Western Australia’s gas hopes float away

Parliament house flag post

Western Australia’s gas hopes float away

Posted 29/08/2013 by Alex St John


http://upload.wikimedia.org/wikipedia/commons/thumb/c/cc/LNG-carrier.Galea.wmt.jpg/320px-LNG-carrier.Galea.wmt.jpg
A liquefied natural gas (LNG) tanker.
Image source: Wikimedia Commons
Last week, Woodside Petroleum confirmed that it was planning to develop its Browse gas field off northwest Western Australia using technology that allows processing at sea. This followed an April announcement that it would not pursue earlier plans to build a processing plant onshore at James Price Point in the Kimberley, which had ignited significant controversy. The Premier of Western Australia, Colin Barnett, reportedly expressed disappointment over the news, citing the loss of jobs associated with an onshore project. But what else does Western Australia stand to lose with floating LNG?

 

What is FLNG?

Floating liquefied natural gas (FLNG) processing is a new technology that is being developed by Shell for its Prelude gas project, also off Western Australia. In previous LNG projects, offshore gas wells were connected to an onshore facility by long pipelines. At the onshore LNG plant, the gas is purified and chilled to less than -164°C, when it turns into a liquid. This liquid is loaded on ships for export. In essence, FLNG simply takes the onshore processing plant and puts it onto a specially designed floating barge or platform, which is anchored over the gas field. The gas wells are connected to the FLNG platform, which liquefies the gas, and then loads it into tankers directly from the platform.

Why use FLNG?

The FLNG model has several advantages from Woodside’s perspective. At the end of the project, the platform can be moved to a new project easily, removing the need to rehabilitate land used for processing. As LNG tankers will take product directly from the platform, there will be no need to construct or operate port facilities, reducing capital and operational expenditure. There are also a number of smaller cost savings, such as removing the need to purchase or lease land, pay land taxes and maintain land-based infrastructure such as roads and related services. FLNG will also neutralise environmental criticism of the use of James Price Point, and possibly relieve Woodside of a $1 billion Native Title agreement.

 

What’s the difference?

The major difference between the approaches is that a processing plant won’t be built onshore. In the case of Shell’s Prelude LNG development, the floating platform is being built in South Korea and Dubai and will be towed to Australia. If Woodside follows this model, then there will be few jobs related to the project’s construction located in Australia.

But perhaps a more substantial change to the project is that Woodside no longer has to seek the approval of the WA government to use land at James Price Point for a processing facility. Significantly, this means that Western Australia has lost any ability to enforce its domestic gas reservation policy. As the gas lies beneath Commonwealth waters, the Commonwealth has the final decision about the development of the petroleum resource.

WA’s reservation policy requires that 15 per cent of the production from any major gas development must be directed to the domestic gas market in Western Australia. In those situations where the WA Government controls the resource to be developed (i.e. when the resource is located less than three nautical miles offshore), it may set this condition specifically as a part of the licence to develop the resource. In instances where the resource has been outside of the WA Government’s control, it has imposed this condition through land-use agreements. This is happening with the Gorgon LNG project, where gas from offshore fields will be processed at Barrow Island, Chevron’s Wheatstone LNG project near Onslow and Woodside’s Pluto LNG project near Dampier.

 

Implications of the change

The domestic gas reservation policy, which is strongly opposed by petroleum producers, is designed to ensure that WA has reliable and affordable access to natural gas. Petroleum producers argue that reservation policies discourage investment in the development of new resources and that only new investment can ensure domestic gas supply. However, a 2011 WA Legislative Assembly inquiry found that the policy was an “essential policy instrument for ensuring that an appropriate level of gas is supplied into the local market to achieve reasonable price outcomes.”, and that “In the absence of a gas reservation policy it is unlikely that LNG producers would develop adequate domestic gas processing facilities.”

If FLNG is used successfully at Prelude and Browse, it might signal the demise for the WA Government’s gas reservation policy for offshore developments, unless the Commonwealth is agreeable to extending the policy to offshore resources. However, the Commonwealth has consistently argued against reservation policies, most recently in the 2012 Energy White Paper. In turn, WA may have to concentrate on finding and developing onshore unconventional gas resources to fulfil its future domestic demand.


Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]

We welcome your comments, or additional information which is relevant to a post. These can be added by clicking on the ‘Add your comment’ option above. Please note that the Parliamentary Library will moderate comments, and reserves the right not to publish comments that are inconsistent with the objectives of FlagPost. This includes spam, profanity and personal abuse, as well as comments that are factually incorrect or politically partisan. We will close comments after three months.




Captcha
Generate a new image
Type characters from the image:

Facebook LinkedIn Twitter Add | Email Print

FlagPost

Flagpost is a blog on current issues of interest to members of the Australian Parliament


Parliamentary Library Logo showing Information Analysis & Advice

Archive

Syndication

Tagcloud

Refugees asylum climate change immigration Australian foreign policy parliament social security welfare policy elections welfare reform school education Australian Defence Force health financing higher education emissions trading indigenous Australians women private health insurance people trafficking Employment illicit drugs gambling health reform federal election 2010 Australian Bureau of Statistics statistics United Nations Asia Afghanistan disability income management Middle East Medicare sport health forced labour United States federal budget Industrial Relations Carbon Pricing Mechanism politics dental health criminal law transport aid child protection environment poker machines Australia in the Asian Century Australian Sports Anti-Doping Agency steroids World Anti-Doping Agency National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system Law Enforcement Australian Federal Police Fair Work Act Australian Public Service governance labour force people smuggling debt taxation international relations constitution New Zealand food WADA Australian Crime Commission pharmaceutical benefits scheme corruption pensions public service reform children's health Aviation foreign debt gross debt net debt defence capability parliamentary procedure Senate Senators and Members ALP ASADA Newstart Parenting Payment multiculturalism Youth Allowance sea farers terrorist groups science social media Higher Education Loan Program HECS federal state relations accountability Papua New Guinea youth paid parental leave same sex relationships coal seam gas customs planning federal election 2013 Australian Electoral Commission doping OECD crime health risks International Women's Day Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy terrorism transparency research and development Mental health welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining High Court military history electoral reform employer employee renewable energy regional unemployment fishing European Union Federal Court family assistance skilled migration banking United Nations Security Council Australian economy forestry food labelling vocational education and training Drugs UK Parliament welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion human rights paternalism integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health China housing affordability bulk billing political parties water productivity health policy Governor-General US economy trade unions domestic violence export liquefied natural gas foreign bribery firearms question time speaker superannuation public housing election results by-election expertise public policy climate Intergovernmental Panel on Climate Change leadership voting Department of Agriculture Fisheries and Forestry regulation Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare ADRV Census Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics violence against women language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage Population rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum early childhood education Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly national security smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid disability employment Economics efficiency human rights; Racial Discrimination Act employment law bullying asylum seekers Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers election timetable sitting days First speech defence budget submarines workers financial sector Canada Somalia United Kingdom GDP Tasmania world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament Korea fuel rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top