Some 400 delegates, speakers and exhibitors attended the biggest SEAAOC to date in Darwin from 16-18 July.
SEAAOC’s speakers included many of the industry’s key policy decision-makers and peak body chief executives, including Federal Minister for Resources and Energy Martin Ferguson, the Northern Territory’s Chief Minister Paul Henderson, Australian Petroleum Production & Exploration Association (APPEA) Chief Executive Belinda Robinson and Australian Pipeline Industry Association Chief Executive Cheryl Cartwright.
The event was the biggest to date, with over 400 delegates attending the three-day conference that was preceded by a day of workshops and master classes covering topics from liquefied natural gas to how to address the knowledge gap in a resource constrained market.
In the lead up to a snap election for the Northern Territory, Chief Minister Henderson promoted the Northern Territory and Darwin’s potential as a northern Australian gas hub.
Welcoming conference guests at Parliament House, Chief Minister Henderson highlighted SEAAOC’s place as a key event on the petroleum calendar. While touting the local crocodile tourist attraction, the Chief Minister said that the Territory’s economy is going in leaps and bounds.
“We are open for business; we’re a can-do government; we want the investment and we’ll work with you to facilitate your projects,”? he told guests as they admired the view and the Darwin LNG project off in the distance.
Addressing delegates more formally the following day, the Chief Minister spoke about the opportunities in the Northern Territory for the oil and gas industry and outlined his government’s vision for Darwin as an oil and gas service and supply industry hub.
APPEA Chief Executive Belinda Robinson highlighted the importance of the Northern Territory’s resources for the petroleum sector, including its world-class discoveries such as Sunrise, Evans Shoal and Crux. “They’ll soon be developed, giving the Territory’s enthusiasm for gas and gas-related projects a new impetus,”? she said.
Ms Robinson described the Territory’s growth over the last few years as almost “surreal”? but noted that with growth comes challenges, including ensuring enough skilled workers are available to bring the projects online, that the wealth from the industry’s success is shared with the entire Northern Territory community and climate change.
Other key speakers at SEAAOC included ConocoPhillips’ Opportunities Manager Mark Nelson, who spoke about achievements in Northern Australia, development plans for Darwin’s liquefied natural gas (LNG) plant and future opportunities.
Osaka Gas Australia Managing Director Shinichi Tada provided an update on Osaka Gas’ offshore oil and gas plans for the South East Asia region and ENI Australia’s Managing Director Eros Agostinelli outlined project plans for offshore Western Australia and the Timor Sea.
A surprise announcement was MEO Australia Managing Director Chris Hart’s retirement. Mr Hart co-founded MEO in 1994, helping to guide the appraisal of the Evans Shoal gas field, which was subsequently sold to Santos. Mr Hart was also instrumental in developing the concept of converting gas high in CO2 into methanol and in particular, the idea of using Tassie Shoal as an infrastructure hub.
Handing over the reigns, Mr Hart welcomed MEO’s new Managing Director and CEO, Jürgen Hendrich, to outline the company’s plans for exploration and production in the North West Shelf, and in the Timor Sea.
Highlights from the second day of the conference included Chairman of the NT Government’s Onshore Gas Development Taskforce, Paul Tyrrell, discussing Darwin as a centre for gas development. General Manager External Affairs for INPEX Browse Sean Kildare presented a case study on the Ichthys Project and strategic development issue. Arrow Energy Managing Director Nick Davies looked at the proposed Gladstone LNG plant based on coal seam gas (CSG), and the implications of an East Coast LNG hub. Mr Davies also discussed Arrow’s plans to extract CSG in China, India, Indonesia and Vietnam. Finally, independent analyst Peter Strachan gave an overview of gas exploration and development activities around Australia, including the market, companies, projects and pricing, and exploration “˜hot spots’.
SEAAOC brings key issues to the table
Global challenges – LNG and an emissions trading scheme
In time with the release of the Federal Government’s climate change green paper, the potential effect of an emissions trading scheme on Australia’s LNG industry was a key issue at SEAAOC.
Addressing the conference, Federal Minister for Resources and Energy placed the issue of climate change in context of the broader challenges facing the industry.
