Your account already exists. Please login first to continue managing your settings.
From fence line to fence line on Curtis Island, there are three major LNG facilities under construction worth over $24 billion.
Liquefied natural gas (LNG) is set to become Queensland’s second largest export behind coal. The Port of Gladstone will become one of the major LNG export hubs in the world – which will be quite an accomplishment for a city of 40,000 to 50,000 people.
“In terms of exports, it is expected that by 2016 the first three projects will be up and running. LNG projects have the potential to generate over 50 million metric tons per year (MMmt/y) of LNG exports,” said Chris Rodwell, Queensland trade and investment commissioner for the Americas, at the 2012 Australian American Chamber of Commerce Energy Conference in Houston on Jan. 20.
“The feedstock will be from coal-seam gas (CSG) fields in the Surat Basin, which will be transported by 500-km pipelines to liquefaction plants in Gladstone,” he continued. “We’re looking to exceed $17 billion in exports when these three plants are operating.”
Bechtel Corp. is the contractor for all three projects, noted Dick McIlhattan, senior vice president and LNG general manager for the company.
“This is an unprecedented concentration of construction work that is going on. That’s three major jobs, all with full trains,” he emphasized.
The three projects are Queensland Curtis LNG (BG Group and Queensland Gas Co. Ltd.), Gladstone LNG (Santos and Petronas) and Australia Pacific LNG (ConocoPhillips, Origin Energy and Sinopec). Two other projects are being evaluated -- Arrow LNG (Shell and PetroChina) and Fisherman’s Landing LNG (LNG Ltd. and CNPC).
Rodwell noted that the final investment decision on Arrow LNG will hopefully be made later this year. Another announcement regarding Australia Pacific LNG was also expected. The first train was already approved and the decision on the second train is eminent.
On Jan. 23 after the conference, Australia Pacific LNG and Sinopec signed a binding agreement increasing the latter’s equity interest to 25% from 15% for a net consideration of $1.1 billion as of Jan. 1, 2011. On completion, ownership will be ConocoPhillips, 37.5%, Origin, 37.5%, and Sinopec, 25%.
The site has been cleared for the project and about 40% of the site work has been completed, McIlhattan said. Currently, that project is focused on getting the marine work done.
Queensland Curtis LNG (QCLNG) is the furthest along. The site is cleared and all of the earth works are done. “They are pouring the concrete for the first of the LNG tanks,” he continued.
Gladstone LNG has gotten its site cleared and 70% to 80% of all the rough batch plants are finished. Site camps are under construction. The first concrete should be poured in about three months, he added.
In its development policy for CSG projects, the government of Queensland set down a list of requirements: there must be sufficient gas in the future for Queensland; electricity and gas prices have to be reasonable; groundwater cannot be adversely affected; CSG water should not be environmentally damaging; benefits must be acceptable to rural communities; there must be fair financial return through royalties; and the CSG/LNG infrastructure must not be funded by the state, said Rodwell.
With CSG development, both water and land access issues are key challenges. In 2010, laws were enacted to protect the groundwater for farmers who rely heavily on that source of water.
“In terms of land access issues, those have been significant given the expanse of the CSG resources,” he explained.
James Fahey, partner, Malleson Stephen Jaques, pointed out that these were the world’s first CSG-LNG projects. “The drivers for CSG projects are the maturity of conventional gas fields in Australia combined with demand in Asia for export LNG and increasing domestic demand. This didn’t exist five years ago.”
These projects have major land access concerns. There is a need for a significant number of wells over the 20-year life of the project. The average CSG well life is only 15 years. The Australia Pacific LNG project will need to drill 10,000 wells. BG’s QCLNG will need 6,000 wells.
“These projects need to have continuing development of reserves during the project. These will need coordinated production across a large geographic area with thousands of wells. That’s 16,000 wells for two projects. You start to get a sense of the scale involved. And, then you have to build multiple pipelines.
“You start to see that land access becomes a very, very significant issue,” Fahey emphasized.
Rodwell noted, “In terms of land access issues, the government had to develop a framework to streamline the process to allow gas companies access to respective resources.”
Another factor in developing CSG resources is hydraulic fracturing. Laws had to be developed for fracing and use of chemicals. For example, CSG operators are not allowed to use petroleum compounds such as benzene, ethyl benzene and xylene in fracing.
There are other environmental concerns facing the projects, such as the impact of dredging on sea grasses that affect fisheries.
Logistically, the companies are facing major challenges as well. “Just the ability to move 6,000 people per day across the harbor on a peak day is a challenge,” McIlhattan said. “We move somewhere between 5,000 and 10,000 tons of equipment on a daily basis.”
Bechtel created a central service organization in Gladstone to deal with support of all three jobs. The company put into place a centralized field office for procurement, marshalling and logistics for this effort, he added.
In developing these projects, Queensland has three priorities: 1) encouraging investment in the CSG industry; 2) protecting the natural resources; and 3) maximizing the economic and social ventures for the state, Rodwell noted.
“CSG looks like a very buoyant industry. Royalty revenues will be around $850 million for the state. Queensland will be able to make pretty sizeable shifts in public policy to support education and health initiatives, which contributes to the social and economic well-being of the state,” he emphasized.
Contact the author, Scott Weeden, at firstname.lastname@example.org.