Queensland's new energy policy pushes proposed Papua New Guinea pipeline
Oil & Gas Journal, September 11-17 issue
In May, the government of Queensland, Australia, issued details of a new
energy policy that will have a positive impact on the proposed 1,988-mile,
New Guinea-Queensland gas pipeline.
The Queensland Energy Policy, created to reduce greenhouse-gas emissions,
strongly supports increased use of natural gas in Queensland while penalizing
continued coal use, according to a new Wood Mackenzie status report on
the project.
The action is the latest in a string of events leading to a stronger probability
that the pipeline will be constructed, the Edinburgh-based WoodMac says.
If built, the pipeline will boost the economies of both Papua New Guinea
and Queensland.
Although the governments of Papua New Guinea, Australia, and Queensland
all favor the project and have signed a memorandum of understanding supporting
construction of the pipeline and ancillary facilities, financing is not
yet fully in place, says WoodMac.
"Capital investment [for the total project] is expected to reach $8.1 billion
(Aus.)," said Jim Elder, Queensland's deputy premier and minister for state
development, in summer 1999 in a statement supporting the project. "The
pipeline and associated projects will deliver an estimated 5,100 construction
jobs and 2,500 operational jobs," he added.
Developer Chevron Services Australia Pty. Ltd., meanwhile, has secured
gas sales agreements for market volumes of 66.5 bcf/year, sufficient to
support the project. The agreements await final approvals.
A major project
The $3.5 billion pipeline system, $2.5 billion of which will finance delivery
facilities in Queensland, is designed to deliver up to 600 MMcfd of natural
gas to new markets there. Supplies will come from Papua New Guinea's southern
highlands fields, which contain reserves totaling 8.99 tcf (see table).
The 18, 22, and 30-in. pipeline system includes a wet gas line from the
fields to an offshore processing plant in the Gulf of Papua, where LPG
will be separated for both domestic and export use.
From the plant, dry gas will be piped across the Torres Strait to Cape
York and down to Comalco Ltd.'s proposed $1.4 billion gaspowered alumina
plant and other markets in Gladstone.
A short lateral to Townsville, on the coast north of Gladstone, will supply
Stanwell Corp.'s proposed gas-fired power station, and a 286-mile extension
to Brisbane is under discussion and will probably follow later.
Supportive energy policies
The new Queensland energy policies stem from the 1997 Kyoto agreement,
when Australia agreed to contain greenhouse-gas emissions to no more than
8% above 1990 levels by 2008-12.
Under this mandate, Queensland plans to spend more than $50 million during
the next 5 years on programs supporting renewable and innovative energy
technologies and facilitating the abundant supply of competitively priced gas.
To reduce the growth of greenhouse emissions, the state will no longer
issue licenses for coal-fired power stations, WoodMac says. The new regulations
require substituting natural gas for coal as fuel for new electric power
generation plants that the state will facilitate.
For example, the government will construct a new power station in Townsville
by 2002 (or support the conversion of one or more existing peaking power
stations to natural gas and base-load operation) if gas is successfully
introduced into the area by then.
The base load power station at Townsville would require about 36 MMcfd
of gas, which initially could come from the Cooper basin or from coal-bed
methane fields in the Bowen basin until the PNG `pipeline is built.
The government and operators of the Australian pipeline section-Australian
Gas Light Co. and Malaysian state oil firm Petronas-have agreed to complete
the construction of the 421-mile Gladstone-- Townsville pipeline section
by mid-2002.
The government is prepared to contribute financially to that segment's
construction, WoodMac says. Overall cost of this section is estimated at
$350 million in 2000 terms.
And beginning Jan. 1, 2005, licenses for electricity retailers operating
in Queensland will require that at least 15% of their electricity sales
come from gasfired sources or 2% from renewable sources.
Because gas is not competitive with coal, the energy policy draws heavily
on the potential impact of carbon taxes to create competition and reduce
greenhouse gas emissions. A discriminatory tax on carbon dioxide emissions
would significantly improve the economics of gas as a fuel source for power
generation, WoodMac says.
If a $30 tax is levied per tonne of carbon produced, for example, emissions
could be reduced by more than 30 million tonnes over 10 years, the government
predicts, and it could save the state economy about $80 million/year. |
