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Australia Energy report November 2010


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T

he best view overlooking the energy world these days is from the land down under. A long time mining giant, the growth of Australia’s petroleum industry is now adding a preponderant

dimension to its international energy standing. With more than $200 bil-

lion worth of projects to exploit over 400 Tcf of gas, the eyes and resources of the oil and gas world are being drawn to Australia’s free-market, OECD environment. Domestic industry and foreign investors, meanwhile, need only look north to energy hungry Asia for steady long-term demand that has helped Australia avoid an economic downturn and positioned it, as the IMF described, at the “forefront of the global recovery.”

This sponsored supplement was produced by Focus Reports. Project Director: Jessica Santos Pereira. Editorial Coordinator: Manuel Felipe B. Mendoza. For exclusive interviews and more info, please log onto www.energy.focusreports.net or write to contact@focusreports.net

North Rankin A Platform, North West Shelf Venture – Courtesy of Woodside

advertisement November 2010  Oil & Gas Financial Journal • www.ogfj.com

3


Australia’s oil and gas, estimates reserves-to-production to be in

Gas reserves and resources

excess of 250 years. “Taking into account the other energy sources

2P 61 + Tcf*

3P 113 + Tcf*

we have, it is an indisputable

AUSTRALIA Resource potential 12 Tcf

statement to say that we are an CSG Resource potential 250 + Tcf*

energy superpower,” she asserts. LNG is forecasted to be Australia’s fastest growing energy export over the next two decades. Twenty-one years after the first

2P 7 + Tcf

LNG cargo delivery from Australia’s flagship Northwest Shelf Ven-

Dr. Clinton Foster, Chief of Petroleum and Marine Division, Geoscience Australia

ture (NWSV), there are over $200

Source: APPEA

billion worth of LNG projects in the planning phases, with final Despite the favorable outlook, 2010 has presented new chal-

investment decision (FID) immi-

lenges to the industry. Fallout from a proposed “super profits”

nent for many of them. By 2015

resources tax spiraled into a mid-year prime minister change and

Australian LNG exports could

subsequent federal elections, but still leaves industry yearning for

exceed 40 million tons per year

fiscal certainty; Deepwater Horizon has heightened safety con-

as Chevron’s Gorgon Gas Project

cerns, particularly as liquefied natural gas carries industry further

and Woodside Petroleum’s Pluto

offshore; and the infrastructure demands of prospective proj-

Project come onstream. Beyond

ects have exposed a looming labor shortage. Australia has the

2015, up to 10 other projects

resources below the ground to grow into an energy powerhouse.

could make Australia the world’s

How it surmounts the above ground risks go equally far in deter-

second largest LNG exporter.

mining its success.

Along the way Australia will be

Hon. Martin Ferguson, Minister for Resources and Energy, Minister for Tourism - Federal Government of Australia

home to cutting edge develop-

Gas is the biggest game in town

ments: the first conversion of

While a country of Australia’s continental size is no stranger to big

CSG-to-LNG; the first application of floating LNG technology; and

proportions, its plethora of “mega” liquefied natural gas (LNG)

the world’s largest carbon capture and sequestration project.

projects planned for the next 10 years are breaking new grounds

The proliferation of Australian natural gas projects coincides

for global oil and gas. Geoscience Australia – an entity of the Fed-

with declining levels of domestic crude oil production. Australia’s

eral Department of Resources,

oil production has been steadily declining since 2000 leading to a

Energy and Tourism (RET) – esti-

$16 billion trade deficit in crude oil, refined products, and lique-

mates conventional gas reserves

fied petroleum gas. Geoscience estimates the deficit could reach

off western basins to be 164 Tcf

$30 billion by 2015 with net imports of liquid fuels as high as ¾

with as much as 250 Tcf of coal

of consumption by 2030 in the absence of a major new discovery.

seam gas (CSG) assets in the

“The outlook for oil is not too good,” says Robinson. The oil

eastern states of Queensland and

reserves-to-consumption ratio is less than 10 years. The upside

New South Wales.

is that there is still the prospect of a major new discovery. Only 20% of our sedimentary basins have been explored. But barring a

Belinda Robinson, chief execu-

major discovery, the outlook for oil in Australia is very grim.”

tive of the Australian Petroleum

Meanwhile, gas production continues to grow to meet both

Production & Exploration Association (APPEA) whose member companies

4

represent

98%

Belinda Robinson, Chief Executive, APPEA

of

domestic and export demand reinforcing its importance to the energy mix.

www.ogfj.com • Oil & Gas Financial Journal November 2010


Hon. Colin Barnett, Premier of Western Australia

Seiya Ito, Managing Director, Inpex Australia

Ann Pickard, Country Chair, Shell in Australia

Jeff Dowling, Oil & Gas Leader Oceania, Ernst & Young

The wild and gaseous west

jors and multinational contractors. “What is happening here is of

Gas in Australia is segmented between onshore CSG assets in the

world significance,” Barnett adds. “The sizes of the gas fields that

east and predominantly offshore deposits in Western Australia

have been and will continue to be discovered are large by interna-

(WA) and the Northern Territory. While a palpable excitement is

tional standards and certainly large by Gulf of Mexico standards.

sweeping both markets, the offshore projects out west that are

The significance of the gas reserves here is their proximity to the

stimulating innovation and strengthening marine services suggest

expanding markets of Asia.”

that the right time and right place for gas is today in WA.

Where to find the majors

“Seventy percent of Australia’s oil and gas is off the Western Australian coast,” says Colin Barnett, the premier of Western Aus-

Attractive linkages to Asia and a stable political environment have

tralia. “The industry is dominated by WA. Of the three major reser-

drawn substantial investment from the world’s major oil and gas

voirs off the coast of WA – the Carnarvon, Browse, and Bonaparte

companies. Commitments vary from Shell and Chevron with over

Basins – only the Carnarvon has been relatively explored.”

100 years in Australia to GDF Suez and Petrobras, both relative newcomers. But the message is clear: Australia is a high priority

The offshore oil and gas reserves today in WA have been com-

market for global growth strategies.

pared to the same stage of development as the Gulf of Mexico 30 years ago, a comment brought to the premier’s attention on

Shell, a founding member of the NWSV, projects half of its

an April 2010 visit to Texas. Perth, consequently, has drawn ref-

global output to come from gas by 2012. “Globally Shell produces

erences as the “mini-Houston” given its landscape of superma-

over 18 million tons of LNG per year,” says Ann Pickard, country chair of Shell in Australia. “By 2020 we will add another 15 million tons per year, more

Fig. 1: Historical Australian oil and gas production

than half of which will come from Austra-

2000

lia. Australia is critical in terms of Shell’s

1600

growth in the LNG marketplace.”

1400 1200

mmbls

1000

300 250 200 150 100 50 0

Underpinning Shell’s projections are its 25% equity in the Gorgon Gas Project and

800

a joint venture (JV) with PetroChina which

600

will acquire Australian junior and CSG rich Arrow Energy for LNG developments in Queensland. Shell is also pioneering floating LNG technology through 100% equity in the Prelude Project and 27% participation in Sunrise LNG. Prelude is widely

93

19

94

95

96

97

98

99

00

01

02

19 19 19 19 19 19 20 20 20 Liquids (oil, condensate, LPG) (mmbls)

Source: APPEA

6

bcf

1800

20

03

04

05

06

07

08

09

20 20 20 20 20 20 Gas (sales gas, LNG) (bcf)

expected to be the first successful demonstration of floating LNG. “Prelude will open up a whole new ‘game’ in terms of

www.ogfj.com • Oil & Gas Financial Journal November 2010


access to stranded gas reserves,” Pickard adds. “It will also be

the opportunity to have an LNG

the first of several FLNG facilities. Our plan is to design one and

project with exploration, produc-

build many.”

tion, liquefaction, shipping, and

Given that the French were the original pioneers of the LNG

marketing all together.

LNG is

trade launching the first shipment from Algiers to Britain in 1964, it

becoming a global market and an

is only fitting that GDF Suez, the industry giant in integrated LNG

LNG leader such as GDF Suez has

projects, has invested in offshore gas’s hottest market. In January

to be present in the Asia-Pacific

2010 GDF Suez finalized an agreement to purchase a 60% share in

market.”

three gas fields in the Bonaparte Basin. Already present in Austra-

While the French pioneered

lia through the waste and water businesses, the Bonaparte LNG JV

the LNG trade, many would argue

with Santos, owner of the fields’ remaining 40%, represents GDF

that LNG today is very much an

Suez’s first move into the Australian energy sector.

Asian industry in both production

“Bonaparte LNG is a strategic project for us,” say Jean-François

and consumption.

Jean-François Letellier, General Manager, GDF SUEZ Bonaparte

Limited natural resource endowments have

Letellier, managing director of GDF Suez Bonaparte. “It adds a

made Japan, South Korea, and Taiwan big customers of Pacific

major component to the natural gas value chain of GDF Suez while

Basin LNG.

reinforcing our position as a world leader in LNG.”

ers. Japan in particular – only 16% energy self-sufficient and the

China and India, of course, are growing consum-

Bonaparte LNG is an integrated project whose purpose is to

world’s largest LNG importer – has a strong presence in Austra-

build a floating liquefaction plant with 2 million tons per annum

lia to address critical energy security needs. Osaka Gas, Tokyo

capacity in the Timor Sea. Final investment decision is expected

Gas, and Kansai Electric all hold minority interests and long-term

by 2014. “We consider integrated projects as key to accessing

purchase agreements in Australian LNG projects. Japan Australia

competitive LNG resources,” Letellier adds. “Australia provides

LNG Pty Ltd (MIMI) is a founding partner of the NWSV.

© PIERRE-FRANÇOIS GROSJEAN. AGENCE MARC PRAQUIN.

Our mission is a source of pride each and every day: responding to today’s needs while shaping the world of tomorrow.

Throughout the world, the men and women at GDF SUEZ focus their businesses on responsible growth to take up today’s major energy and environmental challenges: meeting energy needs, fighting against climate change, ensuring the security of supply for our customers and maximizing the use of resources. In the Timor Sea off the coast of Australia, we are leading the development of the Bonaparte LNG project in a partnership with Santos. Our aim: to extract natural gas from three fields, and liquefy it in a floating LNG plant for ease of storage and transport. Our close collaboration with our Australian partner reflects our commitment to ensuring a reliable supply of liquefied natural gas to the Asia-Pacific region.

gdfsuez.com

November 2010  Oil & Gas Financial Journal • www.ogfj.com CarsGdf_OGFJ_1011 1

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10/18/10 11:41 AM


The face of Japan in upstream Australia, however, is INPEX.

The new paradigm for Australian energy

In the late 1980s INPEX targeted Australia as the next stop in its

Unequivocally, the project that brings Australia to center stage

international diversification. A joint exploration block with BHP

is Gorgon LNG, operated by Chevron with Shell and ExxonMobil

Billiton yielded ten years of successful oil production allowing for

holding 25% interests, respectively. Superlatives abound for the

more aggressive growth in Australia. The result was WA-285-P.