“Much of what happens to us happens beyond our shores – geopolitical uncertainty, unprecedented economic growth on our doorstep in Asia, the global financial crunch, record oil and commodity prices,”? he said.
“The competition for labour, skills, materials and equipment within Australia and globally is also pushing project costs ever higher. And there is the challenge of climate change policy.”?
He said that the Green Paper recognises the challenges facing emissions-intensive, trade-exposed industries and the coal-fired electricity generation sector.
However industry stakeholders and representatives have raised concerns that Australia’s LNG industry will be adversely affected by the proposed emissions trading scheme (ETS) and called for further consultation. Under the proposed ETS, LNG projects do not qualify as an emissions-intensive, trade-exposed industry and so would not receive free permits.
Commenting on the green paper, APPEA said that an Australian emissions trading scheme should recognise that LNG projects, as well as increasing Australia’s national prosperity, also help Asia-Pacific nations join Australia in addressing climate change.
“We are looking very closely at the proposals in the government’s green paper to ensure that Australia’s ability, through LNG exports, to help the world move to a cleaner future is not compromised in any way,”? Ms Robinson said.
She said that tripling LNG exports in the next ten years will result in 120million tonnes greenhouse gas pollution being avoided in the Asia-Pacific, generate an additional $10 billion per year of tax revenue and create many thousands of jobs.
The green paper says:
“…the production of liquefied natural gas is likely to be more emissions intensive than other parts of the oil and gas sector. Significant further analysis is needed to identify emissions-intensive production activities or processes in Australia that would be eligible for EITE assistance. A key objective of stakeholder consultations after the release of the green paper will be to further the Government’s understanding of the relative emissions intensities of different activities and the quantum of emissions produced by those activities.”? (p314)
“The LNG industry agrees that further analysis is required to ensure that the methodology for determining EITE assistance is appropriate,”? Ms Robinson said.
Woodside also raised its concerns over the effect of the scheme on LNG projects. According to Woodside Petroleum Chief Don Voelte, more than $60 billion in planned LNG projects would likely be put on hold because the ETS is “backwards”? because LNG was part of the solution to climate change.
Mr Voelte said “This ETS will knock planned projects with relatively high CO2 emissions right off the block.”?
According to the government the Green Paper sets out a proposed framework for dealing with these challenges and there is now an opportunity for each industry sector, including oil and gas, to make a proper assessment about the implications of the policy proposal for them.
Stakeholders are invited to make submissions by 10 September 2008 and consultations will be held over the next two months.
Supporting new or old?
Another key issue raised at SEAAOC was the changes to the condensate excise.
A few days prior to the conference, the North West Shelf Venture (NWSV) expressed its “˜surprise and concern’ at the Government’s decision in the May Budget to remove the excise exemption on condensate, saying that the removal will have significant consequences for both the NWS project and the broader upstream petroleum industry.
The NWSV said it was disappointed that “the decision to remove the condensate exemption was announced without consultation with the impacted companies or the wider industry, limited assessment of the rationale for change and without provision of detailed reasons.”?
The NWSV said that its principal concerns are that the project requires continued substantial investment to underpin safe and reliable operations; and, Australian fiscal arrangements need to be sufficiently stable to attract such investment.
In addition, the NWSV said the surprising way that this change was announced has unnecessarily detracted from Australia’s reputation as an attractive and stable investment destination by introducing a new element of sovereign risk not previously seen in this industry in Australia.
Mr Ferguson acknowledged these concerns but said “We have to be frank – over time, taxation regimes do change – in fact governments have often responded to requests by industry to adjust taxation arrangements.
“Over the course of the last two decades, under both Labor and Coalition Governments, Australian industry has benefited significantly from business tax reform.
He said that everyone would agree that Australia is a better, wealthier place today for the development of what were then new frontiers at a time when gas was a relatively hard commodity to move.
“But now that the North West Shelf is mature and profitable with record high oil prices,”? he went on, “the concession is no longer justified and we have a responsibility to ensure the Australian community receives a fairer share of the benefits associated with resource exploitation in the North West Shelf Gas Project area, adding that the new generation gas projects such as Gorgon, the Browse projects, and Sunrise that are struggling to get off the ground should be supported.