Former Western Australian premier Colin Barnett has urged the current state government to pursue and facilitate the development of a new large-scale liquefied natural gas project to cater for growing Chinese demand.
Increasing LNG consumption as part of China’s energy mix has been one of Beijing’s top priorities in its push to cut back its reliance on fossil fuels and reduce greenhouse gas emissions.
China’s central government has mandated for LNG to make up 10 per cent of the country’s total fuel requirements by 2020, up from around 5 per cent currently.
That commitment has already spurred many of the world’s biggest oil and gas players to ramp up expansion plans in Africa, the Middle East and North America, with estimates indicating that 200 million tonnes of new supply will be needed through to 2030, equating to capacity additions of between 25mtpa to 30mtpa each year.
Speaking at the annual Australia-China LNG Forum, hosted by the Western Australian Chinese Petroleum Association, Mr Barnett said the establishment of a new LNG development in WA would be a “worthy objective” for the coming decade.
“The North West Shelf project was originally built as a project for Japan,” Mr Barnett said.
“The nearly completed Ichthys project is a second LNG project for Japan. That is welcome, but perhaps it is time for a China project.
“China’s demand for gas is expected to accelerate from the mid-2020s onwards.
“It could be a brownfield expansion of an existing project, or better still a new greenfield project.”
Mr Barnett said Australia’s LNG export industry was one built on overseas investment and driven by the private sector.
“For a China project, the best way forward is to follow the earlier approach of the North West Shelf Project,” Mr Barnett said.
“That is, the combination of Chinese, Australian and international partners on an equal equity basis along with China being the foundation customer for the majority of the gas.
“There should also be capacity for expansion into the future.
“The result would be a secure project structure for all parties.”
In that context, he said a China LNG project would represent both an economic opportunity and a symbol of the growing relationship between Australia and China since diplomatic relations were established in 1972.
“A China LNG project for the next decade is almost certainly going to be based on conventional gas rather than shale gas,” Mr Barnett said.
“That means a site somewhere along Australia’s north west coast and most likely adjacent to the either the Carnarvon or Browse basins.
“If it is to happen, then site selection and gas source become the two critical issues.”
While Western Australia’s Carnarvon Basin is the state’s dominant area for LNG production, with four operating export projects – the North West Shelf, Pluto, Gorgon and Wheatstone – Mr Barnett said there were serious constraints for any potential expansion.
One major constraint is the historical nature of the Burrup Peninsular, the location of the Pluto and North West Shelf projects, and the world’s biggest collection of ancient rock art.
Chevron’s Gorgon is also constrained by its natural environment, located on Barrow Island – an A-class reserve that features a number of animal species found nowhere else on the planet.
Mr Barnett said the Browse Basin was the new frontier for WA LNG, but operators in the area have faced a complex mix of environmental and social issues.
Japan’s Inpex was forced to establish processing facilities for its Browse Basin gas fields in Darwin, after it could not find a suitable site in WA’s Kimberley.
Woodside Petroleum also ran into issues in its bid to establish processing facilities in the Kimberley, abandoning its proposal after a series of legal challenges and rising costs.
“The longer-term development of the Browse Basin gas reserves remains unresolved,” Mr Barnett said.
“Woodside’s second option was floating LNG, but this is not a small gas field, as evidenced by the proposal being for three floating production vessels.
“That plan has now been replaced by a third option to pipe gas south to the North West Shelf project.
“That doesn’t make a lot of sense with closer undeveloped resources in the adjacent Carnarvon Basin, including Woodside’s recent acquisition of the large Scarborough gas field.
“It also ignores the issue of what happens with future gas discoveries in an under-explored Browse Basin.
“The Browse Basin will ultimately need its own LNG project.”
Port Hedland, however, could provide the potential to open undeveloped resources in the Browse Basin, Mr Barnett said.
He said Port Hedland does not face the same environmental constraints as the Carnarvon Basin or the Burrup Peninsular, and its existing shipping channels and port infrastructure, developed for the iron ore trade, could support future gas processing, chemical plants and minerals processing.
“An LNG project for China as a greenfield project is a bold aspiration for the coming decade,” he said.
“Despite the thousands of kilometres of Western Australian coastline, our recent history has shown that the options for a site are surprisingly limited.
“Port Hedland could be the solution.”