Australia - · PDF filetralia’s fastest growing ... Given that the French were the...
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North Rankin A Platform, North West Shelf Venture – Courtesy of Woodside
November 2010 Oil & Gas Financial Journal • www.ogfj.com 3November 2010 Oil & Gas Financial Journal • www.ogfj.com 3
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The best view overlooking the energy world these days is from
the land down under. A long time mining giant, the growth of
Australia’s petroleum industry is now adding a preponderant
dimension to its international energy standing. With more than $200 bil-
lion worth of projects to exploit over 400 Tcf of gas, the eyes and resources
of the oil and gas world are being drawn to Australia’s free-market, OECD
environment. Domestic industry and foreign investors, meanwhile, need
only look north to energy hungry Asia for steady long-term demand that
has helped Australia avoid an economic downturn and positioned it, as the
IMF described, at the “forefront of the global recovery.”
4 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
Despite the favorable outlook, 2010 has presented new chal-
lenges to the industry. Fallout from a proposed “super profits”
resources tax spiraled into a mid-year prime minister change and
subsequent federal elections, but still leaves industry yearning for
fiscal certainty; Deepwater Horizon has heightened safety con-
cerns, particularly as liquefied natural gas carries industry further
offshore; and the infrastructure demands of prospective proj-
ects have exposed a looming labor shortage. Australia has the
resources below the ground to grow into an energy powerhouse.
How it surmounts the above ground risks go equally far in deter-
mining its success.
Gas is the biggest game in townWhile a country of Australia’s continental size is no stranger to big
proportions, its plethora of “mega” liquefied natural gas (LNG)
projects planned for the next 10 years are breaking new grounds
for global oil and gas. Geoscience Australia – an entity of the Fed-
eral Department of Resources,
Energy and Tourism (RET) – esti-
mates conventional gas reserves
off western basins to be 164 Tcf
with as much as 250 Tcf of coal
seam gas (CSG) assets in the
eastern states of Queensland and
New South Wales.
Belinda Robinson, chief execu-
tive of the Australian Petroleum
Production & Exploration Asso-
ciation (APPEA) whose member
companies represent 98% of
Australia’s oil and gas, estimates
reserves-to-production to be in
excess of 250 years. “Taking into
account the other energy sources
we have, it is an indisputable
statement to say that we are an
energy superpower,” she asserts.
LNG is forecasted to be Aus-
tralia’s fastest growing energy
export over the next two decades.
Twenty-one years after the first
LNG cargo delivery from Austra-
lia’s flagship Northwest Shelf Ven-
ture (NWSV), there are over $200
billion worth of LNG projects in
the planning phases, with final
investment decision (FID) immi-
nent for many of them. By 2015
Australian LNG exports could
exceed 40 million tons per year
as Chevron’s Gorgon Gas Project
and Woodside Petroleum’s Pluto
Project come onstream. Beyond
2015, up to 10 other projects
could make Australia the world’s
second largest LNG exporter.
Along the way Australia will be
home to cutting edge develop-
ments: the first conversion of
CSG-to-LNG; the first application of floating LNG technology; and
the world’s largest carbon capture and sequestration project.
The proliferation of Australian natural gas projects coincides
with declining levels of domestic crude oil production. Australia’s
oil production has been steadily declining since 2000 leading to a
$16 billion trade deficit in crude oil, refined products, and lique-
fied petroleum gas. Geoscience estimates the deficit could reach
$30 billion by 2015 with net imports of liquid fuels as high as ¾
of consumption by 2030 in the absence of a major new discovery.
“The outlook for oil is not too good,” says Robinson. The oil
reserves-to-consumption ratio is less than 10 years. The upside
is that there is still the prospect of a major new discovery. Only
20% of our sedimentary basins have been explored. But barring a
major discovery, the outlook for oil in Australia is very grim.”
Meanwhile, gas production continues to grow to meet both
domestic and export demand reinforcing its importance to the
energy mix.
Gas reserves and resources
Source: APPEA
AUSTRALIA3P113 + Tcf*
2P61 + Tcf*
2P7 + Tcf
Resourcepotential
12 Tcf
CSGResource potential
250 + Tcf*
Belinda Robinson, Chief Executive, APPEA
Dr. Clinton Foster, Chief of Petroleum and Marine Division, Geoscience Australia
Hon. Martin Ferguson, Minister for Resources and Energy, Minister for Tourism - Federal Government of Australia
6 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
The wild and gaseous westGas in Australia is segmented between onshore CSG assets in the
east and predominantly offshore deposits in Western Australia
(WA) and the Northern Territory. While a palpable excitement is
sweeping both markets, the offshore projects out west that are
stimulating innovation and strengthening marine services suggest
that the right time and right place for gas is today in WA.
“Seventy percent of Australia’s oil and gas is off the Western
Australian coast,” says Colin Barnett, the premier of Western Aus-
tralia. “The industry is dominated by WA. Of the three major reser-
voirs off the coast of WA – the Carnarvon, Browse, and Bonaparte
Basins – only the Carnarvon has been relatively explored.”
The offshore oil and gas reserves today in WA have been com-
pared to the same stage of development as the Gulf of Mexico
30 years ago, a comment brought to the premier’s attention on
an April 2010 visit to Texas. Perth, consequently, has drawn ref-
erences as the “mini-Houston” given its landscape of superma-
jors and multinational contractors. “What is happening here is of
world significance,” Barnett adds. “The sizes of the gas fields that
have been and will continue to be discovered are large by interna-
tional standards and certainly large by Gulf of Mexico standards.
The significance of the gas reserves here is their proximity to the
expanding markets of Asia.”