$43 billion resource investment, the single largest in Australia’s his-

Better known as the Ichthys field, it is one of Australia’s largest gas

tory. Gorgon is estimated to produce 15 million tons of LNG per

fields with an estimated 12.6 TcF of gas and an expected operat-

year – 8% of current global capacity – every year over its projected

ing life in excess of 40 years. Ichthys’s 527 million barrels of con-

40 year lifespan. “One project; 8% of global capacity. By any mea-

densate makes it the largest petroleum liquids discovery in Austra-

sure, that’s huge,” emphasized Geroge L. Kirkland, Chevron Cor-

lia since 1966. Joint venturing with Total to glean LNG expertise,

poration’s executive vice president of Global Upstream and Gas,

the ambitious field development plans call for one of the world’s

at Gorgon’s FID ceremony in September 2009. According to ACIL

largest offshore central processing facilities and an 885km pipeline

Tasman, an economic consultancy, Gorgon will boost Australian

to an LNG facility in the Northern Territory city of Darwin.

GDP by A$64 billion and generate government revenues of A$40

Ichthys will engender unprecedented engineering challenges as well as usher in what managing director Seiya Ito describes a

billion over its first 30 years. It will also create 10,000 jobs during peak construction and 3,500 more throughout the project’s life.

“new beginning” for INPEX in Australia. “We have been success-

Gorgon’s gas processing plant will be developed on Barrow

ful as an exploration operator. It is now time for us to shift into a

Island, an A-class nature reserve located 56km off Western Austra-

developing operator and ultimately a production operator. Ich-

lia’s coast. As part of its environmental stewardship, Gorgon will

thys is an asset that we will grow with towards these new stages

host the world’s largest carbon capture and sequestration project.

of the company.”

Gorgon’s externalities can be felt here and now in Australia in the way that project planning is categorically elevating the environmental standards and shaping the strategic directions of companies throughout the entire Australian oil and gas value chain.

Fig. 2: Share of primary energy consumption, 2007-2008 (%) 0

10

20

30

40

50

60

Oil 36%

Natural gas 22%

Black coal 26%

Brown coal 11%

70

80

90

100%

Renewables 5%

Source: ABARE

In the right place at the right time An appetite for exploration Just how untapped Australia’s offshore basins are can now come to light after a change in regulatory framework that has made speculative surveying a growing business in Australia. In 2007 Australia increased the time under which speculative survey data becomes public domain from five to 15 years, a move that is drawing the attention of the world’s top geophysics companies. In practice, oil companies picking up relinquished blocks could have waited until data became public rather than pay for new data sets. “Essentially you only got one big ‘bite at the cherry,’” explains Tony Weatherall, VP geomarket director Australia, New Zealand and PNG.

Weatherall chaired the International Associa-

www.metgasco.com.au

8 CarsMet_OGFJ_1011 1

www.ogfj.com • Oil & Gas Financial Journal November 2010 10/18/10 11:06 AM


CPRS & RSPT: politically charged acronyms Australians awoke on June 24 to the surprising headlines of a new prime minister in office. Julia Gillard replaced Kevin Rudd as head of the Labor Party and prime minister of Australia in a swift change of leadership that capped off a precipitous fall in Rudd’s domestic approval ratings. Gillard has since called federal elections and on September 7, 2010 was elected prime minister on her own mandate following Australia’s first hung parliament since World War II. Rudd’s demise was largely blamed on two factors: first, his decision to delay legislation on an emissions trading plan known as the Carbon Pollution Reduction Scheme (CPRS) until 2013. Having labeled climate change “the greatest moral challenge of our generation,” his abandonment of the CPRS in exchange for budget-balancing issues ahead of federal elections damaged opinions on his principles and eradicated support from climate change advocates. Second, and more unsettling for the resources industry, was his proposal of a resources “super profits” tax (RSPT) in April. The rancorous debate that ensued between industry and government for two months eventually cost Rudd his job. The debate centered on the rate at which government defined “super-profits.” Any profits above 6% – equivalent to the long-term government bond rate – would be taxed at an additional 40%. While the RSPT would not have affected offshore projects, it would have drastically altered the economics of onshore developments, including major CSG projects in the works. Also damaging was the tax’s retrospective component to apply to existing projects for which investment decisions had already been made. Equally alarming was the absence of consultation between industry and government prior to the tax’s proposal. From a macro perspective, Australia’s stable, low-risk environment that had

attracted so much foreign investment had been compromised. Australian “sovereign risk” became an issue. Since assuming leadership, Gillard has rescinded the RSPT, proposed variations of existing petroleum rent taxes, and opened more transparent communications channels with industry. As of the writing of this publication, no final decision has been reached concerning reforms to the fiscal regime. Below are comments from industry leaders voicing their opinions and concern over the original RSPT. “Oil and gas is a long term investment. Long term investments need long term certainty. There are enough risks in the business through exploration, development, and oil prices without having to put regulatory and tax risk into it.” – Brent Steedman, partner, oil & gas KPMG “Investment dollars go where the resources are and where regimes are stable. Australia is blessed with enormous resources, which is good news. But any sort of unexpected change in the tax regime discourages investment because people will wait and see what develops.” – Ann Pickard, country chair, Shell in Australia “If the return on your investment is 6% and you are going to pay excess tax on anything above that, why don’t you just buy government bonds and sit home and watch television? One thing I know about resources is that it attracts particular sorts of investors who are willing to take risks. It is a risky business and people expect a better than 6% return to be compensated for the risk.” – Norman Moore, Minister of Mines, Petroleum, Fisheries and Electoral Affairs, Government of Western Australia “A really important point for us is trust and confidence. In Qatar, once we agree on things they don’t get changed. We do not go and do funny things and ruin the market for ourselves.” – Faisal Al Suwaidi, CEO of Qatargas

tion for Geophysical Contractors

certainly going to grow both proprietary and speculative surveys in

for two years which lobbied hard

Australia,” he asserts. I would like to be shooting surveys up in the

for the government to change the regulation.

As a result, he com-

ments, “the regulatory change altered the landscape of seismic in Australia, probably forever.” Results of the change are evident. There were no speculative surveys shot in Australia after 2002 Tony Weatherall, VP Geomarket Director Australia, New Zealand and PNG, CGGVeritas

with Veritas (before the merger with CGG) being the last to shoot

in 2D. Since 2007 CGGVeritas has shot at least 3,000km of speculative surveys by Weatherall’s estimates. Boasting the largest fleet in the world amongst geophysics companies and with seven vessels in Asia-Pacific, the goal for CGGVeri-

CGGVeritas geologist offshore

tas is to bring its first vessel back into Australia since 2008. “We are

November 2010  Oil & Gas Financial Journal • www.ogfj.com

9


A piece of the pie for everyone In the early 1970s, after a decade of unsuccessful drilling, a small independent Australian company struck 50 TcF of gas off WA to form the basis of the NWSV. While offshore gas might be the biggest game in town, don’t tell that to Australia’s junior E&P companies actively drilling onshore with the hopes of becoming the next Woodside Petroleum. “Australian investors like betting on small stocks to see a little bit of exploration luck and watch our share price go up tenfold. They invest in a small company to see it become the next Woodside,” says Russell Langusch, managing director of Orion Petroleum with exploration assets in New South Wales. Juniors in Australia work as scouting agents in a sense for the bigger players whose attention is diverted to offshore basins or, in the case of CSG, liquefaction facility planning. Strategies range as to how to draw the attention of larger farm-in partners. “We generally look at assets that are impaired in some way,” says Langusch. “We would look for assets that companies have walked away from that have been too technically hard to commercialize. That is the edge we can bring – the technical ability to rescue assets that have been suspended rather than a prime A-grade asset.” A company like Central Petroleum leans on its size by boasting the largest acreage package in Australia, predominantly in the Northern Territory’s Amadeus Basin; certainly attractive farmin potential for anyone. “Independent assessments have given

us estimations of a viable exploration target of over 600 billion tons of coal above 1,000 meters that might be developed either through underground coal gasification or coal-to-liquid processor,” says managing director John Heugh. Historically, the Cooper Basin has been the main onshore region for hydrocarbon production. As such, it is very crowded with companies looking to leverage off neighboring petroleum plays. “Almost every block in the Cooper Basin has been awarded,” says Mike Scott, managing director of Cooper Energy. “In our portfolio we probably have three to four years of prospects left and then we will have to replace those exploration blocks with new acreage. We are active overseas precisely for that reason.” The game changer for juniors in Australia could most likely be CSG – just ask junior CSG specialist Metgasco. David Johnson, managing director, describes Metgasco’s acreage position as “similar to that of Queensland Gas Company at the time it was taken over by BG.” Convenient for Metgasco, estimates cite the Bowen-Surat-Clarence Moreton system in eastern Australia to be a major gas producing province for a considerable period of time. “Translating gas in place to reserves and extracting gas commercially is an ongoing process that we are now in the middle of.” It is a discussion that would certainly be of interest to a larger company, given the CSG-to-LNG infrastructure planning amongst a consortia of supermajors.

Browse Basin and in the Northern Territory. The other growth here

Central Petroleum Limited

is obviously processing. We have a very strong depth processing

ABN 72 083 254 308

team here and we get a lot of work from Australia.”

• 270,000km 2 (70 million acres) c. 1/2 the size of Texas • • • •

Prospective for oil, gas, condensate, helium, coal Surrounds producing fields Conventional, unconventional plus UGC, CTL, GTL, LNG potential JORC “Exploration Target” over one trillion tonnes coal

If you build it they will come LNG projects pushing the industry further offshore are stimulating a new generation of marine services. New ships break grounds in size and design and the importance of supply bases are becoming more apparent to address logistical challenges. Despite being entirely within Australian waters, the northwest’s offshore gas fields are equidistant from the industrial hubs of Singapore and

Northern Tertiary

Perth. The competition amongst supply bases can very well see

Western Australia

Texas

Singaporean marine yards servicing Australian offshore projects.

South Australia

Queensland New South Wales

WA’s response for infrastructure in support of local industry is the Australian Marine Complex (AMC). Located 20km south of Perth the AMC is an industrial cluster of manufacturing, fabrication, and assembly services for the marine, defense, oil and gas, and

Victoria Tas.

resource industries. Earlier this year the AMC commissioned WA’s first floating dry dock which will prove critical in servicing upcoming projects. “We are expecting about 80 vessels to be on the North-

John Heugh Managing Director Phone : +61 8 9474 1444 Email : johnheugh@centralpetroleum.com.au Website : http : //www.centralpetroleum.com.au

west Shelf over the next few years,” says AMC general manager Mike Bailey. “A lot of those vessels will be running to and from this facility. All of them will need repair, maintenance, and dockings.”

10

www.ogfj.com • Oil & Gas Financial Journal November 2010


Australian based businesses with access to large scale industrial infrastructure.

