Equus hope for pipe

A QUADRANT Energy petroleum engineer and FMG chief Nev Power believe the proposed multi-billion dollar west-east gas pipeline could open up many of Western Australia’s smaller offshore fields for development.

Equus hope for pipe Infrastructure map of Carnarvon Basin with oil and gas fields as per the old DMP's 2014 WA Petroleum and Geothermal Explorers Guide.

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Quadrant's senior petroleum engineer Dean Manifis wrote in a LinkedIn piece that the pipeline was a "nation-building" project that could lead to the next resource boom in Western Australia.
 
Such a move would trigger more small and medium players to start exploring in the Carnarvon, while medium and large companies with stranded gas fields would invest in appraisal activities and feasibility studies.
 
"Companies will need negotiate long term gas contracts with the East Coast buyers for $ 5-10 per GJ + transport fee," he said. 
 
"At these prices, fields with a gas in-place of less than 2 trillion cubic feet may be commercially feasible. 
 
"Australia will have reliable gas and energy supply for at least the next two decades."
 
Western Australia is home to 90% of Australia's offshore gas but there is not enough local demand to commercialise smaller fields and many offshore gas projects have had huge scale and international backing. 
 
"The WA market is too small to commercialise these gas fields and therefore they must be developed through large LNG projects," Manifis wrote. 
 
"Due to the size and capital requirements of a LNG projects, development is only feasible for the very large gas fields and can only be executed by the majors, Shell, Woodside, Chevron, Inpex and Total.
 
"Western Australia has recently developed a number of its large gas fields through capital intensive LNG projects. These large multi-Tcf gas fields such as Gorgon, Pluto, Wheatstone, Jansz will keep WA's LNG facilities full for at least the next two decades."
 
But plenty of smaller fields have been found by majors including Chevron discoveries Acme, Achilles, Clio, Orthrus, Satyr and Hess Corporation's eight-field Equus project. 
 
Quadrant, the largest supplier of domestic gas in the state, has also made some discoveries in the Northern Carnarvon Basin. 
 
He had a strong backer in FMG chief executive Nev Power who said the same at the Asia Pacific Regional conference in Perth yesterday, though he also suggested gas could be overtaken by renewables. 
 
 "The main purpose for this is we fundamentally believe that a lot of the gas in Australia and a lot of the gas in WA will never be developed because renewables are coming on very, very quickly," Power said, suggesting that a pipeline which connected to South Australia's Moomba would let more gas into the Pilbara too. 
 
Last week Whitebark Energy managing director David Messina said his company fully supported the Comnmonwealth's feasibility study into a pipeline and that "such nation-building infrastructure, coupled with what we hope will be a sensible resolution to the fraccing inquiry, should go a long way to opening up the WA gas fields". 
 
Whitebark's onshore Warro project in the Perth Basin has been frozen since the state government announced a frac ban, now the subject of an inquiry. 
 
On the other side of the fence sit some analysts and Coleman told the same Perth event that import terminals would be cheaper: $250 million for one versus a pipeline cost of $1000 a kilometre. 
 
The "virtual pipelines" created by terminals would allow more competition, he said, pointing out "they are big numbers and those numbers run up very, very quickly". 
 
Wood Mackenzie analyst Matt Howell in October gave AGL Energy's plans for a $300 million LNG import terminal in Victoria the nod, suggesting it would be both economic and give buyers without contracted pipeline cheaper supply. 
 
Yet the firm's Australasia oil and gas lead Saul Kavonic has said a long pipeline would not be cost competitive and it will be cheaper to "send gas west to east via LNG given the existing infrastructure". 
 
Kavonic said that that the threat of the federal government being able to apply the Australian Domestic Gas Security Mechanism to the west is another problem, despite promises that Western Australia and South Australia will remain exempt. 
 
Late last month the government said that it wouldn't trigger the ADGSM, which would have forced east coast gas producers to reserve enough for local needs even if that contradicts export contracts, after Santos, Shell and Australia Pacific LNG ensured next year's supply. 
 
The Australian Energy Market Operator had earlier predicted a 2018 east coast shortfall of between 55-107 terrajoules. 
 

Tyranny of distance

 
Manifis is aware that the tyranny of distance and its associated economics make a tough case, conceding that the biggest project hurdle was the economics and corresponding transport fee.
 
"If the pipeline cost approximately $5 billion to build and can deliver 500 TJ/day (50 % of WA total domestic gas use) for 20 years," he said. 
 
"The break-even transport toll price would be around $2/GJ and to make 10% return on the investment it would need to charge $4/GJ."
 
Given piping gas from Queensland already means higher prices for the southern states and energy cost is a contentious issue, the pipeline may not solve issues of price even as east coast gas shortages are predicted to continue well past next year. 
 
Queensland, which allows onshore gas exploration, both conventional and fraccing but has triggered fears with talk of restrictions in the Cooper Basin, have expressed exasperation that though southern states need a lot of gas they don't want to lift onshore exploration bans, or pay more. 
 
The Commonwealth has contracted ACIL Allen to study the feasibility of a pipeline and results are expected in March. 
The company also recently undertook a study of fraccing in the Northern Territory and found the possibility of enormous economic benefits based on a scenario that allowed full development of shale resources. 

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