Australasian Mining Review

Australasian Mining Review Summer 2011

Australasian Mining Review

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Page 45 of 151

42 2011 The year for Queensland LNG? The Chinese zodiac may have 2011 designated as the Year of the Rabbit, but following a string of new project approvals Queensland’s $50 billion liquefied natural gas (LNG) industry may well have claims to the title, writes Anthony Fensom. W hile Chinese tradition holds that the rabbit brings a year to catch the breath and calm the nerves, it seems the flood-drenched state will be doing anything but once the rains subside and planned development works resume. January’s move by energy major Santos Limited to give the final investment decision (FID) to its US$16 billion Gladstone LNG project (GLNG), following last October’s FID for British group BG’s US$15 billion Queensland Curtis Island LNG project (QCLNG), has kick-started the Gladstone LNG industry. The LNG projects will convert coal seam gas (CSG) into export LNG, and independent CSG companies such as Bow Energy are moving to meet an anticipated gas shortage. Other beneficiaries of the LNG boom include providers of infrastructure, housing and labour. The Queensland LNG projects add to the giant Pluto and Gorgon projects under development in Western Australia, forming part of the $200 billion worth of LNG schemes proposed nationwide in response to growing energy demand in the Asia- Pacific region. With the addition of the Santos FID, more than $100 billion has been committed to LNG projects in Australia and Papua New Guinea during the past three-plus years. Currently the world’s fifth largest producer of LNG, the Australian industry is targeting the number two spot with a goal of boosting production to 60 million tonnes per annum (mtpa) by 2020, up from the 16.7 mtpa produced in 2009. Queensland Premier Anna Bligh welcomed Santos’s January 13 announcement on its 7.8 mtpa Gladstone project as a huge boost to the state’s economy. “This project worth about $120 billion in exports over 20 years, and others like it, will inject billions into the Queensland and regional economies,” the premier said in a statement. “Construction of the project will commence in 2011, and will create around 5,000 construction jobs plus a permanent workforce of around 1,000.” Santos CEO David Knox said the investment approval was an important economic stimulus for Queensland, while also marking a significant milestone in the Adelaide-based company’s history. A joint venture between Santos (30 per cent), Malaysia’s Petronas (27.5 per cent), France’s Total (27.5 per cent) and Korea’s Kogas (15 per cent), GLNG entails the development of CSG resources in Queensland’s Bowen and Surat Basins, the construction of a 420-kilometre gas transmission pipeline from Roma to Gladstone, and two LNG trains on Curtis Island. First exports are scheduled for 2015, with GLNG having already signed up its partners Petronas and Kogas for 7 mpta in gas sales. The project will also nearly double Santos’s revenue, generating US$6 billion a year during production, or more than US$120 billion over its first 20 years. Queensland Treasurer Andrew Fraser noted that the project was the second major LNG investment decision in a matter of a few months for the state. The state government is eagerly eyeing the forecast $850 million a year in royalties and an economic boost of $3 billion a year from a 28 mtpa LNG export industry. While some eight CSG-LNG projects have been slated for Gladstone, BG was the first to achieve FID with its October 31 approval for the QCLNG, a two-train 8.5 mtpa project operated by its subsidiary QGC. The project entails the construction of a liquefaction plant on Curtis Island off Gladstone, together with associated upstream and pipeline facilities, including a 540-kilometre underground pipeline network linking its Surat Basin CSG fields to the plant. QGC managing director Catherine Tanna described the decision as “the single-biggest investment ever undertaken by BG Group.” “Three years ago when BG Group set up in Australia we had an idea. Today, we have a project,” she was quoted saying by PetroleumNews. First LNG exports from the project are anticipated in 2014, backed by sales agreements with customers in Chile, China, Japan and Singapore for up to 9.5 mpta of LNG, including with China National Offshore Oil Corporation and Tokyo Gas. While two trains are planned, BG also stated that construction of a third LNG train was already covered by existing state and federal approvals.

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