The

CUF was initially funded by $100 million and $80 million from State and Federal Government, respectively, which enabled the construction of wharves, fabrication halls, and a protected harbor. “Our role is to enable a company to do projects that they could not undertake with just their facilities by giving them that virtual capacity increase,” says Bailey. “Whereas they could fabricate something up to 200 tons in their workshop, our role is to give them the ability to make a module of 2,000 tons. We want to see projects coming to WA that can and should be done here. We Common User Facility - Australian Marine Complex

are very biased in that sense.” A second piece of vital infrastructure for

The AMC’s most iconic representation and greatest asset is its

servicing Northwest Shelf projects is the Dampier Supply Base

Common User Facility (CUF). Bailey characterizes its enabling role

that is owned by Mermaid Marine Australia, the country’s largest

as a form of “industrial empowerment.” The CUF exists to provide

marine services provider for offshore oil and gas. A stand alone

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November 2010  Oil & Gas Financial Journal • www.ogfj.com CarsCGG_OGFJ_1011 1

11

10/18/10 11:22 AM


TSmarine Havila Harmony at work offshore Western Australia

Mermaid’s core business continues to be the provision of support vessels and has invested over $100 million in fleet renewals over the last five years. Utilizing its vessels for pipelay support on the Pluto Project not only insulated the organization from the financial crisis, but triggered growth in 2008-2009. But with Gorgon and other projects approaching production, supply base operations are becoming increasingly important. Since 2002 Mermaid’s operations have shifted from 95% vessels and 5% supply base to 70% and 30% this year. “You can move boats around to meet the market. But with a supply base it creates a ‘build and they will come’ type scenario,” he adds. As projects and customers come, Weber sees a host of externalities driving business. “You get to know your clients very early on in the cycle. If you are doing offshore work, the first thing that

$100 million asset, managing director & CEO Jeff Weber also con-

you do is get an office and a warehouse to store your gear. By

siders it Mermaid’s single biggest competitive advantage. “Peo-

the time a client needs a vessel to begin their offshore work we

ple often underestimate the challenges of operating vessels in the

already have an established relationship with them.”

northwest compared to Singapore where, if a vessel encounters

Exposure to long-term contracts was particularly beneficial to

a problem there are 20-30 suppliers to help at any time. It is a

Australian marine service companies during the crisis. With Gor-

tremendous asset for a region where it is hard to operate because

gon reaching FID in September 2009, losses carried into the cri-

of minimal infrastructure and scarce supplies.”

sis years were quickly recouped, if not, evaded altogether. Andy Cowan, QHSE manager at Bhagwan Marine, light-heartedly comments, “what financial crisis?” Founded in 1998 with just one ship, Bhagwan Marine has flourished over the past 12 years into the owner and operator of a fleet of over 35 vessels. Its newest addition will be a custom built landing craft – the Bhagwan Shaker – to service Barrow Island; the Shaker’s sister ship, appropriately named the Bhagwan Mover, has already been in operation for Gorgon for the past 12 months. In addition to obvious revenues, servicing Gorgon has provided an

Orion Petroleum Limited An Ambitious Australian Exploration Company

immediate opportunity to exploit the strength of Bhagwan’s vessels while positioning it for future growth. “This is a niche market and there are not many companies dealing in the port services out to and around Barrow Island, which is largely shallow water,” explains Cowan.

7 onshore exploration licences Conventional plus CSG potential Prospect sizes to multi – tcf targets  Always looking for new growth opportunities

Made in Australasia Construction of the AMC’s floating dry dock and the Bhagwan Shaker was done by Strategic Marine, Australia’s largest builder for oil and gas industry supply boats. Strategic Marine leans on a rich tradition of shipbuilding born out of WA. Chairman Mark Newbold explains that WA developed a commercial expertise in building aluminium boats before anyone else. “There were a num-

Suite 303, Level 3, 10 Bridge Street Sydney NSW 2000 Australia T: +61 2 9254 9000 E: office@orionpetroleum.com.au W: www.orionpetroleum.com.au

12

ber of companies in WA that became exporters and a host of reasonable sized yards that became experts. We are now exporting the technology that we developed over the years.”

www.ogfj.com • Oil & Gas Financial Journal November 2010


CEO of AusGroup, the largest fabricator in WA, explains that “what typically comes local is schedule-critical or a product that is price insensitive.”

Fully developed project modularizations,

meanwhile, are sourced in Asia. Strategic Marine has followed suit by developing niche specialties for its Asian yards. “Singapore is very much a specialist aluminium yard that is quite mature in its development and is producing high quality work. The Vietnamese yard has opened up quite a bit of business for us because of its steel capabilities,” says Newbold. The Vietnam yard also played an integral role in Bhagwan Mover at Barrow Island

the construction and assembly of the AMC’s floating dry dock. The Australian yard, meanwhile, being located within the AMC, is shifting more into marine services repair and maintenance mindful

Adapting to the economics of the industry, Strategic Marine

of the future demands of the Northwest Shelf.

has exported its capabilities to its four shipyards in Australia, Singapore, Vietnam, and Mexico. While proximity to Asia allows

Global content, local continent

operators to satisfy a hungry commodity demand, Australian man-

While State supported projects such as the AMC provide an

ufacturers and fabricators benefit from cost-competitive labor and

important impetus for industrial development, the synergies from

resources.

Globalization and the fully developed Asian supply

mature oil and gas provinces are proving equally beneficial in fos-

chain have shifted industry dynamics forcing Australian manufac-

tering service sector growth. The talent and resources that have

turers and fabricators to adjust their strategies. John Sheridan,

made Aberdeen and Stavanger centers of subsea excellence are

14

www.ogfj.com • Oil & Gas Financial Journal November 2010 CarsBha_OGFJ_1011 1

10/18/10 11:37 AM


from other subsea construction companies.

The Mermaid Voyager Berthed alongside the Mermaid Marine multi user wharf facility in Dampier

“We focus most of our activities around the well. In addition to our rigless intervention capabilities we can do all the low margin work for a drill rig typically done by them because no one else has the technology to do so. In our business any activity close to the well is the highest margin work that we can do because of its value for oil companies.” TSmarine’s

integrated

capabilities

afforded by its vessels and ROVs were a serendipitous surprise for Woodside when fulfilling its first contract. Essentially TSmarine’s services exceeded their original mandate. “We did not just do well intervention: we were the first company in this now gravitating to Perth. From executive

The technical challenges of subsea field

region to install and run a Christmas tree

managers to new global headquarters, WA

developments are creating a market for life

thereby freeing the drill rig to fulfil its real

oil and gas services are becoming a truly

of field service providers. TSmarine, how-

value of actually drilling; we installed flow

global mosaic, with a North Sea twist.

ever, explains Edwards, is quite different

bases, tied trees into each other with jump-

Perhaps no greater testament to Australia leveraging, and ultimately overtaking, North Sea activity is TSmarine, a subsea contractor specializing in integrated life of field services. TSmarine was founded in Aberdeen in 2004. The Perth office, which began in 2006 from a Woodside contract, quickly established itself as one of the best performing centers and completed a management buyout of the parent company in November 2009. As

chief

executive

John

Edwards

explains, “There was a period of nearly two years when this office was funding the head office which was in pretty bad financial shape. We decided that the best way to ring-fence what we had and make sure that our success continued was to buy the business from the parent company. That also gave the parent company the needed cash to resolve their financial issues.” Shortly after finalizing the deal the Aberdeen head office shut down. To complete the circle, TSmarine plans to reopen an office in Aberdeen on the back of a service contract.

November 2010  Oil & Gas Financial Journal • www.ogfj.com CarsMer_OGFJ_1011 1

15 10/18/10 11:44 AM


ers, and installed drilling conductors. It is

the resources of a global corporation. “The

bination with Subsea 7, currently awaiting

not typical that a company has all of those

Acergy model is around having the right

regulatory approval, will see an enlarged

services under one roof,” says Edwards.

mix of local knowledge that is backed by a

global fleet of 42 vessels with the full spec-

global consistency,” he explains. “We have

trum of pipelay capabilities, several of which

Scotland’s North Sea neighbors and fellow experts in offshore services, the Nor-

been building a local track

would likely be bound for

wegians, are also finding a comfortable

record over the past sev-

Australia.

home in Australia with multinational com-

eral years to understand

Cormell,

panies steadily increasing their presence to

the local issues. You back

fleet will have the opportu-

grow alongside major operators. Subsea

that up with a company

nity to make more vessels

specialist Acergy made the full leap into

that understands how to

resident in certain parts

Australia in 2006 with the establishment

deliver very large projects

of the world. As Australia

of a permanent office in Perth. “The scale

and I think it is a model for

becomes an ever increas-

and complexity of the LNG projects com-

success.”

ing part of the world, it is

ing to market over the next few years are of

Acergy has been strate-

great interest to a company like Acergy,”

gically building its portfo-

says Darren Cormell, managing director of

lio of assets to support its

Acergy Australia.

local talent. SapuraAcergy,

According to “the

enlarged

likely that we will look to optimize the fleet to make Mark Newbold, Chairman, Strategic Marine

them as attractive as possible in the region.”

Well equipped with world class technol-

a JV between Acergy and SapuraCres, com-

With over 20 years experience provid-

ogy, Cormell considers Acergy’s greatest

mands the Sapura 3000, a regionally based

ing mooring solutions to the harsh condi-

growth driver in Australia to be its human

vessel with leading capabilities in heavy lift

tions of the North Sea, Norwegian incorpo-

assets of strong local talent that leverages

and deep end pipelay. A proposed com-

rated Viking Moorings now brings its suite

16

CarsStr_OGFJ_1011 1

www.ogfj.com • Oil & Gas Financial Journal November 2010 10/18/10 10:16 AM


Structured for success Major multinationals with established expertise in their fields are finding that success in Australia comes as much from their corporate structuring as from their product offerings. Oilfield services giant Baker Hughes, for example, is comfortable accepting the challenges of Australia with the backing of an internationally innovative body of work. “A priority is to focus on more deepwater and high-temperature reservoirs, aligning with the work undertaken by major operators in the area. Most of the high-tech infrastructure required is very familiar to Baker Hughes,” says managing director Bernie Kelly. The biggest difference, however, for Baker Hughes in Australia has been the efficiencies generated from their geomarket model, developed over one year ago, which shifted vice-presidents to regions and consoliCTC Marine RT1 Rock Trencher

dated the management of vari-

Christian Lange, CEO, Neptune Marine Services

ous product lines. of offerings to Australian waters. “In Australia we have not had the high caliber technical mooring solutions that we have now,” explains Perth branch manager Trond Watland. “We have introduced different methods for semisubmersible rig mooring such as

Project-driven solutions and specialist technology for subsea construction, installation and trenching in the international offshore industry

fiber ropes which are new to Australia.” A premium on safety has placed a strong emphasis on expert training. With the training still sourced from Norway, Viking Moorings embodies North Sea-Australian knowledge transfer. “Training people in anchor handling, fiber rope management and being able to certify, qualify, and repair on deck is a trait that the Australian market does not yet have, so most of our training has come out of Stavanger,” Watland explains. “We have an all-Australian crew in Karratha and Dampier that is being trained by Viking Moorings staff that has come in from Norway. Everyone on that crew are the only ones who can do what they do in Australia. It is a valuable input that is coming into our workforce.” When combining North Sea know how with Asian manufacturing and a strong local industrial base, the oil and gas sector’s organization has a truly multinational dimension. As Christian Lange, CEO of Neptune Marine Services, argues, “I am intolerant of people saying

A MEMBER OF

TRICOMARINE

that Australia lacks the technology or expertise as the Gulf of Mexico

G R O U

or North Sea. Australia has a fantastic education system and most

A

D

E

P

T

A

T

A

D

P A

P

T

I

N

G

of the industry here have either come from those regions or have worked there and repatriated. In many cases we lead the charge.” T | +61 8 9218 8400

November 2010  Oil & Gas Financial Journal • www.ogfj.com

E | commercial@ctcmarine.com

www.ctcmarine.com

17


Historically, Baker Hughes’ product lines

base, infrastructure and expertise.”

were managed separately and entered the

Integration, meanwhile, is the defining

market at different times to coincide with

feature of professional services giant Ernst

stages of clients’ oilfield production. “In

& Young throughout Asia-Pacific.

