The Northern Territory Government has granted major project status to the development of a gas pipeline connecting the Northern Territory to the east coast gas market. With the project spanning three states and affecting traditional landowners, the land access negotiations that will be required before this project can even begin will be immense.

With a major gas shortage imminent across Australia’s east coast, the North East Gas Interconnector (NEGI) pipeline has been flagged as a potential saviour for the country’s biggest gas markets.

According to Jason Schoolmeester, Executive Director, Major Projects, Northern Territory Government, the NEGI pipeline is a project of national significance, which will deliver significant economic benefits to both the Northern Territory and Australia.

“Not only will the pipeline deliver much needed Northern Territory gas to the eastern states, it will also provide the level of market access needed to stimulate further investment activity in the Northern Territory gas exploration and production industry.

“The project will also generate employment during the construction and long-term operational phase. Much of this employment will be seen in regional areas of the Territory, with additional direct and indirect benefits flowing to our communities.”

NT Chief Minister Adam Giles agrees. “The NEGI pipeline is a critical piece of economic development infrastructure, which means real jobs in the bush and roads that open up our remote areas, not only for the pipeline, but for other economic activity as well.”

Four proponents were invited by the Northern Territory Government to submit final proposals for the pipeline’s construction: APA Group, DDG Operations (DUET), Pipeline Consortia Partners Australia (China National Petroleum Corporation) and SGSP (Australia) Assets (Jemena). These four parties submitted their proposals at the end of September and the successful bidder will be announced by the end of the year.

Land access considerations

The pipeline will be approximately 1,000km in length, and will cross diverse terrain with limited access to road infrastructure.

Two routes have been proposed for the pipeline: one from Tennant Creek to Mt Isa in Queensland, and the other from Alice Springs to Moomba in South Australia.

The confirmed route will not be determined until the end of the competitive bid process and will be based on the proposal of the preferred proponent.

According to Mr Schoolmeester, the NEGI project team has established coordination points with the Queensland, South Australian and Federal Governments, which will assist the engagement with government agencies as proponents develop their final proposals.

“It can be assumed that the pipeline route will pass through remote areas within the Territory, Queensland and South Australia, therefore proponents will be expected to engage with potential landowners such as pastoralists and traditional owners at the early stages of the project,” said Mr Schoolmeester.

“Land access across states will require the preferred proponent being responsible for securing access to land for the purposes of construction and operation of the NEGI, and complying with relevant Northern Territory and Commonwealth legislation.

“The competitive process for the NEGI is on track for a preferred proponent to be appointed before the end of 2015. The preferred proponent will then need to progress all environmental and other regulatory approvals prior to construction, which is anticipated to begin in 2017.

“This will allow for commissioning of the pipeline in mid-2018, and will be ideal timing to capture opportunities in the east coast gas market, and to accelerate supply from new gas sources for Territory consumers,” said Mr Schoolmeester.

pipeline-map

The two proposed routes for the NEGI pipeline.

 

Why is the east coast running out of gas?

Most analysts are now predicting that the east coast gas market will face a serious shortage in supply at some stage in 2018 or 2019, with the NEGI pipeline flagged as a potential new source of gas supply to counteract this looming shortage.

But, given the detailed analysis that goes into domestic gas supply and demand, how have we gotten ourselves into this position?

According to EnergyQuest Chief Executive, Dr Graeme Bethune, we’re currently experiencing a perfect storm as the collapse in the global oil price coincides with the commencement of LNG export out of Queensland.

“With the fall in the oil price, energy companies exploring for, developing and producing gas on Australia’s east coast, are slashing their capital spending and workforces,” said Dr Bethune. “These actions simultaneously collide with the massive growth of LNG along the east coast within a relatively small domestic gas market. This is an unprecedented market development globally and has, as yet, uncertain results on longer term volumes of gas available for domestic consumption.”

Similarly, Australian Competition and Consumer Commission Chairman Rod Sims believes the east coast gas uncertainty is due to a number of significant factors relating to unexpectedly high demand over a short time period.

“Firstly, it is apparent that the arrival of the major LNG projects has upended the east coast gas market,” said Mr Sims. “QCLNG has commenced production from both of its trains, and GLNG and APLNG are ramping up their initial trains towards production. Already LNG export demand equals the total domestic demand of the east coast gas market.

“By the time all six trains are operating, east coast gas production will need to have tripled to meet both LNG and domestic demand from industrial, commercial and household customers and remaining gas-powered generation.

“To meet these changing market dynamics, transmission pipelines are being inter-connected and flows being made bi-directional. In other words, the transmission network is being prepared to enable some gas to flow north out of southern production areas and into Queensland,” said Mr Sims.

But despite the challenges facing the east coast gas market, industry body the Australian Pipelines and Gas Association (APGA) is positive about the impact the NEGI pipeline will have.

“This infrastructure could be the beginning of a national gas market, as well as provide new gas for the east coast,” said APGA Chief Executive Cheryl Cartwright.

“The east coast gas supply situation is challenging. But the Northern Territory Government has gas it could sell interstate provided it could ship it there. And a new pipeline, whichever route is chosen, could open up new exploration and production in areas now too remote to be viable.”

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