Big projects: Done deals and wriggle room

Hal Duell Vision

The aftermath of the TIO sale has put big money in play, and there’s nothing like the whiff of big money to get hands in the air. The call is for sensible, sustainable infrastructure to form the NT’s future, and what have we heard so far?

 

From the Top End we hear of an agribusiness plan to grow food for the Asian market using dammed water for irrigation. Sounds good, but will it work? Big dams can pack unforseen surprises, and the project itself seems to be inspired by the Ord River Scheme, a scheme of debatable provenance.

 

Does Gina Rinehart really want to build a high-tech private hospital in Darwin? Again, it sounds good with the only problem I can see being if she wants to spend public money instead of her own. As for perhaps building it on public land, that idea doesn’t bother me as much as it does some.

 

Here in the Centre we have heard a few proposals with nothing yet being decided. Or so we are told.

 

With no flood mitigation dam on offer, the first cab off the rank is another Melanka building. It sounds like this will come from private money. Trouble is, that money wants to go to eight storeys to achieve economic viability, and eight storeys, as we all know, sends Alice into fits.

 

At any rate, this might not be anything to keep us awake at night. Regarding building on that site, every few years someone proposes, and every few years Alice disposes. The kids kicking stones out there after midnight can probably look forward to at least one more summer of delinquent fun.

 

Next comes the empty block on the corner of Whittaker St and the Stuart Highway. Our Chief Minister has suggested a combined train station and hotel. That might make sense if people still came to Alice by rail, but with Virgin Air coming in and tourist numbers down?

 

It’s not that we couldn’t do with a new train station. Who knows, with an attached hotel more Ghan passengers might decide to include a night in the Alice on their journey between Adelaide and Darwin. But perhaps a low impact building inspired by Moorish desert architecture rather than one inspired by the Darwin waterfront would fit in better and find more local support.

 

And then finally we come to the Big One, the proposed pipeline to carry fracked NT gas thru the sand hills from here to Moomba. Just like before the sale of TIO, we’re again watching a fan dance of maybe yes and maybe no. But the sale was always a done deal, and I reckon the pipeline is too.

 

This is admittedly speculation, but unless it’s to cater for oversize mining equipment, why are we suddenly seeing road works on the way to Santa Teresa with more mentioned for the far side of Allambi Station? Could it be because the Simpson Desert’s sand hills lie down that track?

 

I predict Dr Hawke’s report into fracking will contain enough recoverable wriggle room to give this project the political cover it needs.

 

 

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7 Comments (starting with the most recent)

NB: If you want to reply to a previous comment, start your comment with this notation: @n where n is the number of the comment you want to reply to.
  1. Hal Duell
    Posted December 13, 2014 at 12:31 pm

    @Ralph
    Posted December 13, 2014 at 11:18 am
    I’m still not convinced on a couple of your points.
    I think the jury is still out on the future movement, or not, of the oil price. Was it artificially high before, or is it now artificially low now?
    There have been pronouncements of the death of the oil cartel before, but without high prices, how will the big producers afford the very expensive arms systems they are so fond of buying and which the US and others are so fond of selling? And without the sale of arms, what does the US have left in the way of a manufacturing industry?
    While low oil prices mean good news for motorists, airlines and tourism, we still have to produce base-line power, and we seem to be locked into hydrocarbons for that for the immediate future.
    If you add low electricity prices to the mix, are we looking at a recession or worse in the world’s financial system? There are many saying this is both inevitable and imminent.
    These are interesting times, indeed. Abbott is a stubborn man. I still think he may double down. If he doesn’t, Santa Teresa has a much needed upgrade to part of their road, and (allow for a bit of speculation here?) the entry to the Simpson Desert thru Steel’s Gap (?) in the Rodinga Ranges might now have a floor.

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  2. Ralph
    Posted December 13, 2014 at 11:18 am

    Hal: The same economics will apply to the US’s shale drillers but they have a couple of big advantages.
    Much of their exploration work has been completed so while they will be exploring less in the future they can keep producing oil at around $40 a barrel so are still profitable.
    In Central Australia the geology is not nearly as good, the tight rock formations require more of the expensive vertical drilling and tracking techniques.
    Take Central Petroleum’s oil strike at its Surprise well, it started free flowing at over 450 barrels a day of light sweet crude, two years on it’s producing less than half that with a pump.
    That single well cost $14m and will struggle to earn that much.
    And we don’t yet have the gas to justify a pipeline even if it was economical, so a lot more exploration will be needed.
    It won’t happen, Santos is cutting all exploration work to focus on production.
    As to whether the low price of oil and gas is temporary, world demand is forecast to only marginally increase next year while increased supply will rise substantially.
    The oil cartel is broken and the low price is here to stay for quite a while.
    But there is a good side to this, low fuel is great for tourism, air fares will decline and tour operating costs will fall.
    With the exception of residents in our town, due to the local oil cartel, people will spend less on fuel and have more spare cash to use for travel.

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  3. Dr Wrongo
    Posted December 13, 2014 at 9:27 am

    Is there a looming gas shortage in NSW? I think they have heaps. I think the problem is that they have decided to sell most of it overseas. Not really clever.