Australasia, we inherited seven different

as major operators have set up regional

offices and five different sites,” says Kelly.

centers for value chain operations, Ernst

Just

“One of the areas we are

& Young has replicated

focusing on is consolida-

its

tion of our separate opera-

lishing

tional bases, which were

tise for its practices: an

the result of our previous

upstream business in WA

divisional

hubs

by

estab-

of

exper-

to

and Queensland; a trad-

provide improved efficien-

ing business in Singapore;

cies to customers.”

New

and a specialist service

efficiencies

approach,

approach

ready

business to support buy-

Baker Hughes to capitalize

now

ers in Beijing. The result,

on both the offshore and

as Perth’s managing part-

CSG segments of the Australian market.

Darren Cormell, Managing Director Australia & New Zealand, Acergy

“Deep water and high

are

leader Jeff Dowling notes is that, “of the ‘Big

temperature

reservoirs

ner and oil and gas sector

Four,’ Ernst & Young

the

is the only firm that

areas in which there

is

is a lot of explora-

grated

tion to come.

the

The

level of tools that in

inte-

throughout

whole

Asia-

Pacific region.”

we are going to run down

financially

“Shell is a very

Australia

good

are becoming much

this,”

more high-tech than

“Shell has relocated

we have seen his-

its upstream busi-

torically.

ness in Oceania to

We can

example he

of

adds.

export our learnings

Perth.

here to other areas,”

have a trading hub

says

in

Kelly.

immediate

The impact

offshore

are

and

interfac-

ing with customers

reservoir

services will be com-

Singapore

they

of Baker Hughes’s

They also

Acergy Team working Offshore

plimented by future

in Beijing.

All of

the

majors

global

are doing the same

growth in the CSG arena by way of its

and we are replicating our business model

September 2009 acquisition of BJ Services

accordingly. We have evolved into three

and its large CSG portfolio. Notes Kelly,

hubs with oil and gas specialists across our

“Baker Hughes will be reassessing its strat-

disciplines in those three areas to provide

egy in servicing CSG, leveraging the syn-

a seamless service between the producers,

ergies gained with BJ Services’ customer

buyers, traders, and support services.”

November 2010  Oil & Gas Financial Journal • www.ogfj.com

19


Innovation down under The subsea systems for the Gorgon Proj-

Viking Moorings personnel in action on prelay vessel

ect in the heart of the Northwest Shelf face combinations of high pressure, high temperature, and corrosive product. “One of the biggest challenges is the deep water element, and especially the continental shelf. It is effectively a subsea cliff 100km offshore across which you need to install a pipeline,� explains Phil Brown, director & performance team leader of J P Kenny Perth. “The environmental conditions there are possibly more challenging than any other place in the world,� he adds. “The cyclones generated in the area are extremely powerful.

You have a num-

ber of other interesting features like the solitons – giant subsea rolling waves that

of the world. Adding the extreme tides,

Responding to these challenges, J P

are within the water column – which you

currents, and cyclones all together, it is a

Kenny has applied its FEED expertise on

would not encounter in many other parts

tremendous metocean design challenge.�

some of the biggest and most difficult

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10/18/10 10:11 AM

www.ogfj.com • Oil & Gas Financial Journal November 2010


subsea projects in Australia: Gorgon upstream development in

an onshore treatment facility are at the top of a developer’s list.

partnership with Technip; subsea development for the Julimar

A lot of the focus from an engineering and developing point of

Project, Apache’s largest ever gas project; and INPEX’s Ichthys

view is at the field itself – wells, platform, onshore plants and the

Project. “We have always had a focus on optimizing and eliminat-

marine facilities to export LNG. The pipeline is often seen as the

ing the layers of design conservatism that have

detail that connects the two. It is not underesti-

historically existed,” says Brown. “We have also

mated infrastructure, but normally where we put

expanded that philosophy into other design fea-

the pipeline on the seabed depends on where the

tures such as lateral buckling, for example.” All

plant will be built.”

of this has branded J P Kenny Perth an emerg-

In April Woodside announced plans to develop

ing center of excellence amongst it global offices

its Sunrise Field with a floating LNG facility rather

for pipeline stability. Considering Wood Group

than a pipeline to either East Timor or the North-

Kenny’s global presence and identity as the spe-

ern Territory. “That is how easily a pipeline can

cialist of its kind in the world, the Perth office’s

be eliminated on paper,” asserts Jas.

recognition speaks to the degree of difficulty of

large projects are currently in the planning phase

subsea Australia. Adding another dimension to subsea pipelines

Several

for pipeline design, construction, and first gas. Phil Brown, Director and Performance Team Leader - J P Kenny

is the difficulty in their design, yet the ease in

Those whole views could easily change over the next year, Jas believes.

which they can be altered, even scrapped, from a project’s plans.

Meanwhile, for those pipeline projects that do go ahead, the

Eric Jas, managing director of Atteris, a design engineering com-

northwest’s seabed poses considerable challenges. Brown char-

pany, cites that despite the difficulty of pipeline engineering, “it

acterizes its unconsolidated limestone materials at the top and

doesn’t seem to me that offshore pipelines between a field and

hard rock beneath as very difficult foundations for installing big

November 2010  Oil & Gas Financial Journal • www.ogfj.com CarsJpk_OGFJ_1011 1

21

10/18/10 10:48 AM


platforms or trenching pipelines. “There is significant variability from calcarenites and limestone

Eric Jas, Managing Director, Atteris

powerful mechanical rock trencher in the world. RT-1 is the premier reason for CTC Marine’s increasing presence in Australia,” he comments.

to deep sand,” agrees Marcus

Traditionally pipeline stabilization in the Northwest Shelf has

Hemsted, technical sales man-

been done by rock dumping – an expensive exercise that carries

ager of CTC Marine. “There are

environmental concerns. Using RT-1, CTC Marine’s technique to

not a lot of trenching machines

bury pipelines is used in conjunction with dumping to minimize

capable of burying trunk lines in

the effect of rock. “In sum,” Hemsted concludes, “there is no

these seabed conditions in the

other hard ground trencher like the RT-1 at the moment that can

current marketplace.”

productively trench pipes as big as the ones she does in the hard

Recognizing this void, CTC

seabed.”

Marine established a local presence in Perth in 2008 to grow its Australian operations bringing

The local innovator turned global player

with it cutting edge technology that is customized for the North-

Local innovation ultimately built a growing international business

west Shelf. Operating one of the biggest trenching fleets in the

in the case of Neptune Marine Services. What is today a broad-

world, the specific feather in the asset cap of CTC Marine is RT-1,

based subsea engineering company providing a suite of life of

a potential game changing technology for large diameter subsea

field services and bespoke engineering solutions across four con-

pipeline stabilization. Weighing over 200 tons and capable of

tinents, began with one proprietary technology. “Neptune was

trenching pipes up to 1.5 meters in diameter, Hemsted described

incorporated in 2003 in order to develop our underwater welding

RT-1 as the biggest mechanical subsea pipeline trencher in the

technology, NEPSYS®,” says Lange. As Neptune’s flagship tech-

world. “With 2.3 megawatts of trenching power she is the most

nology, NEPSYS® was developed to provide a low-cost permanent weld solution equal to dry weld standards that was believed to be missing in the Australian market. Lange joined Neptune in 2006 with the task of growing a business out of the technology. “My goal was to build a service orga-

𰁄𰁥𰁳𰁩𰁧𰁮𰀠 𰁅𰁮𰁧𰁩𰁮𰁥𰁥𰁲𰁳𰀠 𰁦𰁯𰁲𰀠 𰁓𰁵𰁢𰁳𰁥𰁡𰀠 𰁐𰁩𰁰𰁥𰁬𰁩𰁮𰁥𰀠 𰁓𰁹𰁳𰁴𰁥𰁭𰁳

nization with the NEPSYS® technology as the key differentiator. After spending six months reviewing the marketplace, I felt that there was a role for a domestic Australian company that offered our broad range of services; and that model could be expanded to key offshore areas,” Lange explains. Neptune’s growth and the development of a business from its technology has been largely

𰁓𰁵𰁢𰁳𰁥𰁡𰀠 𰁐𰁩𰁰𰁥𰁬𰁩𰁮𰁥𰁳 𰁒𰁩𰁳𰁥𰁲𰁳𰀠 𰀦𰀠 𰁔𰁩𰁥𰀭𰁩𰁮𰀠 𰁓𰁰𰁯𰁯𰁬𰁳 𰁓𰁨𰁯𰁲𰁥𰁬𰁩𰁮𰁥𰀠 𰁃𰁲𰁯𰁳𰁳𰁩𰁮𰁧𰁳

fuelled by international acquisitions.

Today operators look to

Neptune for engineering prowess while construction companies are supported by surveys, diving, ROVs, pipeline stabilization services, and upfront engineering to support detailed design. However, Neptune’s diverse capabilities often put them in nebulous and unintended competition with traditional EPICs that is consequently is reshaping the traditional EPIC model. Explains Lange, “one thing that we that we need to address and contend

𰁃𰁯𰁮𰁣𰁥𰁰𰁴𰀠 𰁄𰁥𰁳𰁩𰁧𰁮 𰁆𰁅𰁅𰁄 𰁄𰁥𰁴𰁡𰁩𰁬𰀠 𰁄𰁥𰁳𰁩𰁧𰁮

with is a lot of EPIC companies looking at us as competitors. We have made the separation between ‘church and state’ so we very clearly support them and do not compete with them on the construction scope. That is not to say, however that they do not compete with us. A lot of those companies are looking at various 𰁔𰀠 𰀫𰀶𰀱𰀠 𰀨𰀰𰀩𰀸𰀠 𰀹𰀳𰀲𰀲𰀠 𰀷𰀹𰀲𰀲 𰁆𰀠 𰀫𰀶𰀱𰀠 𰀨𰀰𰀩𰀸𰀠 𰀹𰀳𰀲𰀲𰀠 𰀷𰀹𰀸𰀸 𰁩𰁮𰁦𰁯𰁀𰁡𰁴𰁴𰁥𰁲𰁩𰁳𰀮𰁣𰁯𰁭𰀮𰁡𰁵 𰁷𰁷𰁷𰀮𰁡𰁴𰁴𰁥𰁲𰁩𰁳𰀮𰁣𰁯𰁭𰀮𰁡𰁵

22

life of field services – from seismic drilling to decommissioning – which is our sweet spot.”

www.ogfj.com • Oil & Gas Financial Journal November 2010


Power of the people

into oil and gas spe-

The fiscal uncertainty that is still looming

cific needs such as

as many LNG projects approach FID will

reservoir engineering

likely “change development timeframes

or drilling.

until people get a better handle on how to

the continuous devel-

bring these projects on,” predicts Dowling.

opment of Australia’s

Fiscal uncertainty notwithstanding, project

supernumerary

timetables could be delayed on the basis

gram to team interna-

of another major industry concern: a labor

tional specialists with

shortage. The construction boom for Aus-

local graduates and

tralian LNG projects is estimated to create

accelerate the knowl-

55,000 new jobs. Additionally, projects

edge program.

