Development potential
Arrow Energy has more than 80,000 square kilometres of coal seam gas (CSG) acreage near Queensland’s main markets of Townsville, Brisbane and Gladstone. Mr Scott says that there are significant amounts of CSG in Arrow’s tenements that could be processed, based on the resources that the company has identified to date.
“We have a huge resource base”š of approximately 70 trillion cubic feet there. Even if only 20 per cent of that is economically recoverable, that’s really enough to support 12-15 million tonnes per annum of LNG.”?
Arrow, together with joint venture partner Shell, is planning to develop an LNG export facility in Gladstone as part of its CSG to LNG project – one of several LNG projects proposed for the region. Mr Scott says that these projects have been a catalyst for much recent change in the industry, in terms of all the investment that has been made.
People have known about Queensland’s CSG resource potential for a long time, he says, but have had difficulty seeing how that resource could be marketable. “And that’s really where LNG has bridged the gap; not only from the perspective of taking this gas into global energy markets, and therefore better pricing, but also in terms of the volumes of gas that can be monetised through LNG projects and into the significantly larger market in Asia.”?
The proposed Gladstone CSG to LNG projects also signify enormous upcoming investment into Queensland, as well as the creation of countless jobs during both the projects’ construction and operational phases, Mr Scott says.
Bowen and Arrow
Infrastructure for Arrow’s project will include two pipelines to transport CSG to Gladstone: the 440 km Central Queensland Gas Pipeline running from Moranbah in the Bowen Basin to Gladstone; and the approximately 500 km Surat to Gladstone Pipeline.
Mr Scott says “Currently we have the pipeline licence in place for the Central Queensland Gas Pipeline, and most of the easements and right of ways are in place.
“We’re working on the Surat to Gladstone Pipeline; we’ve currently mapped out the route [and] got our survey in place. We’re working our way through getting the easements and right of ways in place, as well as the environmental process that goes with that.”?
While Arrow is currently planning to construct the pipelines to deliver gas from its own fields, Mr Scott says that there is no reason why they couldn’t supply CSG from other fields in the future. “Certainly from an infrastructure-saving perspective it makes much more sense to try and do those things.”?
Collaboration and consolidation
From both a resource and ultimate marketing perspective there is sufficient potential at Gladstone for all of the projects that have been proposed. However, Mr Scott says “The issue really is one of logistics; whether it is logistically feasible to build it all at the same time.”? He suspects that rather than continuing with all the independent projects, there will be some process of collaboration at various levels.
“There’s a fairly significant savings pool that is available to everyone, and certainly a risk reward equation that’s much better.”? He believes that, regardless of this, the same LNG capacity will be developed, but simply staged differently; probably over a longer period of time.
Mr Scott says that the enormous amount of organisation and number of staff required to develop resources that have been proven may drive many of the smaller companies currently involved in Queensland CSG exploration and appraisal activity toward consolidation. “I certainly know from my own experience that developing a business from seven people up to 300 people – or whatever’s required to do the development – is a huge challenge.”?
He says that these companies could be faced with the choice of individually delivering the project, or combining with others who already have the necessary infrastructure and resources in place. “From a shareholder value perspective, [the latter is] probably a better outcome,”? he says.
Achievements and challenges
“Obviously the biggest achievement for the industry has been getting those first [LNG] projects up and running, and demonstrating their technical and economic viability.”?
One of the major challenges facing industry, Mr Scott says, has been developing the capacity to deliver a project; how to amass the necessary people, equipment and resources, as well as managing rapidly rising costs in the current economic climate. “A lot of projects that were on the drawing board and using a lot of these resources up have been cancelled or deferred,”? he notes, stating that while this is unfortunate for the affected companies, it has aided Arrow in obtaining human resources and equipment procurement for its project.
Looking toward the future, Mr Scott says that Arrow is currently trying to obtain all of the necessary approvals to get its project up and running, which can be quite a challenging process. “As we continue to tick these things off, get into financial close, construct the project and [are] hopefully successful to get it up and running, that’s going to be another precipice to climb.”?
Industry and government policy
Mr Scott says that the industry needs more certainty of outcome from government in terms of regulatory regime and approval processes. People will not be vying to invest in these projects with uncertainty surrounding perceived cost, and approval processes can greatly impact on project schedules and viability.
The government’s role is to balance the timing of the required project approvals with the genuine concerns of landowners and environmental issues. “It needs to be a well co-ordinated and streamlined process that basically meets all the rated outcomes as quickly as possible.”?
There is a significant incentive, Mr Scott says, for government to do what they can, given “the billions of dollars of revenue that’s going to come from these projects, as well as the billions of dollars of investment, and all the jobs that are going to be created.”?
In addition, he says that LNG has the ability to make a considerable contribution to lowering the carbon footprint of the Asia Pacific region, providing a clean gas supply to countries in Asia that are currently heavily dependent on fuel oils and coal.
Furthermore, Mr Scott sees Australia’s gas resources as an important component of the enactment of the country’s Carbon Pollution Reduction Scheme. “Gas-fired generation emits less than 50 per cent of emissions than that of a coal-fired plant, so there are certainly significant benefits in that perspective.
“I think gas is going to play a really important role in that going forward.”?