“Our” gas: If you think Inpex is big …

p22100-Inpex-2By ERWIN CHLANDA

 

The gaps in the NT Government’s natural gas policies are matched in size only by the mammoth reserves we are believed to have, yet they can become the basis for massive industrial development across the Territory.

 

Try this for size: The North West Shelf has deposits of 55 to 60 trillion cubic feet of gas and that sparked the Inpex development in Darwin worth $34b.

 

The Territory’s onshore reserves are four times as big, around 200 trillion cubic feet, says Treasurer and Mines Minister Dave Tollner: “It’s almost unimaginable how much gas this is.” So much in fact that it can make the NT a global player.

 

The grand plan goes something like this: The ultimate beneficiaries of the gas need to be the people of the Territory who own it.

 

p22100-David-Tollner“It’s our gas,” says Mr Tollner (at left).

 

He says “gas to liquids” processes can produce clean and cheap synthetic diesel for cars, trucks and electricity generation, able to “massively reduce diesel costs in remote parts of Australia where you can be paying up to $3 a litre”.

 

“Our” gas can drive more power station turbines than we can dream of.

 

“The Holy Grail for us is not exporting gas to Queensland or putting it into LNG plants. It is getting to a stage where we have enough gas in the system to start a manufacturing industry in our own right,” says Mr Tollner.

 

It can become the foundation of an advanced manufacturing industry of plastics, petrochemicals and fertilisers, “good, long-term, sustainable industries that come with very high paying jobs”.

 

He says most every-day items we are using are made from gas or oil based plastics: “The plastic ‘don’t frack the Territory’ signs you see around the place are made from natural gas.”

 

Under this plan a growing manufacturing economy can piggy-back on the exploration and production of natural gas which we couldn’t afford with the Territory’s own limited resources.

 

The trick now is to make deals appealing enough to giant companies to spend the billions it takes to find and produce the gas, which they can sell for profit, so we can retain a portion for our, Territory based, industries.

 

p22100-Brewer-power-stationHowever, there are a string of chicken-and-egg dilemmas: The deal, already made between Jemena and the NT Government, for the $800m Tennant Creek to Mount Isa pipeline, is making it clear where the Giles Government wants to be going.

 

Yet rules for the widely distrusted fracking are still a work in progress: “I’m certain we can get the environmental regulations in place but we do want to get public support for it as well,” says Mr Tollner.

 

While Mereenie has been very productive, “there is no guarantee that any other of those gas areas have the same sort of rock”.

 

Even the royalties for new gas – what the public gets for its underground riches – are yet to be determined.

 

It’s time to “hit the go slow button,” says Mr Tollner.

 

Royalties for the old Mereenie and Palm Valley fields west of Alice Springs are about 10% of the well head price. Unlike royalties for offshore gas, which go to the Feds, the on-shore ones go to the NT.

 

“Our current royalty regime is set up solely for that field, but given the fact that we want to expand onshore gas we are looking at an entirely new royalty regime,” he says.

 

So, are we going to sell our gas to multi-nationals for 10% of its value?

 

No, says Mr Tollner.

 

NEWS: Well, what will they be, 10% or 90%?

p22100-power-station-SM

TOLLNER (laughs): It will be a lot closer to 10% than 90%. How’s that?

 

He says “we’re probably five years away” from new fields coming on stream “and 10 years away from having a vibrant industry”.

 

We have time to “get it right,” offering “incentives for gas exploration while providing a good rate of return for Territorians for our gas.

 

“Currently I am working on a royalty regime. I’m not into pulling a number out of the air. I want to look around the world to make sure that we’re globally competitive.”

 

The Treasurer is certain that its immense gas reserves will catapult the NT onto the global stage: “What the US has done with shale gas has changed the geo-politics of the world.

 

“The US doesn’t have to be in other countries to protect their energy security.

 

“They don’t have to be in the Middle East because of the oil.