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  4. Hal Duell
    Posted December 13, 2014 at 1:28 am

    @Ralph
    Posted December 12, 2014 at 1:06 pm.
    Ok. If anything is going to kill the pipeline it is always going to be when the extraction of the gas to fill it becomes too expensive.
    But with oil at $60 a barrel, not only will NT gas become too expensive to mine, but won’t the same apply to the US’s shale gas revolution? They have quite a lot of money and national prestige invested in that.
    And will Saudi Arabia and the Gulf States be prepared to accept a reduced income indefinitely? All they need do to increase the price is cut back on production.
    Electric cars will be a boon to cities everywhere, but they will always need charging on the local grid. Where will that power come from?
    The Abbott government’s tinkering with the renewable energy target has effectively pulled the plug on the Burdekin hydro project as well as the Mildura solar farm. Local communities looking to use that renewable power will be forced back to reliance on hydrocarbons.
    I hear what you’re saying about the negative economics, but I have yet to be convinced that low oil prices are here to stay. If they are, then no question the gas will stay where it is and a pipeline will not be needed.
    A question: We read that Sydney has projected a looming shortfall in fuel for energy production. If not gas, what will they use?
    Or go further – China may be slowing down, but if not Russian gas and oil, what will they use to provide power for their 1.3 billion residents and the businesses that employ them?
    As you say, the price of oil is low right now, but it may come back again. Is it out of the question that our Federal and Territory governments will take a punt on the price coming back and build the pipeline anyway?

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  5. Ralph
    Posted December 12, 2014 at 1:06 pm

    Hal, today the price of oil has fallen below $60 a barrel, or more than 40% and it won’t be coming back for years, and probably never.
    One driver is a massive oversupply from shale production in the USA where costs are around $40 a barrel in Eagle Ford.
    A battle for market share has taken precedence over price.
    The other factor is that a revolution is underway in the US and elsewhere featuring the Tesla electric car and many other variations that will reduce oil demand, permanently.
    Paradoxically, the lower price of petrol won’t stop this trend, more money in the consumer’s pocket means the alternative energy cars are now more affordable. As a result of these changes our local Central Petroleum is trading at 10c a share having lost 60% of its value.
    Ditto for Santos which operates many local tenements.
    These companies have all but collapsed because it is now far too expensive to locate, drill and export Central Australian natural gas.
    The pipeline has been consigned to history by negative economics.

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  6. Hal Duell
    Posted December 11, 2014 at 10:35 pm

    @ Jimmy
    Posted December 11, 2014 at 12:40 pm
    I agree that the fall in the world oil price is an interesting development, and one that has the ability to impact on the economic viability of gas wells in the NT. But this fall is the result of economic positioning currently being undertaken between the US, Saudi Arabia and Russia. There’s not much we can do about that except hope our petrol prices fall in tandem with that of West Texas crude.
    Will it stop the pipeline? I suggest not for the simple reason that the price of oil will probably soon rise to previous levels. My reasoning is that while the US wants to hobble Russia and Saudi Arabia wants to protect its market share in the US, Russia has the capacity to wait them both out. None of them want the price to remain artificially low, so it won’t.
    What that means for us is that NT gas will be economically viable. And the east cost wants it. And we will supply it. And whether or not the pipeline is thought to be a done deal, I still reckon it is.
    No argument that the world’s corporations, especially the energy giants, are determined to keep us burning hydrocarbons as long as there are hydrocarbons left to burn.
    But with a PM saying coal is good for us, and with a Trades Minister currently in South America attempting to create a greater role for multi-national corporations in our national life, and with a Foreign Minister in full climate change denial attending a climate change conference in Peru, solar’s chance of gaining centre stage is remote.
    There will be some lip service to renewables, there will be some research and development money to that end, and there will be a pipeline.
    I might not like it, but that’s the way I see it.

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  7. Posted December 11, 2014 at 12:40 pm

    @Hal
    None of these ‘big ideas’ are done deals. They are ideas with money behind them.
    As with anything like this, big money wants to make bigger money and given the current volatility in commodity markets and the crashing oil price – investment risk in this region is quite high.
    While we rejoice lower petrol prices at the bowser, gas companies writhe in agony. While the oil prices make it cheaper to dig big holes and drive long distances, the commodity prices only support the biggest players and squeeze out the smaller ones.
    It is not as simple as build it and they will come or alternatively, put it on the front page and it will happen. It is not necessarily so.
    The Giles government may be cashed up from the sale of TIO, it is critical that this money is invested wisely into well-planned, strategic infrastructure that will assist Territorians to cope with the two degree temperature rise that appears all but locked in.
    These phallic expressions of progress do nothing but neuter the community’s ability to adjust and adapt to climate change. A pipeline transporting fracked gas to the east coast will be another stranded asset and drive emissions higher, thus creating more risk to livelihoods in the NT.
    The NTG needs to consider all of its “big ideas” through the lens of climate adaptation. If we’re not reducing risk, we’re increasing it.
    If we’re not building infrastructure to help us cope with a hotter and more extreme world – then we’re failing future generations. Our future here is solar, not increasing energy intensity, emissions and locking in a failed petrochemical police state.
    ALEC has a vision of “healthy futures for arid lands and people”. A big part of this vision is people having a hand in getting what they need and what they want, not this current approach of being told what we’re going to get through headlines and media release.
    For a more sustainable vision and plan for Alice Springs, check out the Roadmap to a DesertSmart Town. http://desertsmartcoolmob.org/current-projects/roadmap-to-a-desertsmart-town/
    Let’s talk more about what we want, rather than what the Giles Government tells us we’re going to get.

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