked the Territory into ever-escalating bills by using coal for power generation.”

 

Mines Minister, Ian Tuxworth, in a weekend radio broadcast, clearly stated the Government’s preference for coal over the Territory’s cheaper and abundant natural gas, he said. Other Australian states with huge coal deposits are stepping up the search for natural gas while the NT blindly insists that coal is the answer for us.

 

“Instead of realising the potential that we have in the Territory in the way of natural gas, the NT Government is frittering away this immense advantage. Mr Tuxworth has merely brushed the cobwebs from an old Canberra decision to build a coal-fired power station in Darwin,” Mr Isaacs said.

 

He in turn was taken to task by the CLP Member for Stuart, Roger Vale, who (prior to being elected in 1974) had originally worked for Magellan Petroleum, the company that first discovered the Central Australian natural gas fields, saying the parrot cry that natural gas is the answer to all the Territory’s energy needs is verging on exasperating stupidity.

 

“Mr Vale said the Northern Territory Government had committed itself to using Palm Valley gas in the Alice Springs power house for the simple reason that there were sufficient proven reserves of gas at Palm Valley to run the power house for at least 15 years. But the Territory’s proven reserves of gas ended with Palm Valley – there were no proven reserves in the Top End,” the Advocate quoted Mr Vale as saying.

 

“The Government is going to use gas in Alice Springs and if there were known economically recoverable gas reserves in the Top End, the Government would tap these for the new Darwin power station. But there aren’t and so the Government is opting for coal imported from the eastern states.

 

“The Labor Party attacks us for this move. They say we should have powered the Darwin station with natural gas, even though years more work needs to be done before the estimated gas reserves of the Top End can be proven.

 

“The Territory Government is not about to take that gamble. But our planning schedule for the new Darwin power station does allow for a switch to gas firing if Top End gas reserves are proven in time.”

 

The CLP retained office after the elections of June 7, 1980; but near the end of the following year a remarkable run of events occurred that were to have a transformative effect on the future of natural gas development in the NT.

 

The first was the resignation from parliament of Labor leader Jon Isaacs on November 2, 1981. With him went any recognition of policy initiatives he had championed in previous years – including natural gas development.

 

Less than a fortnight later came this news: “The NT Government and Magellan Petroleum have signed a multi million dollar deal for supply of Palm Valley gas to the Alice Springs powerhouse.

 

“Mr Tuxworth said the agreement was a milestone and would serve as one of the most effective factors in containing electricity costs in the southern part of the Territory,” the Advocate reported in November, 1981.

 

“It will lead to the full scale development of the Palm Valley resource and as such is a major breakthrough in NT development.”

 

Later that same month came news of a potential market for Central Australian gas: “South Australia wants to buy Palm Valley gas, according to NT Mines Minister Ian Tuxworth. He told The Advocate that SA Deputy Premier Roger Goldsworthy had been making enquiries recently.

 

“Mr Tuxworth said Mr Goldsworthy had indicated South Australia may be willing to pay $2 a gigajoule at the wellhead, and pay for a pipeline. NTEC [Northern Territory Electricity Commission, precursor to Power Water Corporation] has signed a contract for Palm Valley gas at $1.12 a gigajoule, according to Mr Tuxworth.

 

“SA is now using the Moomba gas fields but they are expected to be exhausted later this century. Mr Tuxworth said the NT Government had not yet finalised its policy on sales of gas and Mereenie oil outside the Territory.”

 

One month later came major news: “Pancontinental Petroleum has made apparently substantial oil and gas discoveries 80 km south of Alice Springs – and according to sources, it may only be the tip of the iceberg.” Later discoveries ensured the commercial viability of the Central Australian gas fields.

 

The gas pipeline to the Alice Springs powerhouse was completed in 1983, thereby fulfilling the CLP’s promise of the 1980 election campaign – and, despite the proving up of the Centralian gas fields, Mines and Energy Minister Ian Tuxworth also remained firmly attached to the promise of building a $400 million coal-fired power house for Darwin. Tuxworth still held to this position at least as late as January 1984 but dissension was growing within the CLP’s ranks.

 

It had become the turn of Roger Vale, now the member for the brand new seat of Braitling, to champion the cause of natural gas development in the NT, when he wrote to Tuxworth in January: “I must say at the outset that I was both amazed and disappointed at your personal attack on me when I suggested that Natural Gas from Central Australia would be a far better proposal than NSW coal.

 

“I again reject your criticism that I have a vested interest in wishing to see the Palm Valley Gas Field in full production, I do not hold and indeed have never held shares in Magellan Petroleum and severed all financial connections with this company prior to my election to the Legislative Assembly in October 1974.

 

“Sufficient gas reserves exists to supply for at least 25 years not only the Major Territory towns between Darwin and Alice Springs but also Nhulunbuy.

 

“Coal from NSW would both in the mining and Transportation involve many unions and place the Territory at the mercy of the union movement outside of our control, further the NT would have no say in the pricing of this ‘imported’ product. Natural Gas is the caviar of the energy world in terms of both heating and environmental issues.”

 

From having been harshly critical of former Labor leader Jon Isaacs four years previously, Roger Vale was now using Isaacs’ arguments to support the development of natural gas for power production throughout the NT.

 

Whether Vale’s letter had the desired effect on Tuxworth and his colleagues is unknown but ironically, in light of subsequent history, he in turn was never to be given credit for his initiative, too.

 

Three months later came the news of a major new development proposal that vindicated Vale when it was announced the Westpac Banking Corporation had formed a consortium of major Australian companies to plan the natural gas pipeline from Alice Springs to Darwin for an estimated $250m.

 

From this time onwards, the NT Government steadily swung its support towards the gas pipeline project: “The announcement by Magellan Petroleum of substantially increased gas reserves at Palm Valley has increased the prospects of a gas pipeline from Alice Springs to Darwin, with a later possible extension to to Gove, with Nabalco meeting the $300m cost.

The long-serving Mines and Energy Minister, Ian Tuxworth, who formerly had promoted coal for electricity production in Darwin, was now the principal government member responsible for promoting and overseeing the biggest gas pipeline project in Australia.

 

The construction of the gas pipeline was the last major capital works project funded under the generous terms of the Memorandum of Understanding between the Commonwealth and NT Governments agreed to, following the granting of NT self-government in 1978.

 

But on October 19, 1984, Tuxworth’s role was changed – he replaced Paul Everingham as Chief Minister of the Northern Territory, and it was in this capacity that he continued oversight of the final negotiations, drawing up of contracts and initial construction of the gas pipeline from the Centre to the Top End. However, Tuxworth was destined to lose this office before the pipeline was completed.

 

Next: NT gas pipeline proposals for SA and Gove keep on spinning round and round.

 

Images: The territory’s first Chief Minister, Paul Everingham, on an election advert in May 1980. Google Earth shot of the Palm Valley gas field.

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