Oil and Gas in Australia’s Northern Territory

Oil and Gas in Australia’s Northern Territory

Australia's Northern Offshore Basins and Operations

Global liquefied natural gas (LNG) demand is forecast to double by 2030 and, in particular China’s investment in LNG- receiving terminals is growing rapidly, with three in operation, four under construction, and many others in the pipeline. Japan is the Territory’s principal LNG customer with a major expansion soon to take place.

Currently five gas and oil fields in Territory waters are in production, while exciting new discoveries have been made with potential for many more. Downstream processing of natural gas, particularly for LNG, is an important and established part of the existing industry, based in Darwin. LNG production is also the key to the Territory’s economic future.

The Darwin LNG plant located at Wickham Point near Darwin commenced shipments of LNG to Japan in February 2006. The plan now produces at a rate of up to 3.7 million tonnes per annum. Operated by US-based company ConocoPhillips, the Darwin plant manufactures LNG from the Bayu-Undan field connected by an undersea pipeline 500 km north-west of Darwin.

Petroleum liquids such as condensate (a form of light oil), and liquefied petroleum gas are separated from the natural gas offshore and exported directly from the Bayu-Undan site. The field produces about 100,000 barrels per day of petroleum liquids. The LNG produced is shipped from the Darwin plant to Japanese firms Tokyo Gas Company and Tokyo Electric Power Company, who are also equity partners in the project.

The Ichthys final investment decision on 13 January 2012 has signalled a start to construction of the Territory’s most ambitious LNG project: the development of the Ichthys gas field, to the north and west of Darwin. The Ichthys ‘wet’ gas field, (containing liquid condensate and Liquid Petroleum Gas), is jointly owned by the Japanese company INPEX and the French company Total E&P. It is estimated to contain 12.8 trillion cubic feet of gas and 527 million barrels of condensate. The condensate component of Ichthys alone makes it the largest oil discovery in Australia in four decades. In 2008 and 2009 several other discoveries were announced in the near vicinity of the Ichthys field. Some of these promise to also be world class petroleum fields.

The Ichthys project will see an offshore floating production and processing facility feed into a 889km undersea pipeline to Darwin where two 4.2 million tonne per annum LNG trains will produce LNG. The poroject will supply about 10 percent of Japan’s LNG imports when it is commissioned in 2016. The offshore pipeline, when completed, will be the fourth longest in the world.

Sunrise is another rich wet gas field located 450km north-west of Darwin in the Timor Sea. It is owned by a multinational joint venture including Woodside Energy, ConocoPhillips, Shell and Osaka Gas. Containing an estimated 5.13 trillion cubic feet and 226 million barrels of condensate, this field may become another of the world’s first floating LNG production facilities (FLGN), a process where LNG is manufactured at sea and serviced from Darwin

The first FLNG development is already underway with Shell Oil’s $13 billion Prelude gas project set to begin production in 2016. In order to pump the gas from the sub-sea floor and process it at sea, the company is building what will be the world’s largest floating vessel at 488m long.

FLNG is a process by which smaller gas fields can be developed economically without having to build pipelines and onshore gas plants. Another FLNG project has moved into the FEED (Front End Engineering and Design) stage of development, and is headed for a final investment decision in 2013. It follows the announcement of a strategic partnership between the French company GDF SUEZ and Australian company Santos. Together, they will develop the Petrel, Tern and Frigate gas fields in the Bonaparte Gulf, for floating LNG. Separately, the Thai petroleum company PTTEP has announced its interest in developing an FLNG project on the Cash-Maple field about 700km west of Darwin.

The 1980s saw the Northern Territory’s first onshore gas production when two gas fields in central Australia started delivering gas for power generation through a pipeline that stretched over 1400 km across the Territory. By early 2010 those arid zone fields were in decline and, to continue gas-fired power production, the Blacktip offshore gas field was developed. The Blacktip field, located south west of Darwin in the Bonaparte Gulf, is owned and operated by the Italian company Eni. The field now supplies the Northern Territory’s complete power generation requirements.

The petroleum activity both onshore and offshore and the mining and mineral processing industry across the remote areas of northern Australia support a thriving supply and support sector in the Darwin region encompassing activities like rig tender supply boats, steel fabrication and equipment maintenance, to name but a few. The establishment of Darwin’s new Marine Supply base will create fresh opportunities resulting from a wide variety of offshore projects.

Darwin’s gas and oil sector, supported by a growing supply and service sector, is represented by international companies from around the globe, including all the major economic powers in the Asian region, several countries in Europe and the United States. This ‘United Nations’ of the petroleum and support industries is testament to the Northern Territory’s welcoming policies toward foreign investment and the Darwin industry’s desire to establish itself as the oil and gas centre of northern Australia.

“The Blacktip field now supplies the Northern Territory’s complete power generation requirements.”