With natural gas demand increasing in Asia, the competition to produce liquefied natural gas (LNG) to supply those markets is also rising rapidly. Queensland in eastern Australia has become a hotbed of activity for turning coal-seam gas (CSG) into LNG.
A recent analysis of the region by EnergyQuest, titled “Australian Coal Seam Gas 2011: From Well to Wharf,” forecasts that LNG production could reach 25 million metric tons per year (MMmt/y) in Gladstone by 2020. The sector could grow even faster if three of the projects approve expansions.
However, while demand is strong, the report noted that high-quality reserves are not growing at the same rate. Increasingly, the LNG projects have to expand outside the low-cost, highly productive acreage into lower-quality acreage. Some projects will even need to supplement the CSG with conventional gas, according to EnergyQuest, an Australian consulting company.
Currently, three projects are under construction and a fourth has signed a contract for front-end engineering and design (FEED). International oil companies are shoring up the projects. Just this week, Arrow Energy Ltd., a joint venture between Royal Dutch Shell and PetroChina, made an offer of about $540 million for Bow Energy Ltd., a major CSG producer in the region.
Arrow made the preliminary, non-binding proposal to Bow Energy. The acquisition of Bow would allow Arrow to increase the size of its first two trains at its Arrow LNG Project. In mid-August, the joint venture awarded a contract to a consortium of Chicago Bridge & Iron, Chiyoda Corp. and Saipem for the FEED of a plant with a capacity of 8.0 million metric tons per year (MMmt/y) of LNG. The companies said capacity could be doubled by adding two more trains. The plant will use Shell’s proprietary liquefaction technology. A final investment decision (FID) is not expected until late 2013, and first LNG production would be in 2017.
The other LNG projects are active as well. On Aug. 9, Origin Energy completed the subscription agreement facilitating the acquisition of a 15% ownership in Australia Pacific LNG Pty. Ltd. by Sinopec. Also, the Chinese company met all conditions for the purchase of 4.3 MMmt/y, starting in 2015. Australia Pacific LNG received $1.75 billion for the 15% interest. The current ownership is: ConocoPhillips, 42.5%; Origin Energy, 42.5%; and Sinopec, 15%.
The FID was approved in July 2011 for the first of two, 4.5-MMmt/y trains. The project will cost an estimated $20 billion. The Sinopec sales agreement covers the majority of the capacity of the first train. Discussions for the offtake from the second train are well advanced, according to Origin Energy.
Santos Ltd. stated the Gladstone LNG Project on Curtis Island offshore Queensland will produce 7.8 MMmt/y from two trains. The FID was made in January 2011. Clearing of the LNG plant site is 60% complete and construction of bulk earthworks is under way. The first LNG is expected to be produced in 2015. Santos noted it has enough CSG reserves to underpin the first train.
Based on completed sales transactions with Korea Gas Corp. (KOGAS) and Total, the ownership structure is: Santos, 30%; Petronas, 27.5%; Total, 27.5%; and KOGAS, 15%.
The fourth project is the Queensland Curtis LNG facility being developed by BG Group. Construction is also in progress for this plant. The FID was okayed in October 2010 for the two-train, 8.5-MMmt/y facility. Commercial operations are expected to begin in 2014. A third train could be added to the site if demand warrants the construction, bringing total capacity to 12 MMmt/y.
After signing a sales and purchase agreement with Tokyo Gas in March 2011 for 1.2 MMmt/y for 20 years, the Japanese company received a 2.5% interest in Train 2 and 1.25% equity interest in reserves and resources of certain BG properties in the Surat Basin. The project is being developed by BG’s wholly owned subsidiary, QGC Pty. Ltd.
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