Third, is

pro-

Len Bunn, Executive Director; Steve Jones, CEO and Dean Paton, Executive Director, Plexal Group

moving into brownfield environments will

Australia’s 457 Visa is a process in place to

A turning point in the industrial relations

place an increasing need on local services

facilitate this type of transfer. “We even think

challenge could very well be the new Labor

leaving many in the industry pondering

that you can cherry pick certain projects of

government. While still too early to tell,

about how to fill labor needs.

national significance and create a highway for

Brunel believes that positive signals have

“I am concerned as to the collective

them whereby the immigration process is tai-

been sent regarding more active engage-

plan of both industry and government to

lored to match project requirements. That is

ment between industry and government

be ready for this without driving inflation-

where government and industry need to align

on this issue which could realistically inhibit

ary wage pressures, the flow on effect to

their needs. If that highway is fabricated, Bru-

the full development of Australian oil and

cost of living, and production target assur-

nel is ready to travel on it,” he adds.

gas.

ance for the operating companies,” adds Plexal Group CEO Steve Jones. Construction for many LNG projects is not scheduled to begin for another few years so industry and government still have the silver lining of time on their side. Robinson points out that not all 55,000 jobs will be created at once. “There is going to be an elevation of a need for resources over a much longer term. Fortunately we will have time to work on mid-term and longterm solutions,” notes Craig Follett, Australasia regional director of Brunel Energy, the global leader in white collar placement and the Australian leader for blue collar placement for the oil and gas industry. However, time cannot breed complacency. Follett highlights a three pronged approach to address labor shortages. “The longer term solution is the stimulus of technically skilled people” to align stu-

Expanding Regional Portfolio. Opening our Third Office - Brisbane Australia. CSG, LNG, Gas Transmission complementing our Thailand and Western Australian business. -

Marginal field development Multi-discipline engineering Turn-key control & safeguarding Turn-key PIMS Metering

dents’ technical directions with industry requirements.

www.plexalgroup.com

Second are apprenticeships programs to transfer traditional heavy industry skills

November 2010  Oil & Gas Financial Journal • www.ogfj.com

23


Safety first and always

wants to perform as the best in the

Three converging issues have heightened the safety mindset in

world,” says Brendan Fitzgerald,

Australia to new levels. In August 2009 the Montara rig, owned

managing director and co-founder

by Thai exploration company PTTEP, began leaking oil for two

of safety and risk engineering con-

months off the coast of WA. The final results of a federal gov-

sultancy Vanguard Solutions. In its

ernment inquiry into the report are expected by year’s end with

10 years of operations Vanguard

likely regulatory changes to follow. Second is Deepwater Horizon

and its personnel have taken the

with its impact reverberating around the world. In response, 30 of

lead on safety engineering for

Australia’s biggest oil and gas producers are preparing an industry

many of Australia’s largest projects

wide agreement to allocate financial resources in the event of an oil spill in Australian waters. Third, and perhaps most challenging,

Bernie Kelly, Managing Director, Baker Hughes Australia

is the integration of a multitude of new workers under one common safety culture.

such as Woodside’s Chinguetti, North Rankin B, and Pluto.

“The

problem though is that sometimes people become overly focused on the slips, trips, and falls part of

Lange asserts this might be easier said than done.

Australia

“will have a large influx of people who may not speak the language and have different cultures, educational backgrounds, and

safety – which are easy to identify – rather than the management and process risk.” Any regulatory changes will add to an already progressive five

expectations. When you put all the new backgrounds, cultures,

years for safety standards in Australia.

and expectations together, the management of the integration of

Petroleum Safety Authority (NOPSA) began operations in 2005.

all of these people is my main concern.”

Today Australian law requires every offshore facility to have a

The National Offshore

Specific changes to the regulatory landscape are still unclear.

NOPSA accepted safety case. The mandatory introduction of the

“I think there is no doubt that the Australian oil and gas industry

safety case, Fitzgerald notes, is one of the biggest changes he has seen in his over 25 years in the industry. However, he believes, more action needs to support the plans. “A lot of people think that the job is over when the safety case is delivered. Producing the safety case and having it accepted by the regulator is just the first step. You then have the lifetime of the facility to operate. The safety case is a roadmap and you have to walk the talk.” Safety issues for drilling are an obvious concern with industry penetrating harsher environments and increasing water depths. Well designs are becoming more complex through extended reach, horizontal, and multi-lateral wells; all pose high risks and enormous costs of failure not previously encountered in Australia. The best accident prevention and safety enforcement is quality training as viewed by Welltrain, a rapidly expanding school for operationally relevant well control training. Welltrain addresses both the human element of accident prevention and harnesses the transferrable skills between offshore,

onshore,

and

CSG

drilling. “Improved levels of training are required to match the skills necessary to operate more complicated equipment and well

24 CarsVan_OGFJ_1011 1

Brendan Fitzgerald, Managing Director, Vanguard Solutions

www.ogfj.com • Oil & Gas Financial Journal November 2010 10/18/10 11:33 AM


designs,” says training manager Dave Pol-

clear business opportunity – Jones is posi-

are seriously depleted?”

lack. “Today, we have cyber-outfitted drill-

No stranger to conventional hydro-

tioning Plexal to leverage technical IP from

ing rigs where the work for a driller is all

carbon engineering, the Plexal Group’s

LNG and transfer it into renewables which

done through joysticks, not brake handles.

expertise is in brownfield expansions,

he believes is the next big industry for Aus-

The driller is more removed from the drill-

upgrades,

and

marginal

tralia. “The LNG business

ing process by being insulated inside a

greenfield

developments

is going to produce a lot of

quiet, high tech environment.”

with a focus on control

revenue. It is also going to

Pollack notes that existing well control

and safeguarding systems.

bring in a lot of technical

training tends to be more academic and

Jones cites Plexal’s work

expertise. In the medium

does not provide sufficient practical and

on Woodside’s Goodwyn

term, we would like to

operational training.

Welltrain aims to

A Safeguarding System as

grow a lot of this exper-

plug that gap by blending the practical

a critical experience that

tise

with the theoretical.

underpinned its extension

involved

Third party drilling training is still an

into Thailand and its con-

energy, tidal power gen-

evolving market in Australia that is neces-

tinued expansion through-

eration, or concentrated

sarily driven by industry changes. “Previ-

out Southeast Asia. Plexal

ously, in-house training courses were a

proved

feature of working for major oil and gas

upgrade and transfer under full production

resource endowment creates many syner-

operators,” explains Welltrain managing

conditions, with no dedicated shutdowns,

gies between conventional fossil fuels and

director Tom Brand. “In the last 10 years,

a gas platform of 3,500 safety devices.

renewable energies.

however, companies are tending more towards outsourcing training.

its

ability

to

Craig Follett, Regional Director Australasia, Brunel Energy

But driven by a larger purpose – and a

and

get in

ourselves geothermal

solar power,” says Jones. Indeed WA’s total natural

“There are massive

water and power issues in the northwest

There are

also a lot of smaller rig owners who just don’t have the resources or specialized skills to run their own training department.” Specialized training is also required in the comparatively new CSG industry. “Whilst the mechanics of the drilling process are essentially the same, crew members may not be aware of the hazards that are involved in drilling CSG wells where hydrocarbons are being exploited,” adds Brand.

Engineering the future While Australia is preparing for an eventful decade of major LNG projects whose production and economic impact will extend decades more into the future, the head of one engineering firm is looking ahead to life after LNG. “We have this unbelievable

Providing Professionals Globally Brunel Energy provides specialised knowledge to the international oil & gas, petrochemical, power generating, fabrication and construction industries. Our parent company, Brunel International NV, is publicly listed on the Amsterdam Stock Exchange with operating offices in 35 countries. Since 1975, we have been providing qualified personnel in all disciplines and throughout all project phases whose experience and knowledge has enhanced client performance.

LNG energy source from which we hope to be the number two provider in the world,” says Steve Jones, CEO of Plexal Group. “But it is a finite resource. Where will Australia be in 50-60 years when these fields

www.brunelenergy.net

November 2010  Oil & Gas Financial Journal • www.ogfj.com

25


The best place on the planet for oil and gas Natural gas is still the biggest game in town. With declining production in the North Sea, a drilling moratorium casting a shadow on the Gulf of Mexico, and Brazil still years away from first oil in its pre-salt fields, Australia is the darling of the offshore oil and gas world. “This is such an exciting and dynamic time,” says Belinda Robinson. “This is the industry that has helped Australia evade some of the more negative consequences of the financial crisis. This industry provides so much optimism for the long-term economic sustainability of Australia and in doing so, supplying clean energy. It has so much going for it that it is hard to not be excited for it.” Perth, the capital of oil and gas Australia and this year’s host of the World Energy Cities Partnership, is certainly reaping the

Tom Brand, Managing Director and Dave Pollack, Training Manager, Welltrain

benefits of the rising tide of the industry. Beyond the quantifiable returns on multi-billion dollar projects, a walk down St. George’s

so it is rewarding to be involved in sustaining that cornerstone of

Terrace or a stroll through an engineering office will bring to life

the Australian economy in a way that has a lower environmental

the international face of oil and gas in Perth. “The industry is

footprint. If we can really leverage off this industry maintaining

really putting us on the map in a global sense – it is profiling WA

an energy production or delivery focus to the world, that will be

and the city of Perth to the world,” beams Dowling, a native of

Australia’s next fantastic export.”

WA. “The oil and gas industry being a global industry is really helping drive that cultural change in our society and it is a benefit that should not be underestimated.” Australia has all of the necessary assets to become the premier oil and gas province for the foreseeable future. Voracious Asian demand for preponderant natural resources has attracted global talent and capital which in turn are stimulating innovation and enhancing service industries. A very favorable picture is painted for Australia’s future as an exporter of cutting edge technology and leader in clean energy if it can surmount today’s obstacles of fiscal uncertainty and human resource deficits.

The mixture

of future promise and current challenges present unprecedented opportunities for coordination and collaboration between industry and government. All things considered, the right place, right time for exciting oil and gas activity is Australia, today.