 

“Because they have driven down their energy costs you’re seeing European businesses setting up manufacturing in the US because they can manufacture far cheaper than they can in other parts of the world.

 

“Nations are looking at new options for their energy security.”

 

Mr Tollner says 1200 drilling rigs in the USA are idle because President Obama has curtailed gas exports. We may see some of these rigs in NT, he says.

 

“The manufacturing we’re talking about is not about energy production, it’s about manufacturing goods.

 

“For manufacturing purposes gas has to be very cheap. The only way we can get to that situation is to create a glut of gas in the Territory so we can use low cost gas as feed stock in manufacturing.”

 

What portion of the gas will stay here and what portion will go out of the NT?

 

“I can’t tell you that. Initially, I would say that probably most of the gas will go interstate or into LNG plants. It’s only when we hit a critical mass” that broad local uses become viable.

 

p22100-Inpex-3“Gas to liquids may be the doable right now because we have stranded gas assets … where the prices of diesel is high and the price of gas is very low because they have no market for it.

 

“That would be the case in a lot of places across the Territory until a pipeline runs beside a gas field. These are now stranded gas assets.”

 

Would the Tennant to Isa pipeline rob the NT of gas it could be using?

 

For that to happen “you’d need another 50 pipelines like this. It pales into insignificance,” says Mr Tollner.

 

“I’ve been studying gas to liquids now for two or three years. It’s a leading edge technology. The world is only starting production line GTL plants now. My expectation is the price of those plants will drop to a point where they become very much commercially viable.

 

“In some places in the world they are commercially viable now,” says Mr Tollner.

 

Given his long-term views it is a puzzle why Mr Tollner has been dumped by the CLP. He has not been pre-selected for his nor any other seat to contest in the next election. As things stand, he will be out of a job in less than a year.

 

Are his cautious approach, and his apparent view that the NT Government should have a more direct role in the development of gas, playing a role here?

 

“It’s one of the things I was a little bit negative about,” says Mr Tollner.

p22100-Inpex-1

“We allowed APA Group to purchase the Amadeus gas pipeline relatively cheaply in 2011.

 

“Had the NT [Labor]  Government made a decision to own the pipeline, then we probably wouldn’t be paying the gas transportation charges.”

 

It seems Mr Tollner believes the NT Government should be getting involved in transportation of gas while the Giles Government has permitted Jemena to build and own the Tennant Creek to Mt Isa pipeline.

 

PHOTOS (from top): A bird’s-eye-view across the Inpex Ichthys LNG Project’s Bladin Point site to Darwin • The gas turbine driven power station at Brewer Estate, Alice Springs, to be mead more efficient • The town’s noisy old Ron Goodin power station, to be decommissioned • “Big” gets a new meaning as activities at Bladin Point are progressing from the civil construction phase to the mechanical and electrical phase • Cranes dot the skyline at Bladin Point.

 

NOTES:

 

[1] We have asked staff of Opposition Leader Michael Gunner three times to arrange an interview with him. They have not returned our calls on any of these occasions.

 

[2] The Australian Petroleum Producers and Exploration Association claims the NT Government would get “up to” $460m a year, according to Katherine local Bruce Francais, who raised the issue with Mr Tollner. The Treasurer told Mr Francais: “I am advised that this figure was derived under an optimistic ‘Aspirational’ scenario which reflects benefits that may accrue if upper-bound assumptions materialise.”

 

[3] The old Ron Goodin power station alongside the posh Golf Course Estate in Alice Springs will soon be decommissioned and the Owen Springs (Brewer Estate) plant be made “a lot more efficient”.

 

[4] It is not yet clear where the gas compression station will be built for the Tennant to Mt Isa pipeline. That plant will need extra power. Tennant Creek sources have indicated that Chief Minister Adam Giles has promised it to be built in Tennant Creek. This also raises questions about the pledge by Mr Giles that no public money would be spent on the pipeline project.

