Queensland pipe dream warning

AUSTRALIA’S pipeline lobby has warned against the Commonwealth funding infrastructure without production in place or even planned, after Queensland’s government called on the feds to help build pipelines into the Bowen and Galilee basins to help solve the east coast energy crisis.

Queensland pipe dream warning Dr Anthony Lynham.

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The Australian Petroleum Production and Exploration Association and the Queensland Resources Council hailed the state government's attempt to pitch gas as the saviour for the east coast's energy woes as energy minister Dr Anthony Lynham called for North Australia Infrastructure Facility funds to build pipelines into emerging gas basins.
 
Dr Lynham said in Brisbane yesterday he had put forward a package to federal Resources Minister Matt Canavan and wants a meeting to seek guaranteed funding for "any viable options" to improve gas supply in the Australian market.
 
"I'm talking about gas pipelines into the Bowen and to the Galilee, to open up these vast new reserves for Australian domestic supply," Dr Lynham said, adding that the funding guarantee could be drawn from the NAIF.
 
He is also pushing for a jointly-funded study into infrastructure options.
 
Yet there have as yet been no commercial gas discoveries in the Galilee Basin, while the operators of the three CSG-LNG megaprojects in Queensland all draw their gas from the Surat and Bowen basins, and further afield as required in the case of Santos' Gladstone LNG.
 
Blue Energy believes the Bowen Basin has the resource base to solve all of eastern Australia's gas woes but says moving the stranded gas to market was the challenge.
 
Blue managing director John Phillips said eastern Australia would likely not be facing a gas crisis if the Australian Competition and Consumer Commission had imposed a condition on Shell during its takeover of BG Group requiring the development of their portion of the Bowen Basin CSG fields.
 
APA Group has been studying a pipeline with Comet Ridge to facilitate options for the delivery of gas from the junior's Galilee Basin permits, further to the west.
 
Australian Pipelines and Gas Association national policy manager Steve Davies told Energy News that the four proposals to build the Northern Gas Pipeline showed the pipeline industry was always interested in new investment opportunities, and that where there is a viable new project there is fierce competition.
 
Yet while it is apparent there is active interest in investment in pipeline projects in the Galilee Basin, in the absence of production projects ready to proceed he said it was "difficult to see investment occurring".
 
"Under the present, market-driven, system, producers find gas and then find a buyer for the gas they plan to produce. Once the buyer and seller have a contract in place, then a pipeline is built to connect them," Davies said. 
 
"The contract enables the significant infrastructure investment to be made, and it defines the route of the pipeline. Without knowing exactly where the gas is coming from or going to, the risk of building infrastructure that is needlessly expensive because it goes to the wrong place or delivers gas in the wrong direction, is significantly increased.
 
"If there are viable projects that cannot get a pipeline built to them then there may be a case for government assistance; but we would be cautious about calling for government funding for projects that are not supported by any contracts for supply."
 

Producers' response

 
Despite these challenges, both APPEA and the QRC welcomed the "proactive" approach to boost supplies.
 
QRC CEO Ian Macfarlane said Dr Lynham's suggestion of using NIAF funds for gas pipelines was a "good idea" to release stranded gas.
 
APPEA Queensland director Rhys Turner said Dr Lynham's willingness to engage with the Commonwealth, including to develop new pipeline infrastructure, echoed what the industry has been saying for some time.
 
"Developing new fields to bring more gas to market is the most important part of the equation right now," Turner said.
 
"Exploration is at a thirty year low.  Regulatory costs and delays are discouraging development as well as adding to the cost paid by our customers. 
   
"We must also avoid an infrastructure deficit.  Queensland has promising gas fields that can be developed in the Galilee and Bowen Basins.  Unfortunately, there is a real risk that this gas may be stranded because of a lack of pipeline infrastructure."
 
Though he believes the "first and best" solution is private investment in competitively priced infrastructure, Dr Lynham's call for the Commonwealth to support infrastructure has merit and is worth considering if the market fails.
 
Turner said Dr Lynham and the Commonwealth should be congratulated for having a "mature" discussion to address serious issues, unlike governments in the southern states who "continue to have their head in the sand when it comes to looking at new ways to increase the country's gas supply". 
 

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