Australia's Northern Territory Wants to be National LNG Hub

Researched by Industrial Info Resources Australia (Perth, Australia)--Oil & gas companies are looking to tap into the Northern Territory of Australia, which has significant energy resources, including onshore natural gas in the Amadeus Basin at Palm Valley and Mereenie, and world-class offshore reserves in the Bonaparte Basin at Bayu-Undan, Greater Sunrise, Caldita, Evans Shoal, Blacktip and Petrel Tern.

Many of these reserves are in leases held by Santos Limited (Adelaide, Australia), which says that it has gas available for the Northern Territory that it cannot sell due to low demand. However, the Gove Refinery, owned by Pacific Aluminium, a subsidiary of Rio Tinto Limited (NYSE:RIO) (Melbourne, Australia), is struggling to source gas. Pacific Aluminium wants to convert its power generators from the expensive diesel-fired to more cost-effective natural gas, but has been unable to secure a supply. Santos is believed to have about 78 petajoules, which is less than a third of what Gove requires for the conversion.

The Ichthys Project, a joint venture between INPEX Corporation (Tokyo, Japan) and Total S.A. (NYSE:TOT) (Paris, France), is a $31.8 billion project that will process gas sourced offshore, some 500 miles away, into liquefied natural gas (LNG) for export to Japan. The 250-hectare site is under construction at Blayden Point, just outside Darwin; when complete, it will supply about 10% of Japan's LNG imports.

The Ichthys gas field is closer to Western Australia, but the decision was made to construct the processing plant in the Northern Territory to avoid the mandatory 15% domestic supply reserve set in place by the Western Australian government. By constructing a 1.2-meter-diameter subsea gas pipeline to Darwin, INPEX is able is able to sell all of the gas produced at Ichthys overseas, where it fetches a higher price.

Northern Territory Chief Minister Adam Giles made it very clear that the Northern Territory is not interested in any domestic gas reservation policy and has suggested that Woodside consider building a pipeline to Darwin, now that it is no longer considering an onshore plant at James Price Point, north of Broome in Western Australia. Woodside is moving forward with their plans to utilise a Floating LNG facility for Browse.

APA Group (Sydney, Australia) also is looking to increase involvement in the Northern Territory. Already the owner of Australia's largest long-distance gas pipeline network, APA has expressed an interest in operating the proposed Gove Natural Gas Pipeline, as well as constructing a new pipeline that would link their existing Amadeus Gas Pipeline in the Northern Territory to their Carpentaria Gas Pipeline in Queensland. The proposed pipeline would connect the Northern Territory to the eastern states gas network for the first time.

Giles said that the next stage for the territory is to encourage additional trains for Ichthys, before enticing other companies to come onshore, or to use the Darwin port as their supply base for offshore floating production vessels. The Prelude Offshore Project will have a supply depot based in Darwin.

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