 

[5] The employment opportunities from a pipeline after it has been completed appear to be over-stated. We have asked Jemena for details and will post them when they are to hand. Meanwhile the APA Group, which owns and looks after the existing network in the Territory, provided the following statement:
” APA has an office in Alice Springs that oversees the maintenance activities of the Palm Valley to Darwin Pipeline. There are a total of seven APA employees based in Alice Springs.
“APA engages contractors from time to time to conduct various work on this asset including excavations, painting and minor installations.
“APA also maintains the Palm Valley to Alice Springs pipeline and Alice Springs Gas Network on behalf of Australian Gas Networks (AGN).”

 

 

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11 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. Bob Beadman
    Posted December 17, 2015 at 3:52 pm

    Didn’t the Gove alumina refinery close nearly two years ago, primarily for want of gas?

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  2. Dr Wrongo
    Posted December 16, 2015 at 2:55 pm

    Bruce, most of our pollies are full of gas, we should send them across the Barkly to the east instead of putting in a pipeline.
    Do it now while people still seem to want that gas rather than after the next couple of elections when probably most of them will migrate that way anyway and we won’t be able to charge for them.
    Is a pollie full of gas worth as much as a pipe full of promises of the possibilities of gas?
    Seems to be a lot of opposition to fracking for gas but I’m pretty sure not too many people will complain about mining politicians.

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  3. Trevor Shiell
    Posted December 16, 2015 at 12:06 pm

    Money talks. Government should have looked at the view of the international investment community as expressed by Platinum International Asset management fund, and the reasons why they sold out of Inplex a long time ago (Japanese Fund; last year’s annual report).
    Briefly they claim that the economics are unsound and that Shell and others could have done the same for 1/10 of the cost, having had a long history of such constructions in other places.
    This has been common knowledge in the International investment community for some time.
    In addition this Government has failed to read the signs both pre and post Paris regarding world energy trends, which are all against non renewable fuels. Had they read the signs which have been so evident to thinking people, the gas corridor to Mt Isa should include room for an electricity interconnector as between SA and NSW, with a minimum of 50 squ km of solar generation at the NT end to replace the declining reliance on coal at the eastern end.
    That is a no brainer.
    South Australia is also a good example of what not to do as 40% of their power now comes from wind power and they have just realized that when the wind does not blow they have to import coal generated electricity from the east at an greatly increased cost.
    There is another economic opportunity which will, on past performance, go wanting here, for the lack of a long term opportunistic vision. How about a renewable powered railway across the country or charging stations every 200 K up the highway to cater for the large number of electric cars which will be on our roads within 20 years? Forget gas!

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  4. Hal Duell
    Posted December 13, 2015 at 9:41 am

    A couple of points to consider: “Because they have driven down their energy costs you’re seeing European businesses setting up manufacturing in the US because they can manufacture far cheaper than they can in other parts of the world.”
    Or could it be that having looted their national treasury to wage foreign wars and having undermined their own middle class by outsourcing manufacturing industries to Asia while destroying their own unions, America is in many ways now a third world country.
    “It is not yet clear where the gas compression station will be built for the Tennant to Mt Isa pipeline. That plant will need extra power.” Suggest powering the compression station with solar to confound your enemies.
    Mr Tollner looks a certain to find work in the gas extraction industry after he leaves office. No problem with that, but given the salary packages we read about in that sector, why will we Territorians be paying Mr Tollner a lifetime pension?

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  5. Bruce Francais
    Posted December 13, 2015 at 12:01 am

    Tollner is full of gas. When asked to explain why the Australian Petroleum Production and Exploration Association (APPEA) claimed that royalty revenue for the government would be $460 million per annum when Independent research done for APPEA put the figure at a mere $48 million, Tollner claimed that the higher figure was an aspirational, optimistic figure that may be reached if upper bound limits materialise. His Chief of Staff said that the actual figure would be somewhere in between.

