2009: the year in CSG

As work went on, one topic seemed to be the flavour of the year: consolidation.

First talk of consolidation began in February with Arrow chief executive Shaun Scott saying the industry was headed for consolidation as rival ventures looked for cost efficiencies.

“Companies are now looking at a project consolidation phase,” he said. “Everyone sees that as inevitable.”

Scott’s comments were mirrored in June at the Australian Petroleum Production and Exploration Association’s 2009 conference by ConocoPhillips vice-president for international exploration and production Ryan Lance.

Lance said that as the players looked at the issues facing the industry, there would be collaboration at both reserve and project level.

This view was shared by federal Resources Minister Martin Ferguson, who said he expected consolidation between the LNG gas plants for Gladstone, and by FACTS Global Energy chief executive officer Fereidun Fesharaki, who said CSG-LNG players would merge among themselves.

More recently, Origin Energy managing director Grant King said there was no way the major CSG-LNG projects would be able to start at the same time, while Shell executive director upstream international Malcolm Brinded flagged that the major was in consolidation talks with other companies planning to build CSG-LNG projects at Gladstone.

Head of the University College London School of Energy and Resources Professor Tony Owen also jumped on the consolidation bandwagon, saying he didn’t think all five of the major CSG-LNG projects would go ahead.

“They’ll combine,” he said. “It just doesn’t make sense to have five separate entities within stone’s throw of each other developing, it’s too expensive. So I think you will see some amalgamation taking place.”

Fisherman’s Landing LNG

Liquefied Natural Gas’s Fisherman’s Landing project on Curtis Island is the smallest of the five proposed CSG-LNG projects but could be the first operating, with first production targeted for late 2012.

In August this year, LNG Ltd got a major boost for the project after two separate reviews of its proprietary OSMR process by Foster Wheeler and South Korea’s SK Engineering & Construction found it was technically sound and fit for processing LNG.

Foster Wheeler said the design was capable of producing on-specification LNG from the available CSG feed stream and that the process was based on the integration of well-proven technologies with low inherent technical risk.

LNG Ltd technical director and developer of the OSMR process Paul Bridgwood said the positive response from the reviewers and approval from the Queensland authorities on the use of membrane tank technology had given the company a faster construction schedule to achieve first production from Fisherman’s Landing in late 2012.

Following closely behind the review, LNG Ltd announced it would start front-end engineering design studies for its second LNG train at Fisherman’s Landing, while partner Golar LNG signed up Japan’s Toyota Tsusho Corporation to buy LNG from the project.

Under the sales agreement, which could be seen as a major step forward for the project, Toyota will buy about 1.5 million tonnes per annum of LNG over a 12-year period from 2014 to 2026.

In October, LNG Ltd started ground improvement and earthmoving works with the project to move into full construction early in 2010.

A final investment decision on the project, which will use coal seam gas from Arrow Energy as feedstock, is targeted by the end of March 2010.

Gladstone LNG

Santos’s Gladstone LNG project has come some way since the company announced plans for an initial 3.5MMtpa LNG plant on Curtis Island in 2007.

In June the company signed up Malaysian partner Petronas as its foundation customer. Petronas, which holds a 40% stake in its partner, will offtake at least 2MMtpa of LNG for 20 years. It also has the option to take up another 1MMtpa if Santos elects to sell it to the company.

The binding contract, which Santos managing director David Knox said was competitive with industry practice for long-term contracts, effectively underpins the GLNG project while still allowing Santos to find a better deal for the 1MMtpa option along with the remaining 500,000tpa.

Another milestone was reached when the project’s draft environmental impact statement was released for public scrutiny late in May. The EIS assesses the impact of each stage of the project, from Santos’s CSG fields near Roma to the proposed plant on Curtis Island.

In December, Santos announced it was looking to add a second LNG train to the project to meet expected demand in Asia, which is expected to hit 110MMtpa in 2025.

The company is due to make a final investment decision on the first 3.6MMtpa train, which will use coal seam gas as feedstock, in mid-2010.

Australia Pacific LNG

The Australia Pacific LNG joint venture, a 50:50 JV between Origin Energy and ConocoPhillips, also made progress on its CSG-LNG project at Laird Point on Curtis Island as it works towards lodging an environmental impact statement early in 2010.

In August, the JV selected Laird Point as the site for the 14-16MMtpa CSG-LNG plant. The JV said the 230-hectare site offered sufficient land for the proposed processing facility and good port facilities, and was a major step forward for the project, which plans to sell first LNG to international markets in 2014.

Before the year drew to a close, the JV awarded a $220 million drilling and workover rig contract to Savanna Energy to help the JV meet its target of drilling 300-500 wells a year over the life of the project.

A final investment decision for the APLNG project is expected at the end of 2010 with first LNG production targeted for 2014.

Queensland Curtis LNG

BG Group was relatively quiet about its Queensland Curtis LNG project at Gladstone in 2009. In August, the company released its environmental impact statement for public comment while in October, BG said it had made good progress on the project, having drilled more than 150 wells for the year.

Tendering had begun for the pipeline material and construction contracts while FEED for both the upstream facilities and LNG plant were progressing to plan.

In a third-quarter results conference call, BG chief executive officer Frank Chapman said the project was going well and it was on track for sanction in 2010 with first shipments in 2014.

The project will use CSG as feedstock to produce 7.5MMtpa of LNG under the first phase of development. The project has a total planned capacity of up to 12MMtpa.

Shell Australia LNG

Oil major Shell made inroads on its CSG-LNG project in Gladstone with the Queensland government declaring it a significant project.

Named Shell Australia LNG, the project involves the phased construction of up to four LNG trains, each with a capacity of 3-4MMtpa.

The project will utilise gas resources from acreage jointly developed by Shell and Arrow Energy.

The foundation train will use about 200 petajoules per annum as feed gas with up to 4000PJ required for the foundation train in the first 20 years of operation.

Shell believes its jointly held tenements with Arrow contain sufficient gas resources for the first train.

The company expects its EIS to be submitted for public comment in April 2010 with first LNG in 2014 or 2015.

Tuesday, 19 January 2010
PNN