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LNG: from little things big things grow

Santos – which is already involved in the LNG industry through its interests in Darwin LNG – has proposed the construction of an LNG facility at Gladstone in Queensland, which would see 170 to 220 PJ/a of CSG processed and sold into export markets.

The proposed Gladstone LNG project involves a 3 – 4 MMt/a processing train and associated infrastructure, and has an expected total cost of $5 – $7 billion.

While the output is significantly less than larger-scale LNG projects – such as Woodside’s North West Shelf plant which produces 11.9 MMt/a, and Santos’ Darwin plant, which has the potential for expansion to 10 MMt/a – small scale LNG projects nonetheless represent a viable and economic means for transporting gas.

Though CSG has not previously been used in an LNG project, Santos says it does not see any technical impediments to using it for this purpose.

“With significant advances in investment, understanding and technology over the last five years, CSG has proven itself as a reliable and significant source of gas supply in eastern Australia. Given this, we believe that the opportunity now exists to supply CSG into both the domestic and the export market,”? said Santos.

Queensland Premier Peter Beattie has given his support to the project, granting it Significant Project status.

“The potential is enormous, with Santos keen to utilise Queensland’s vast reserves of CSG from both the Bowen Basin and the Surat Basin before piping it to Gladstone and then liquefying it for export by ship,”? said Mr Beattie.

“Significant project declaration will help Santos streamline its feasibility study and planning process.”?

Santos will now undertake an assessment of the environmental impacts of the project, to be supervised by the Coordinator-General on behalf of the Government.

“This is a landmark project for Santos which will underwrite the continued growth of the CSG industry in Queensland and is a major step forward in the development of a new export industry for the state,”? said Santos Managing Director John Ellice-Flint.

A Final Investment Decision is expected by the end of 2009 to enable first LNG cargoes to be exported in early 2014.

Meanwhile, Arrow Energy has been garnering interest and organising funds for its proposal to develop its own LNG facility in Gladstone.

The proposed facility, developed in partnership with LNG International and Golar LNG, will require up to 1,400 PJ of gas and is targeting first gas sales in late 2010.

Arrow has launched a $294 million development program to ramp up the multi-billion dollar LNG project, while also accelerating exploration in key Australian acreages and aiming to roll out its international expansion over the next 18 months.

Chief Executive Nick Davies said that the program “will accelerate the exploration, development and appraisal of our acreage for the proposed Gladstone LNG project… which will give Arrow exposure to oil pricing and potentially more than double production.”?

Arrow is also involved with the development of a 100 t/d LNG plant at its Daandine CSG field. In April, Arrow and Liquegas Energy – who will build and operate the plant – reached an agreement for the supply of CSG from Daandine to the LNG plant, which will be built on land currently owned by Arrow.

Arrow’s agreement with Liquegas is initially for 2 PJ/a over a period of 15 years with first gas supply expected during the first half of 2009. The LNG produced will be targeted to customers in southern Queensland and northern NSW.

In September 2006, Arrow flagged additional gas markets outside of the current gas to power generation market as future growth areas, with specific mention of pursuing Gas-to-Liquids, compressed natural gas and small-scale LNG opportunities.

“Whilst this is only a small step in the development of a new market, it is a highly important and significant one that we believe will be the birth of a whole new industry.

“This agreement will not only provide a basis for further development of the Daandine field, but will also contribute to a new and important gas supply alternative in Queensland,”? said Mr Davies.

“We are encouraged by the initiative and commitment shown by Liquegas and we believe that the demand for LNG has the potential to support significant growth. We also believe that there is an untapped opportunity for LNG in the Australian and Asian markets,”? he added.

Liquegas Chief Executive Officer Simon Mewing said “This is good news all round – for the Australian energy market as a whole and for the environment.”?

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