Fig. 3: Forecast share of primary energy consumption, 2029-30 (%) 0

10

20

30

40

50

60

Oil 36%

Natural gas 33%

Black coal 17%

Brown coal 6%

70

80

90

100%

Renewables 8%

Source: ABARE

26 CarsWel_OGFJ_1011 1

www.ogfj.com • Oil & Gas Financial Journal November 2010 10/18/10 11:32 AM


AUSTRALIA: PT.II

Eastern rising

I

n any continental sized country there exists room for several mega-industrial

This sponsored supplement was produced by Focus Reports. Editorial Directors: Karim Meggaro, Manuel Felipe B. Mendoza Project Coordinator: Merlin Ozkan For exclusive interviews and more info, plus log onto energy.focusreports.net or write to contact@ focusreports.net

regions. Not to be outdone by surging offshore activity in Western Australia, the eastern seaboard states of Queensland, New South Wales, and Victoria are devel-

oping their own prized assets at a frenetic pace. Onshore coal seam gas (CSG) deposits estimated at 250 trillion cubic feet have the industry abuzz. The viability of their conversion to liquefied natural gas (LNG) received major votes of confidence with recent final investment decisions for two large-scale projects. Meanwhile, Victoria, the birthplace of Australia’s oil and gas industry, will soon commence another 40 years of offshore gas production, adding to its already rich history as the source of 30% of the country’s gas.

Fairview compressor station, Queensland Australia. Courtesy of Santos

www.ogfj.com • Oil & Gas Financial Journal  August 2011

energy.focusreports.net

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“We see the LNG industry as

FID for its $15 billion Queensland Curtis LNG Project (QCLNG)

an opportunity to create a new

in November 2010. A 380 km pipeline will link CSG fields in the

generation of employment and

Surat Basin to its 8.5 mtpa LNG plant on Curtis Island with first gas

prosperity in Queensland,” says

expected in 2014.

Anna Bligh, the state’s premier.

The Santos-Petronas-Total-Kogas consortium rang in 2011 with

“We have just come out of the

FID for its $16 billion, 7.8 mtpa Gladstone LNG (GLNG) project.

global financial crisis, and are

With first gas expected for 2014, Mark Macfarlane, ceo of GLNG,

still building the recovery. We

describes it as “a world class CSG-to-LNG project that will put

identified the LNG industry as a

Gladstone and Queensland on the world LNG stage. It is a project

very important part of rebuild-

Hon. Anna Bligh, Premier of Queensland

of great significance for Queensland and all of Australia.”

ing and creating new industries.”

The ConocoPhillips and Origin Energy joint venture, Australia-

Despite the challenges confront-

Pacific LNG, gained federal environmental approval in February,

ing Queensland from devastating

paving the way for FID by mid-2011. Still waiting in the wings is

floods in early 2011, the burgeon-

environmental approval and FID for Royal Dutch Shell and Petro-

ing CSG industry is still gaining

China’s Arrow Energy LNG project.

momentum. The government

Economic studies indicate that a medium-sized 28 mtpa LNG

has played an instrumental role in

industry – far below what Queensland will produce – could create

creating the correct environment

over 18,000 jobs, generate $40 billion of private sector invest-

to encourage the development

ment, and increase gross state product by one percent. Output

of the world’s first CSG-to-LNG projects, and today four liquefac-

from these four projects will propel Australia to become a top-two Mark Macfarlane, CEO, GLNG

global LNG exporter over the coming decade.

tion terminals are planned for the coastal town of Gladstone. Speaking in December 2010, Bligh

A rising tide

explained that “the emergence of the CSG and LNG industry is

Movement from the majors is mobilizing industry across the greater

a natural progression from our gas policy – our energy policy – in

eastern seaboard. Much of the buzz about Queensland and New

the early part of this century. But it is equally true that it could not

South Wales CSG stems from the relative proximity of fields to

have reached the stage that it has, as quickly as it has in the last 8

mass markets and their connectivity to existing infrastructure.

months, without enormous focus from government.”

Feedstock for LNG is an enticing option. But when considering

As a well-established coal exporter for several decades,

domestic clean energy targets which favor investment in gas-fired

Queensland has taken advantage of relatively new technologies

plants, then asset prospectivity becomes highly valued for internal

to bring gas out of the state’s coal seams in response to global

Historical Australian oil and gas production

shifts towards cleaner energy. As Bligh explains, “these projects are, in both resource and investment terms, as big as the Gorgon

2000

Project in Western Australia. They have been brought to regula-

Gas (bd): CSG Conventional gas LNG

1750 1500 bcf

tory approval and financial decision stage within 2-3 years which in world terms is remarkable.”

1250 1000 750 500

Eastern flagships

250

Over the past year huge progress has been made to ensure that

0

planned, two have reached final investment decision (FID) totalling over $30 billion, and one has crossed the crucial threshold of environmental approval. Queensland Gas Company, a subsidiary of British Gas, reached

2

energy.focusreports.net

Mmbls

Australian CSG-to-LNG will deliver. Of the four mega-LNG projects

Liquids (oil, condensate, LPG

300 250 200 150

1998

2000

2002

2004

2006

2008

2010

Source: APPEA

August 2011  Oil & Gas Financial Journal • www.ogfj.com


consumption. “New South Wales

success of the next generation of

currently imports 7% of its energy

CSG-minded juniors.

requirements and consumes

While gas-fired plants are in

about 27% of Australia’s total

the planning phases and the major

energy,� states Ian Halstead, ceo

LNG projects ramp-up construc-

of Sydney-based junior Planet

tion, some companies have more

Gas. “Another 12-14 gas-fired

independent ambitions. Rather

power plants are projected for

than waiting for the big consortia

construction between now and

to bring LNG facilities online,

2016. Additionally, large scale

David Casey, Managing Director and CEO, Eastern Star Gas

Ian Halstead, CEO, Planet Gas

Eastern Star Gas is building one of its own. Originally focused

LNG projects in Queensland will consume much of the gas produced in the eastern Australia, leav-

on conventional oil and gas, Eastern Star Gas shifted to CSG in

ing a potential deficit in the domestic market. Planet is targeting

2005 in New South Wales – away from the traditional hotbed of

that deficit.� Backing Halstead’s assertion are Planet Gas’s well

Queensland. David Casey then joined as managing director to

addressed CSG licenses in the Sydney and Gunnedah Basins that

apply his 20 years experience in CSG to the company’s new assets. The company currently has three agreements to provide over

are adjacent to existing discoveries; Cooper Basins blocks containing significant thicknesses of coal with high gas formations; and

1,700 petajoules to domestic power generation companies. But,

exploratory shale potential in its Cooper reserves. With a diversi-

as Casey explains, “the challenges from a CSG perspective were

fied portfolio of asset classes in strategically proximate areas to

produceability: the fact that unlike a conventional reservoir you do

market and infrastructure, Planet Gas embodies the strategy for

not get maximum production on day one. Looking at those chal-



 www.ogfj.com • Oil & Gas Financial Journal  August 2011 CarNac_OGFJ_1108 1

energy.focusreports.net

3

7/14/11 11:24 AM


lenges, we realized that you cannot change how a CSG field can be

“In terms of development oppor-

developed; so we looked at how to liquefy it, and not necessarily at

tunities there is nowhere in the

the liquefaction process itself, but rather the size and scaleability.”

world that has as many opportunities as Queensland does right

The company is now progressing to front-end engineering and design on a mid-size LNG plant with Hitachi and Toyo. This is

now,” says Terry Bayliff, Laing

particularly groundbreaking given the size of the company and their

O’Rourke’s global leader for oil

ambitions for the future scale of their plant. “Small scale has been

and gas. The British construc-

done elsewhere,” says Casey. “What hasn’t been done is looking at

tion giant recently made its first

a large project using small-scale technology: genuinely looking at

foray into the hydrocarbons sector

a project that could deliver four million tons, but doing it in half mil-

bringing Bayliff on board to lead

lion ton increments. One of the attractive qualities for Hitachi and

the charge after a distinguished

Toyo in dealing with Eastern Star Gas is the opportunity to prove

career at Bechtel.

that their technology and their skill sets can actually match world-

The global oil and gas move

scale projects, only with smaller trains. The more we look at it the

began in Australia with a contract

more we get excited by the prospects and the benefits of using

to build a liquefaction plant for

smaller scale technology.”

mid-scale specialist LNG Ltd. The

Mark Bumstead, Managing Director, Nacap in Australia

deal was suspended when Arrow

Start local, think global

Energy, the plant’s originally slated

In addition to innovative methodologies, international players have

buyer, was acquired by a Royal

been converging on the state to strengthen their global brands.

Dutch Shell-PetroChina joint venture. Undeterred, Laing O'Rourke

Terry Bayliff, Global Oil & Gas Leader, Laing O'Rourke

has since been awarded contracts for a Gorgon Gas utility project and a BG water treatment plant. The company also recently completed the Dalby Power Project for Origin Energy, which is powered by gas from unconventional fields. Bayliff is confident in Laing O'Rourke’s strengths to compete in a crowded oil and gas construction market. The company specializes in multi-discipline, self-perform construction for which there are few general contractors in Australia. “Most contractors are single discipline,” says Bayliff. “They are either civil, mechanical, or they are electrical disciplines. Laing O'Rourke offers a full suite of packages.” Bayliff hopes to use Australia as a springboard for launching Laing O'Rourke’s oil and gas offering across the world. “I expect that there will be a period of up to three to five years of growth here in Australia: winning projects and demonstrating excellence in execution. This is the offering we are going to take around the world and it has to be grown here in Australia initially.” The Australian experience that Bayliff aims to replicate at the global level has already come to fruition for another multinational resources contractor, Nacap. The Dutch pipeline construction company looks to Australia for a high benchmark of technical learnings and, more lucratively, 30% of total global turnover. “Australia is somewhat unique in our global pipeline market,” says Mark

4

energy.focusreports.net

August 2011  Oil & Gas Financial Journal • www.ogfj.com


Bumpstead, managing director

Energy pipeline from Queensland

of Nacap Australia. “Contrary to

to South Australia. Traversing vast

most other Nacap markets, our

stretches of Australian outback,

pipelines here are characterized

the Epic Energy project, QSN3, is

by long distances.� Indeed, the

being constructed at astonishing

tyrannies of distance and strict

rates of 4 ½ - 5 km per day. As

environmental codes in Australia

Bumpstead notes, “it is a long

require many service companies to

way to even walk each day much

streamline logistics and innovate

less construct a pipeline.� As a

their operational models. These

Michael Carroll, Managing Director, Synertec

Troy Campbell, CEO, Easternwell Group

models will certainly be tested

result of successful execution and project delivery, “Nacap world-

with the construction wave of transmission infrastructure to connect

wide has benefitted very much from its presence here. A lot of the

CSG fields to markets. “When considering not just the trunk lines

risk management systems, procedures, and practices that we have

but the upstream gathering facilities, there are many thousands of

developed for ‘business as usual’ in Australia have been taken to

kilometers of pipelines to be built to support these CSG projects,�

Nacap globally.�

says Bumpstead. Daunting as the challenge might be, a company such as Nacap

Aussie rules

leans on paramount experience. Nacap is currently construct-

Despite Laing O’Rourke and Nacap’s success, the trap for new

ing pipelines for two nationally significant projects – a $5.4 billion

players in the sector can be huge. Australia’s rich resources can

desalinization plant in Victoria and 940 km of looping for an Epic

naturally invoke exuberance amongst service companies from afar.