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  6. Phil Walcott
    Posted December 12, 2015 at 12:32 pm

    Personally, I’ll be delighted to see the back of Tollner at the next election. His “bovver boy” bullish behaviour and his race to embrace the “need for greed” is simply disgusting.
    The future lies in research and development of the renewable resources sector. Solar, wind and tidal wave technologies will provide all of the energy supplies we’ll need without needing to rape and pillage our precious environment.
    We have evolved past the oil and gas “cave-dweller” fossil-fuel industries. Let’s develop the cleaner energy alternatives to provide the employment opportunities that lie ahead.
    Central Australia is the perfect environment in which to develop solar powered solutions for our energy requirements. Technologies in these areas are developing almost exponentially. We have opportunities to lead the world in design, construction and energy delivery.
    The current NT administration is being driven by out-of-date thinking tied to creating fiscal wealth at the expense of social wealth.
    Both aspects of wealth need to be developed in tandem. Forward, progressive thinking and action is what the people of the NT deserve.

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  7. Charlie Carter
    Posted December 12, 2015 at 9:36 am

    We won’t need drilling, let alone fracking, if we can just catch the gas coming from soon-to-be Mr Nobody.
    Not much wonder even the CLP wouldn’t preselect him again.
    Typical CLP “development” by wishful thinking.
    It is also worth mentioning that some figures show that supposed “clean” gas may contribute as much to greenhouse gases as coal when the methane leakage from fracking, production and transport of gas is taken into account.
    Gas as “a cleaner, transition fuel” may turn out to be yet another fossil fuel industry con.

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  8. Richard Bentley
    Posted December 12, 2015 at 9:04 am

    Calculations such as “capturing the sun’s energy for an hour could power the world for a year” probably have more relevance than DT’s “200 trillion cubic feet”. The first calculation can be made without drilling. And I will admit I am not sure what the first calculation is, it might be two hours or half an hour but it has been made.
    More importantly, what are the available alternatives and how do they stack up economically and environmentally? In the NT we have massive resources of solar energy that can be used to generate electricity directly or to produce biogas and this all can be done without releasing CO2 into the atmosphere.
    DT may have missed it but most countries of the world have been meeting in Paris these past two weeks discussing this very issue.
    Their collective decision is unlikely to provide uncritical support for ongoing gas development no matter how big the estimated reserve.

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  9. Charles
    Posted December 11, 2015 at 10:22 pm

    He wants to “look around the world to make sure we are globally competitive!”
    Can’t believe I just read that tripe!
    What a nerve! And this from the guy who is not even going to be an elected representative at the next election!
    Come on The Territory! We deserve better! Enough of this ship of fools!

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  10. Marli
    Posted December 11, 2015 at 7:28 pm

    What is the rush to get this natural resource out of the ground?
    Australia will not see a shortage of gas for another 20 years without the introduction of shale gas fracking in the NT, and it is clear that by then we will be living alongside much greener technologies.
    Unconventional gas is fraught with danger, Australia is in experimental stages of shale gas extraction.
    The gas volumes here in the NT are speculative, another over-exaggeration from the Giles Government.

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  11. Jungarrayi
    Posted December 11, 2015 at 6:31 pm

    Either very much has changed in the oil and gas industry since I started my career half a century ago as a “gravel picker” (geologist) in the “Oil Patch”, or we are dealing with a case of “counting one’s chickens before they’re hatched”.
    To his credit Dave Tollner speaks in round numbers, but there is no mention of how this “… almost unimaginable …” quantity of gas was derived at.
    “The Territory’s onshore reserves are four times as big, around 200 trillion cubic feet, says Treasurer and Mines Minister Dave Tollner”.
    Unless he’s misquoted, and if he can prove it, Dave Tollner would have no trouble finding a replacement job.
    He would save exploration companies a great deal of money by working for them as an oil and gas reservoir engineer who has developed a system of assessing reserves without the need for drilling etc.!

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