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Queensland revolution: Santos’ LNG proposal requires 170-220PJ per annum; and Arrow Energy’s LNG Proposal 55PJ per annum

Posted by gasweek on 10 October, 2007

On the 18 July 2007, Santos announced a proposal to construct a 3-4 million tonnes per annum (mmtpa) liquefied natural gas (LNG) facility at Gladstone.

Detiled studies begin: Santos would now embark on detailed engineering and environmental studies as well as preliminary marketing of the LNG. A Final Investment Decision was planned by the end of 2009 and would enable construction to proceed with first gas cargoes by early 2014.

A$5-A$7 billion: Santos estimated the capital cost in the range of A$5-A$7 billion (including upstream development, liquefaction plant and associated infrastructure). The annual gas supply volumes required would be in the range of 170-220PJ per annum.

4,000 and 5,500PJ: The total volume of gas required to support a LNG scheme of this scale (assuming 20 to 25 years supply) is estimated to be between 4,000 and 5,500PJ. It is important to note that Santos had only proposed to enter into detailed evaluation at this stage. In addition to the studies, they would also need to establish sufficient gas reserves to allow them to sign long-term LNG contracts. This reserves certification would run in parallel to the studies.

Bowen and Surat Basin fields: Santos had indicated that they would be using Coal Seam Gas (CSG) from their Bowen and Surat Basin fields. With the scale of reserves required in the order of 5,000PJ, this would require a significant increase to Santos’ current CSG gas reserves.

Lone wolf: Santos was assessing the Gladstone LNG project on its own. Santos had some experience with LNG through their equity in the Darwin LNG Project, but had not operated or developed an LNG project in their own right. Santos could potentially bring in other partners as plans progressed, including a partner with LNG development and operating experience.

Arrow Energy’s LNG Proposal: On 30 May 2007, Arrow Energy announced it had signed a Heads of Agreement (HoA) with LNG International Pty Ltd (LNGI), to supply gas to a proposed LNG facility to be located within the Gladstone Port area and designed to produce approximately 1 mmtpa of LNG (with an option to expand to 2 mmtpa).

55 PJ per annum: The annual gas supply volume required for a 1 mmtpa LNG Train is approximately 55PJ per annum. Arrow Energy have stated that the initial supply to the LNG terminal under the HoA is for a period of 12 years, commencing in late 2010.

Gross reserves volume of 1,100PJ: There was an option to supply a further 55PJ per annum, starting as early as mid 2011, subject to a second LNG train being developed. Arrow Energy was targeting a gross reserves volume of 1,100PJ to support the initial LNG Train development of this project. In addition to the smaller scale of this LNG project, the ownership structure was also different to the Santos’ proposal. Arrow Energy intended to sell the gas to the LNG project that would be developed by LNGI. Arrow Energy has indicated it could act as aggregator of gas supply from other sources including its joint venture partners.

Reference: Owen Inquiry into Electricity Supply in NSW, Availabiltiy and Cost of Gas for NSW Baseload Generation, 31st July 2007.
This report has been prepared for the Owen Inquiry by Wood Mackenzie, Sydney, Suite 108,Level 1, 16-20 Barrack Street, Sydney, NSW 2000, Australia. Phone: +61 (0) 2 9299 0989. Fax: +61 (0) 2 9299 0669. Consultants: Ian Angell, Phone: +65 6518 0862; Andrew McManus, Phone: +61 2 9299 0989; Richard Quin, Phone: +44 131 243 4378; David Bradley, Phone: +61 8 9430 9599; Graham Tyler, Phone: +65 6518 0823; Valery Chow, Phone: +65 6518 0854; Karthikeyan Sathyamoorthy, Phone: +65 6518 0853; Facsimile: +61 (0) 2 9299 0669, e-mail: Andrew.McManus@woodmac.com

Erisk Net, 31/7/2007

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