đ° ?đ° Žđ° Œđ° ‰đ° Žđ° …đ°€ đ° đ° Žđ° đ° Œđ° ™đ° “đ° …đ° ’ 𰠓𰠙𰠓𰠔𰠅đ° ?đ° “ 𰠄𰠼𰠳𰠊𰠧𰠎𰀎𰠆𰠥𰠢𰠲𰠊𰠣𰠥𰠴𰠼𰀎𰠉𰠎𰠴𰠼𰠧𰠲𰠥𰠴𰠼𰀎đ° ?đ° Ąđ° Šđ° Žđ° ´đ° Ąđ° Šđ° Ž

  đ° 𰠾𰠳𰠴𰠲𰠥𰠏𰠊𰠥𰀠𰀭𰀠 đ° đ° łđ° Šđ° Ąđ°€  đ°€­đ°€  đ° ?𰠊𰠤𰠤𰠏𰠼𰀠 đ° …đ° Ąđ° łđ° ´ đ° ?𰀺𰀍𰀜𰀹𰀠 𰀨𰀰𰀊𰀳𰀠 𰀚𰀲𰀡𰀴𰀠 𰀳𰀰𰀰𰀰𰀠 𰀯𰀠 𰠅𰀺𰀠 𰠊𰠎𰠌𰠯𰠀𰠳𰠚𰠎𰠼𰠲𰠴𰠼𰠣𰀎𰠣𰠯𰠭𰀎𰠥𰠾𰀠

6 CarSyn_OGFJ_1108 1

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August 2011  Oil & Gas Financial Journal • www.ogfj.com 7/14/11 CarEas_OGFJ_1108 11:58 AM 1

7/14/11 11:30 AM


Mat-supported jackups fared well in hurricanes

S

teve Hearn, managing director and chief geophysicist of Velseis, a Queenslandbased geophysics company explains the merits of a local company over larger seismic players, and the challenges of bringing a science-focused company to the market. For the full interview, log onto energy.focusreports.net. What can Velseis offer to clients that they cannot get from the bigger geophysical companies? There are definitely some things that the bigger players can offer that are arguably more difficult for us, one of which is volume. Sometimes there will be a need for a company to supply a huge amount of equipment for a very big project. It is possible for Velseis to compete for these projects. We have some long-standing arrangements with rental organizations – when we want to push our channel count up we bring in more gear. However, it is perhaps easier for the larger players to do those types of projects. Velseis’s unique offering comes in the company’s ability to tailor a service to a particular

problem or technical requirement quickly and competitive marketplace can be difficult. efficiently. The company has an effective inWhy is Velseis different? house R&D division, which is perhaps unusual It is quite possible that if more entreprefor a company of our size. We routinely do neurial people had been specialized software development - this might be to running the company, it tune a particular acquisimight have had a totally different direction, but this tion program, or to model is the way that it has come a particular geological out. The people running problem. This is all about giving our clients customthe company generally make reasonably intelligent ized, scientific service. I decisions on the basis of am a geophysicist and am information available to always willing to explore us. We like to think that something interesting or something new, and I am there are upsides to the model that we have. There the one that has to sign off have been plenty of cases on it. Arguably this enables with the big geophysimore flexibility than in cal companies starting some bigger companies out as technology driven where developmental work Steve Hearn, Managing Director and companies, and at some might be subject to more Chief Geophsyscist, Velseis point in the growth cycle formal procedures. they have moved to having more professional business people running A lot of geophysical start-up companies the companies, which hasn’t always worked are very science driven, very into innovaout for the better. tion, but trying to commercialize that in a

Integrated Seismic Technologies

Design ñ Drilling ñ Acquisition ñ Processing ñ Interpretation ñ R & D www.velseis.com 8

CarVel_OGFJ_1108 1

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Integrated Seismic Technologies

August 2011  Oil & Gas Financial Journal • www.ogfj.com 7/14/11 11:55 AM


Source of gas production

But the country’s array of regulatory and environmental codes can

Western Australia and Victoria remain the largest gas producing states in Australia, while Queensland production, predominantly from coal seem gas, continues to increase its share.

prove difficult for new companies who do not fully comprehend the impact of regulations on project delivery. Troy Campbell, ceo of Easternwell Group, Australia’s largest integrated well servicing and drilling provider for CSG and mining, concurs. “Foreign companies are entering a very restricted market. There is also a complexity around the logistics and management of operations.” An established local presence and strong market familiarity breed an Australian advantage. Easternwell Group’s industry

0

standing is a result of a series of diversifications in response to market needs. Originally focused on well servicing and drilling since

10

20 WA 55%

1976, the surge in CSG exploration from 1999 onwards and an oil price spike that attracted foreign players led Easternwell Group

30 VIC 19%

40

50 60 Percent

QLD 14%

JPDA 7%

SA 4%

70

80 TAS 1%

90

100

(NSW,NT<1%)

Source: APPEA

to enter new service sectors. By merging into a broader mining services group in 2009 and most recently, joining forces with main-

quite well. We specifically design our kit to be compliant to local

tenance and service heavyweight Transfield Services, Easternwell

regulations, but with the restrictions in work crews we innovate the

Group now has access, as Campbell describes, “to the front and tail

rigs and design the equipment to have the least amount of people

end of projects.” Integrated services combined with local market

operating them.”

knowledge produce a winning formula for Easternwell Group. “Obviously being an Australian contractor we know the conditions

Local market insight paid dividends for another Australian company further down the value chain. In February 2011, multi-

www.ogfj.com • Oil & Gas Financial Journal  August 2011 CarUndeRev_OGFJ_1108 1

energy.focusreports.net

9 7/25/11 2:18 PM


discipline consultancy and special-

was expertise in equally complex,

ist engineering firm Synertec was

risky, and stringently regulated

awarded a landmark contract for

Australian industrial environments.

the QCLNG project. In one of

A growing company still break-

the largest orders to an entirely

ing into the CSG market with IP

Australian systems integrator, Syn-

in sampling systems, Carroll is

ertec will engineer 45 analyzers

confident that local knowledge,

for lead EPC contractor Bechtel.

local presence will pave the way

Managing director Michael Carroll

for Synertec. â&#x20AC;&#x153;International play-

specifically noted Synertecâ&#x20AC;&#x2122;s Aus-

Mark Paton, CEO, Cue Energy

Neil Doyle, CEO, Oil Basins

tralian edge. â&#x20AC;&#x153;In terms of process

ers are converging on Australia. Australian engineering is innova-

analytics, one of our big differentiating points is local knowledge

tive and has an in-depth understanding of the regulatory environ-

which starts with standards and follows right through to environ-

ment that will overlay all of these projects.â&#x20AC;?

ment. Curtis Island, sitting in a hurricane prone area, calls for very complex Australian standards which are not just a derivative of the

Victoria: back to the future

US or Europe. Bechtel was very engrossed in the rigidity of Aus-

Western Australia and Queensland fittingly grab the lionâ&#x20AC;&#x2122;s share of

traliaâ&#x20AC;&#x2122;s standards and dove into specific details with our experts.â&#x20AC;?

headlines given the size of their offshore and CSG industries. Yet

Originally specialized in process analytics for pharmaceuticals,

as the state of Victoria demonstrates, size and industrial weight do

Synertec diversified into oil and gas as the pharma market consoli-

not necessarily go hand-in-hand. Resting at the foot of continental

dated and CSG expanded. The commonality that enabled the shift

Australian and smaller than every state except Tasmania, Victoria

Unidel provides oil and gas owners and developers with a range of specialist services to transform concepts into operational assets. Working across the project lifecycle, our 250-strong team of linear and ďŹ eld development experts are known for delivering results in critical areas including:        

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August 2011â&#x20AC;&#x201A; Oil & Gas Financial Journal â&#x20AC;˘ www.ogfj.com


SE Gobe production facility

that its Bass Strait hydrocarbon production has generated over $200 billion to Australian GDP over the past four decades. As Bass Strait oil production declines, gas output still has substantial life ahead. “We are only about halfway through the gas reserves and have a significant number of years to continue to extract gas,” adds Dashwood. While production in the Gippsland Basin is 40 years old, we are about to put the biggest steel structure in the Bass Strait – the Marlin B platform – to develop the Turrum field.” ExxonMobil Australia’s Kipper Tuna Turrum Project is currently one of the largest domestic gas developments on the eastern seaboard. An estimated $4 billion project which holds enough natural gas to power a city of one million people for

was the birthplace of the country’s petroleum industry and is still

35 years, Kipper facility construction is expected to be complete

very much a cornerstone of its future.

by 2012 and Turrum in 2013. “There are still another couple of

“Victoria has up to 30 years in proven conventional gas reserves spread across three producing basins – Gippsland, Bass and

decades of production to come from the Bass Strait and a lot of business yet to be done here.”

Otway,” says Michael O’Brien, Victoria’s minister for energy and resources. “GeoScience Victoria estimates that 4-8 trillion cubic

Eyes fixed north

feet of gas remains to be discovered along with up to 600 million

While Victoria’s offshore basins are largely the plays of majors such

barrels of liquids.”

as ExxonMobil, BHP Billiton, and Santos, there is still substantial

Australia’s first oil discovery was in Victoria in 1924 at an onshore field with an estimated 50 million barrels of oil in place. In December 1964 the Glomar-III exploration vessel drilled Australia's first significant offshore well and discovered gas. In 1967 the Kingfish-1 well encountered Australia's largest oil field with 1.2 billion barrels recoverable. Fifteen of the Victoria’s first 16 offshore wells were successful, yielding three major gas fields and Australia’s two largest oil fields to-date. ExxonMobil, the country’s oldest oil and gas company, was instrumental in all of these discoveries. John Dashwood, chairman of ExxonMobil Australia notes that “we have a long history and heritage of developing resources for the benefit of this nation. We have produced two-thirds of the country’s oil out of the Gippsland Basin and one-third of the country’s cumulative gas. There is indeed a legacy feeling that Australia has been a real jewel in ExxonMobil’s history.” Modeling the economic impact of its Gippsland Basin Join Venture’s operations, ExxonMobil calculates

www.ogfj.com • Oil & Gas Financial Journal  August 2011

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11


activity amongst juniors who accumulate acreage through joint ventures and proprietary bidding. Juniors such as Bass Strait Oil Company, Oil Basins, and Cue Energy are all active in coastal Victorian waters. However, the compelling presence of majors in a relatively confined offshore space leads

John Bell, CEO, Australian Drilling Associates

many Victorian-based juniors to seek more distant markets. Leading the charge of Melbournebased companies with eyes fixed north is Cue Energy behind its new ceo Mark Paton. With an extensive background in production and operations Paton joined Cue Energy in early 2011 keen to build on its already successful corporate foundation. While Cue joint ventures in the Bass Strait, its operational strengths stem from international markets. Cue Energy is among the rare batch of Australian juniors that enjoys mature production – slightly over half a million barrels in 2010 – through tenements in New Zealand, Indonesia, and Papua New Guinea. The company will see a further production boost when its joint venture Wortel field, operated by Santos, comes onstream in December 2011 in Indonesia. Paton is now targeting $1 billion market capitalization over the next 3-5 years by combining new exploration plays with maximization of existing assets. “Rather than meteoric growth from a zero base asset, we see value in assets that are near to or in production. We are long on exploration opportunities but short on near term additive production opportunities. I do not want to wholly rely on exploration success for growth.” Although keen to maximize existing production, Cue is

Cue Energy Maari drilling activity with wellhead platform and FPSO


equally well-poised to capitalize off exploration in the Carnar-

life as a junior can be tough in

von Basin – Australia’s “hot” offshore LNG province. “We have

Australia. A long coast, huge

extremely good partners in these blocks,” admits Paton, refer-

mobilization costs, and hefty

ring to Woodside and Apache. Having firm partnerships with the

compliance fees make it difficult

companies who are looking to aggregate additional gas and build

for naturally cash-strapped juniors

more LNG trains speaks a great deal to the fine work done by my

to fund offshore campaigns. The

predecessor.”

commodity price spike of 20062008 exacerbated cost dilemmas

Operating under a similar philosophy is Oil Basins Limited which

while engendering a new model

explores in the offshore Gippsland Basin; offshore Carnarvon Basin; and onshore Canning Basin in Western Australia. Like Cue

Ron van der Schalk, Managing Director, Uhde Shedden

of consortium management to assist juniors exploring offshore.

