Oil and gas
The Northern Territory oil and gas sector has the potential to significantly increase its contribution to the Northern Territory and the Australian economy and has an important role to play in providing energy security for Australia and its strategic partners, particularly those in Asia.
The Northern Territory is strategically located near globally significant offshore energy resources with an estimate that the Northern Territory has access to more than 30 trillion cubic feet of gas reserves in offshore waters. Industry estimates that the Northern Territory has more than 200 Tcf of gas resources in six onshore basins - potentially enough gas to power Australia for more than 200 years.
In 1985 the Northern Territory only had two small producing fields in central Australia. The construction of the 1,673km Amadeus to Darwin Gas Pipeline enabled the supply of gas for electricity generation in major centres across the Northern Territory for more than 20 years.
Today, the Northern Territory produces oil and gas from offshore reserves in the Timor Sea, and onshore oil and gas in Central Australia.
Darwin is now connected to operating gas fields in the Bonaparte Basin (0.8 Tcf), the Bayu-Undan field (4 Tcf), and the gas fields in Central Australia via 2,500kms of onshore gas pipelines and more than 600kms of offshore gas pipelines. A further 890kms of gas pipeline will soon connect Darwin to the huge reserves in the Browse Basin (30+ Tcf) through the Ichthys LNG Project.
The Northern Territory has developed the local infrastructure and expertise required to support high calibre projects:
- The US$37 billion INPEX-led Ichthys LNG project, currently under construction. First production is targeted for third quarter of 2017, and the project is expected to produce 8.9 million tonnes per annum (Mtpa) of LNG, 1.6 Mtpa LPG and 100,000 barrels of condensate per day at peak.
- The ConocoPhillips-led Darwin LNG project which first shipped LNG in February 2006 and has now loaded more than 500 ships. The facility has the capacity to produce 3.7 Mtpa of LNG and environmental approval to increase production to 10 Mtpa.
- The BOC Darwin Helium Plant, the only one of its kind in the southern hemisphere and one of only 15 in the world, produces enough helium to supply the entire Australian market with additional capacity (over two-thirds) available for export.
Through the Darwin Marine Supply Base, the Charles Darwin University’s North Australian Centre for Oil and Gas (NACOG), Shell’s onshore facility to support their Prelude floating LNG project and the BOC Darwin Helium plant, the Northern Territory is creating the foundation for a sustainable, broad based oil and gas sector. The Northern Territory has experienced and continues to experience growth and diversity in the supply and service industries required to support these projects.
Darwin LNG case study
Discovered in 1995, Bayu-Undan is a gas-condensate field 500kms north west of the Northern Territory. It is located in the Timor Sea within the Joint Petroleum Development Area. Initial development included the construction of offshore facilities to produce and process condensate, propane and butane (LPGs). During this phase 13 wells were also drilled for production, gas injection and water disposal. Production commenced in 2004.
Subsequently, the Darwin LNG development saw the installation of a sub-sea pipeline and the LNG production facility. The 500km 26 inch pipeline supplies gas from Bayu-Undan for processing into a 3.7 Mtpa design capacity LNG facility. Located in Darwin, the LNG facility is operated by ConocoPhillips on behalf of the same co-venture partners as Bayu-Undan.
The development of Darwin LNG, supported by an effective supply chain established by local industry, demonstrated the capability of the Northern Territory to be a significant LNG industry supply and service hub.
This has encouraged other projects such as Ichthys and Prelude FLNG to choose Darwin as their base, potentially resulting in four world-class LNG trains operating out of Darwin from 2018.
Creating the remarkable
The Northern Territory provided a location closely aligned to the project’s site selection criteria. In particular it offered low sovereign risk, an excellent deep water harbour, large capable workforce and capital city infrastructure including national road, air and rail links, international airport, hospital, education and other social infrastructure.
Critical enabling infrastructure was also provided by the Northern Territory Government. Its practical support included the offer of a serviced site (road, water infrastructure and construction power) at Wickham Point.
Certainty for the project sponsors was also offered through clear processes and timelines for environmental and construction approvals, along with significant assistance for native title and heritage approvals.
Advantages that set the Northern Territory apart
The Northern Territory Government makes strategic interventions, proactively supporting and promoting accelerated investment to realise the potential of the oil and gas sector. The Northern Territory:
- Declared that there will be no reservation of gas for domestic use in the Northern Territory, in contrast to contemplation of gas reservations in other states, allowing gas to flow to customers wherever they exist.
- Invested $110 million toward the construction of the Darwin Marine Supply Base, a dedicated service and supply base to support establishment and long term operations of the offshore industry.
- Developed the enabling infrastructure and expertise required to support world-scale projects.
- Actively monitors the Northern Territory’s robust regulatory system for oil and gas to maintain contemporary best practice and adaptability to new technologies.
- Fast-tracks approvals for major projects to ensure certainty for investors, including passing legislation to address project specific needs.
- Initiated a competitive process for private sector proposals to develop a new gas pipeline connecting the Northern Territory to Eastern Gas Markets. The Northern Gas Pipeline (NGP) attracted strong interest from national and overseas companies with Jemena awarded the contract to construct the NGP in late 2015. The NGP will be completed by 2018.
Opportunities for investors
Immediate prospects for continued growth of the Northern Territory’s oil and gas sector are strong. Recent fluctuations in oil and gas markets are expected to have limited impact on the long-term trends that support demand for Northern Territory gas.
Importantly for the Northern Territory, most new demand for gas is in Asia - a market which Northern Territory producers should find easy to serve. As an example, shipments from Darwin to Tokyo have a distance of only three thousand nautical miles to travel, or less than nine days voyage, giving the Northern Territory a distinct advantage.
Downstream gas industries
Over time, the Northern Territory’s oil and gas resources could support downstream processing and manufacturing opportunities such as methanol production or, when coupled with the Northern Territory’s large phosphate reserves, fertiliser production.
Service and supply
Regional growth in oil and gas activity is continuing to create service sector opportunities for Northern Territory businesses. The oil and gas service industry has grown significantly since the commissioning of the Darwin LNG in 2006, and has continued to develop strongly throughout the construction of the Ichthys LNG facility.
With the purpose built Darwin Marine Supply Base now complete, the Northern Territory has the capacity to serve projects across the Timor Sea and the Browse Basin, including the new Prelude floating LNG vessel.
The Northern Territory Government's constructive approach to development has encouraged companies to choose to use Darwin as a supply and production base. Despite there being alternative centres in Western Australia that are closer to these fields.
Onshore gas and oil exploration and production
Offshore gas and oil exploration and production