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An Energy Scenario for the Northern Territory

Dr. Michael C. Clarke, CPEng, FIEAust. MAusIMM, RPEQ
CEO, M.E.T.T.S. Pty. Ltd.
Consulting Engineers, Resource Management and Infrastructure Development
Gold Coast, QLD, Australia
Email: metts[at]metts.com.au

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The Northern Territory is unique in Australia regarding energy supply. It is energy rich but has no economic coal reserves like New South Wales, Victoria, Western Australia, South Australia, Tasmania and Queensland. It has natural gas, some oil and significant potential for renewable energy resources. It is indeed in a lucky situation for energy supply with resources stretching through this the twenty first century and beyond, given the likely levels of use in the future.

The new Liquefied Natural Gas (LNG) export terminal in Darwin is an example of how the Territory has potential to earn from natural gas. The terminal and its supplying gas wells, are however an essentially quarrying operation, with minimal processing being carried on the gas sent to export, ie LNG cannot be considered an elaborately transformed manufacture that creates significant employment during the production phase.

The Territory needs to consider other options, as well as LNG exports, for its gas and indeed for its sourcing of electrical power. Those options should include the maximising the financial return from the gas resource, the development of industry that can benefit from having gas (and other hydrocarbons), and industry that will be attracted to the Territory because of abundant and cheap electricity.

In 2000/2001 a Canadian company, Methanex, proposed a natural-gas to methanol plant for the utilisation of the Territory's gas resource. That project was still-borne due to differences over gas prices and incentives. The basic concept was however good, and could be revived in a slightly different form. That form would be a Gas-to-Liquids (GTL) plant that produced liquid petroleum product (diesel, naphtha, lubricants and LPG), plus significant electricity.

A scheme that is being explored is a GLT plant that will produce fifty five thousand barrels of petroleum per day when fully constructed. The plant would be built in three production trains with each train capable of producing 150 MW of electrical energy as a by-product. The total plant would also produce approximately sixty thousand barrels of clean water per day.

Given the Territory's present power generation capacity of around 400 MW, the phased in supply of 450 MW from the GTL plant would allow for growth in supply, as well as the repowering or phasing out of some of the more expensive existing power plants. Since the power supplied from the GTL plant would be a by-product, and would be generated from waste heat and the use of waste process gas from the plant, the price of power supplied to the Territory's Power and Water Authority would be reduced, and thus cheaper power should be available to domestic, commercial and industrial customers.

Some product and cash-flow considerations.

The GTL plant would require around 500 million cu ft of gas per day. For a reserve of 5 - 6 Trillion Cubic Feet (equal to 5000 - 6000 PJ), and given a 340 day production year, product would be produced for around 30 years. The product of 55,000 bbl /day plant would consist of: ultra-clean diesel 35,000 bbl /day, lubricant feedstock 8000, naphtha (light petroleum) 12,000 and LPG 10,000 bbl /day, with a power export of 450 MWe, and clean water production of over 3 GL/year. For this production the return from product sales has been conservatively estimated to be over $ 800 million per year.

For the Territory and Australia the total benefit for best utilising the Territory's gas reserves would be much bigger than the returns from a GTL plant alone. Many synergies and opportunities would be created by the landing of natural gas from the Bonaparte basin in the Darwin region, and processing a significant portion of that gas into liquid petroleum.

The first synergy, is the operation of the LNG plant in parallel with the GTL plant. Because the liquefying of natural gas requires extreme cold (cryogenics), the separation of air into oxygen and nitrogen for the GTL could be accomplished in the same plant. The cold nitrogen, that would not be used in either the LNG or GTL plants, could be utilised by the Territory's export frozen meat and livestock industry.

The second synergy, is that the natural gas from the central Australian gas fields near Alice Springs, is rapidly running out. By reversing the flow of gas in the Darwin-Alice pipeline, then Alice and the customers along the existing pipeline could be supplied with gas for a very long time. This would provide the Territory's mines and other users of gas with energy security on which to base their continued existence and allow for future expansion.

The most significant synergies and opportunities however exist for the export of liquid petroleum product from the Territory. The ultra clean diesel and LPG could be directly shipped to southern markets by the Darwin-Adelaide railway. The naphtha and lubricant feedstocks could either be shipped to Singapore or to Eastern Australian refineries for further processing. Likewise petroleum condensate from the gas processing plants could be combined with the GTL naphtha, and be shipped to Singapore or to Eastern Australian refineries. (Note. If the volumes of petroleum throughput were sufficient, then a refinery attached to the GTL plant in the Darwin region would be an option.)

Energy security and the role of the Northern Territory

R. F. X. Connor, the Energy Minister in the Whitlam Government, once proposed an East-West intercontinental gas pipeline. That pipeline would bring gas from Western Australia to the eastern states. A less grandiose scheme, and one for which much infrastructure already exists, would be the interconnection of the Alice pipeline to the Moomba system - see map. With suitable by-passes on the Moomba hub, gas could be supplied from the Territory resources into the Eastern Australian gas grid. Further by the construction of two modest LNG receival terminals in say Newcastle, NSW and Geelong, Victoria, the Territory would be in a position to again supplement gas supplies into the eastern states when shortages occurred.

As the Bass Strait oil and gas reserves are exhausted, the introduction of synthetic petroleum from the Territory would help reduce the threat to the Australian balance of payments and hence our standard of living from the need import more oil. The Territory and Australia would receive a far greater return by producing synthetic liquid petroleum from gas, than from the export of raw natural gas. That return would include improving national energy security.

How to ensure that the Territory has a continued place in Australia's energy scenario.

The signing of contracts to supply the American and Chinese markets with gas as LNG from Western Australia's Gorgon gasfield is both welcome news and a cause of worry. The quarrying of the WA gas resource will bring income to that state, but the managing of that resource as other nations' strategic reserves is of concern. For the Territory the over-commitment of its reserves to export LNG use could be foolish.

The development of a Territory First policy for resource use should be a priority. That policy could be encouraged by:

- the enforcement of petroleum lease relinquishing clauses if the resources are not properly tapped in the lease timeframe,

- the encouragement of partnerships between petroleum lease holders and GTL technology holders by the NT Government offering modest incentives and providing a site,

- the obtaining of an excise rebate on GTL products from the Commonwealth Government, and

- the fostering of partnerships with energy users and developers of industrial infrastructure.

For the Territory there are additional prospects for energy supply. These include renewable forms of energy such as tidal power and hot rock geothermal energy. By having energy available from multiple sources added security of supply can be achieved. In the future, development will be dependant on having the following: space for growth, affordable energy, clean water and an educated workforce. The wise development of the natural gas resource will provide one of those legs for the four legged development stool.

The vital gas pipeline connection:

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