Energy, Oil Basins’ acreage is in strategically proximate areas to

“The rapid rise in oil prices in 2006 created a worldwide short-

existing or future development infrastructure. Since listing on the Australian Stock Exchange in August 2006, Oil Basins has signifi-

age of offshore drilling rigs,” says John Bell, ceo and founder of

cantly expanded its initial portfolio of two permits and now stands

Australian Drilling Associates (ADA). “Every oil company wanted

to earn interests in

to drill and the

drill-ready assets in

demand in Australia

both the Gippsland

was unprecedented.

and Canning Basins.

It was also difficult

The company’s

for the smaller inde-

upstream interests

pendents to get the

which hold game-

attention of drilling

changing potential

contractors for a one

include 100% rights

or two well program,

to Backreef, a low

particularly when rig

cost oil play in the

utilization worldwide

Canning Basin,

was peaking at 98%.”

and 100% equity in

Recognizing the

R3 situated in the

synergies of scaling

GLP Micro LNG Plant in Westbury, Tasmania

costs, the oppor-

Carnarvon Basin. Oil in place for the undeveloped Cyrano Oil Field within the R3 block

tunity arose for Bell in 2006 to create consortiums comprised of

was upwardly revised by 250% in April 2011.

junior independents and medium sized E&Ps with sufficient terms

Oil Basins aligned with LNG Ltd last August to evaluate projects

to attract drilling contractors with rig availability. “The consortium

in the Canning Basin using future Oil Basins gas as feedstock. Oil

model spread the mobilization and demobilization costs, reduced

Basins will have the right to invest up to 20% on an at-cost basis

third party costs as a direct consequence of purchasing volume,

in any LNG project, with a maximum of 30% should the company

and gave flexibility for campaigns to drill more wells with the added

deliver certified 2P gas reserves of at least 1 Tcf. A potentially

commercial benefits normally expected for major oil companies,” he

significant long-term investment opportunity, it is consistent with

explains. Over the past two years ADA has managed several consortiums

the company’s strategy of “sweating the value of its assets” nearby existing or future infrastructure. With the agreement in place,

which equated to $1 billion worth of exploration and appraisal

Oil Basins is confident in its ability to attract farm-in interest in its

wells. By coinciding with diminishing recruitment rates of drilling

strategic and untapped CSG and shale gas portfolio.

personnel by the majors over the past 20 years, ADA functions, as Bell describes, as “a virtual traditional drilling department where we

The enabler

could make a contribution to the industry by optimizing on person-

Despite the promise and potential of attractive petroleum plays,

nel resources and drilling equipment. We provide well engineering

www.ogfj.com • Oil & Gas Financial Journal  August 2011

energy.focusreports.net

13


and well planning; materials and logistics management; procure-

joule of gas to thousands of dollars per ton of chemical product.

ment of well consumables; contracting of all associated services to

Another Achilles heel of Australian oil and gas, and potential

drill; HSE management; and well operations management just as

Uhde Shedden breakthrough, is the unanswered question of utiliz-

any oil companies drilling department would.”

ing salt in water that is co-produced with CSG. “We are interested in finding those solutions since part of our business involves

Victorian innovation

understanding how to turn salt into chlorine through the technology

“Melbourne is Australia's knowledge, innovation and technology

of our parent company. We are looking at how to develop solu-

capital and is home to a large cluster of research institutes ready to

tions that deal with salt and convert it to a potentially marketable

collaborate on innovative cross-sector projects,” asserts Minister

product.” More than wishful thinking these technological revolutions have

O’Brien. Outmatched by Western Australia and Queensland on resource size, Victoria’s culture of innovation gives it a comparative

tangible inroads through synergies with parent company ThyssenK-

advantage in cutting-edge hydrocarbon infrastructure. Several gas

rupp’s knowledge and expertise. “Because we are part of a larger

process engineering firms lead the way in revolutionizing Australia’s

conglomerate we are looking at how to integrate other ‘family

downstream landscape.

company’ expertise into our solutions. We are always trying to look for a unique problem and determine the issue at play.”

Uhde Shedden, a ThyssenKrupp company specialized in gas processing and multi-disciplinary engineering for the oil and gas and

A big stimulus for new technologies is the potential introduction

petrochemical sectors, relies on Australia as a fulcrum for rotating

of Australia’s much-mooted but still elusive carbon tax which many

talented labor amongst its global projects. “We very much benefit

believe will provide investment certainty. Until that comes, however,

by utilizing Australia as a skills base from which to move smart peo-

Australian companies are taking the lead in creating new markets

ple around the region for various projects,” says managing director

and forging new trends.

Ron van der Schalk. Already a major player in CSG processing, van der Schalk is looking beyond traditional industry to other avenues

Pandora’s Box

where Uhde Shedden can build sustainable legacies. According to

“All I wanted to do was produce facilities and service our customers

van der Schalk, Australia lacks a robust national chemical complex to

in a more professional manner than what I had seen in the past,”

turn energy from natural gas to downstream projects, a void which

admits Peter Ramsey, founder and managing director of The GLP

Uhde Shedden and ThyssenKrupp technologies can fill. Having pre-

Group (GLP). “My initial vision was to move into larger projects in

viously managed Uhde Shedden in Thailand, he admires Thailand’s

alternative energy. However, with the picture being drawn up about

ability to turn natural gas into specialty chemicals through a serious

the energy boom we quickly got involved with natural gas process-

of processing stages whereby converting several dollars per giga-

ing.” The pinnacle of that trajectory was launched in February

2 questions about LNG

to David Dennison, managing director – Wood Mackenzie – Australia Do you think that Australia’s gas connectivity to foreign markets and the true globalization of LNG will eventually lead to pricing parity between Atlantic and Pacific Basin LNG? The key question on peoples’ minds will instead be, “what will happen to gas prices in Australia?” Anyone who has a gas /LNG project on the eastern side of Australia exposes themselves to oil price linkages. We have a positive view on oil prices in the medium to long term therefore having an attractive LNG project in eastern Australia

14

and exposing yourself to international gas pricing with its inherent oil price link would have its appeal. The global LNG market has many lump-sum projects coming on stream . Considering increasing supply, voracious Asian demand, and declining LNG production out of Southeast Asia over the next decade, is LNG a buyer’s market or a seller’s market? Actually we see the market is quite well balanced. We have however seen prices

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come off the highs of 2007/08 and there appears to be downward pressure on prices for proponents of the CSG to LNG projects versus the more conventional. The key issue is around cost inflation and the challenge to the more recent projects is to deliver on time and as close to budget as possible. The LNG business is cyclical in nature and not so long ago the race was on to fill the perceived shortfall of gas in the large US gas market. Subsequently we saw the meteoric rise of unconventional gas that has negated the pressing need for LNG into North America.

August 2011  Oil & Gas Financial Journal • www.ogfj.com


with the opening of Australia’s

is currently used for long haul transport applications. Ramsey, how-

first micro-LNG plant in Tasma-

ever, believes that future LNG plants will be able to service any fuel

nia, constructed by GLP. Using

consuming commercial transport. “The diesel market in particular

BOC/Linde’s liquefying phase

will dry up in 5-10 years especially if India and China continue rapid

technology, the country’s flagship

energy consumption growth. The mining sector sees the benefit to

micro-LNG plant will provide fuel

convert from diesel to LNG with the idea of having a central LNG

for over 120 natural gas-powered

processing facility that links to satellite stations for fuel dispatch. I

heavy vehicles in the state.

believe that this is where the micro LNG market is headed in the

Initially looking to import units from overseas, BOC recognized

future for Australia.” Beyond Australia Ramsey sees micro-LNG as Peter Ramsey, Managing Director, GLP

greatly beneficial for countries that cannot afford to build extensive

GLP’s engineering flexibility and

gas pipeline networks. “It is much cheaper to build a central micro

ultimately contracted with the family-owned company to design,

LNG processing facility and distribute the LNG by tanker trucks, and

build, and commission the Westbury Micro-LNG plant. According to

get those areas to convert their transport to LNG.”

Ramsey, while GLP originally designed the plant for 50 tons per day

As one Melbourne-based engineering executive confident in

of output, recent runs have pushed capacity up to 55 tons per day.

the country’s ability to continuously break new grounds, stated, “I

“This can be attributed to our optimized process plant design and

like to think of Australians as innovative because we challenge the

careful quality control during construction,” he notes.

norm. We are an isolated country so we must be ingenuous. When

As CSG-to-LNG projects break barriers in size and scale, BOC and

people think of Australia I would like for them to think ‘innovative,

GLP are proving that micro-LNG has boundless potential to usher in a

thorough, and well built.” The degree of innovation coming out of

mega-trend for transport fuels. With proven technology, micro-LNG

Victoria indeed justifies this Aussie assessment.

Process Plant Solutions ï ï ï ï ï

LNG Plants CO2 Capture Clean Fuel Technology Scrubbers Natural Gas Dehydration and Fuel Gas Conditioning

 Design  Consult  Construct  Install  Commission

Engineered Products ï Demisters ï Internals

Vessel Internals ï Mist Eliminators ï Ejectors and Eductors

Process Materials ï Catalysts Absorbents ï Ceramic and Alumina Supports

www.glp.com.au Phone: (03) 9335 9000 Fax: (03) 9334 5488 Email: info@glp.com.au

www.ogfj.com • Oil & Gas Financial Journal  August 2011 CarGLPRev_OGFJ_1108 1

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7/22/11 10:19 AM


email: info@focusreports.net

Oil and Gas Australia report 2010  

Written after exclusive interviews with Australia's decision makers from NOCs and multinational E&P companies, legislators, financial instit...