Where to find the majorsAttractive linkages to Asia and a stable political environment have
drawn substantial investment from the world’s major oil and gas
companies. Commitments vary from Shell and Chevron with over
100 years in Australia to GDF Suez and Petrobras, both relative
newcomers. But the message is clear: Australia is a high priority
market for global growth strategies.
Shell, a founding member of the NWSV, projects half of its
global output to come from gas by 2012. “Globally Shell produces
over 18 million tons of LNG per year,” says Ann Pickard, country
chair of Shell in Australia. “By 2020 we will
add another 15 million tons per year, more
than half of which will come from Austra-
lia. Australia is critical in terms of Shell’s
growth in the LNG marketplace.”
Underpinning Shell’s projections are its
25% equity in the Gorgon Gas Project and
a joint venture (JV) with PetroChina which
will acquire Australian junior and CSG rich
Arrow Energy for LNG developments in
Queensland. Shell is also pioneering float-
ing LNG technology through 100% equity
in the Prelude Project and 27% partici-
pation in Sunrise LNG. Prelude is widely
expected to be the first successful dem-
onstration of floating LNG. “Prelude will
open up a whole new ‘game’ in terms of
Hon. Colin Barnett, Premier of Western Australia
Ann Pickard, Country Chair, Shell in Australia
Seiya Ito, Managing Director, Inpex Australia
Jeff Dowling, Oil & Gas Leader Oceania, Ernst & Young
Fig. 1: Historical Australian oil and gas production
Source: APPEA
600
Liquids (oil, condensate, LPG) (mmbls) Gas (sales gas, LNG) (bcf)
800
1000
1200
1400
1600
1800
2000
300
mm
bls
bcf
250
200
150
100
50
0
19931994
19951996
19971998
19992000
20012002
20032004
20052006
20072008
2009
Our mission is a sourceof pride each and every day:responding to today’s needs whileshaping the world of tomorrow.
gdfsuez.com
Throughout the world, the men and women at GDF SUEZ focus their businesses on responsible growth
to take up today’s major energy and environmental challenges: meeting energy needs, fighting against
climate change, ensuring the security of supply for our customers and maximizing the use of resources.
In the Timor Sea off the coast of Australia, we are leading the development of the Bonaparte LNG project
in a partnership with Santos. Our aim: to extract natural gas from three fields, and liquefy it in a floating LNG
plant for ease of storage and transport. Our close collaboration with our Australian partner reflects our
commitment to ensuring a reliable supply of liquefied natural gas to the Asia-Pacific region.
© P
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CarsGdf_OGFJ_1011 1 10/18/10 11:41 AMNovember 2010 Oil & Gas Financial Journal • www.ogfj.com 7
access to stranded gas reserves,” Pickard adds. “It will also be
the first of several FLNG facilities. Our plan is to design one and
build many.”
Given that the French were the original pioneers of the LNG
trade launching the first shipment from Algiers to Britain in 1964, it
is only fitting that GDF Suez, the industry giant in integrated LNG
projects, has invested in offshore gas’s hottest market. In January
2010 GDF Suez finalized an agreement to purchase a 60% share in
three gas fields in the Bonaparte Basin. Already present in Austra-
lia through the waste and water businesses, the Bonaparte LNG JV
with Santos, owner of the fields’ remaining 40%, represents GDF
Suez’s first move into the Australian energy sector.
“Bonaparte LNG is a strategic project for us,” say Jean-François
Letellier, managing director of GDF Suez Bonaparte. “It adds a
major component to the natural gas value chain of GDF Suez while
reinforcing our position as a world leader in LNG.”
Bonaparte LNG is an integrated project whose purpose is to
build a floating liquefaction plant with 2 million tons per annum
capacity in the Timor Sea. Final investment decision is expected
by 2014. “We consider integrated projects as key to accessing
competitive LNG resources,” Letellier adds. “Australia provides
the opportunity to have an LNG
project with exploration, produc-
tion, liquefaction, shipping, and
marketing all together. LNG is
becoming a global market and an
LNG leader such as GDF Suez has
to be present in the Asia-Pacific
market.”
While the French pioneered
the LNG trade, many would argue
that LNG today is very much an
Asian industry in both production
and consumption. Limited natural resource endowments have
made Japan, South Korea, and Taiwan big customers of Pacific
Basin LNG. China and India, of course, are growing consum-
ers. Japan in particular – only 16% energy self-sufficient and the
world’s largest LNG importer – has a strong presence in Austra-
lia to address critical energy security needs. Osaka Gas, Tokyo
Gas, and Kansai Electric all hold minority interests and long-term
purchase agreements in Australian LNG projects. Japan Australia
LNG Pty Ltd (MIMI) is a founding partner of the NWSV.
Jean-François Letellier, General Manager, GDF SUEZ Bonaparte
8 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
In the right place at the right time
www.metgasco.com.au
CarsMet_OGFJ_1011 1 10/18/10 11:06 AM
The face of Japan in upstream Australia, however, is INPEX.
In the late 1980s INPEX targeted Australia as the next stop in its
international diversification. A joint exploration block with BHP
Billiton yielded ten years of successful oil production allowing for
more aggressive growth in Australia. The result was WA-285-P.
Better known as the Ichthys field, it is one of Australia’s largest gas
fields with an estimated 12.6 TcF of gas and an expected operat-
ing life in excess of 40 years. Ichthys’s 527 million barrels of con-
densate makes it the largest petroleum liquids discovery in Austra-
lia since 1966. Joint venturing with Total to glean LNG expertise,
the ambitious field development plans call for one of the world’s
largest offshore central processing facilities and an 885km pipeline
to an LNG facility in the Northern Territory city of Darwin.
Ichthys will engender unprecedented engineering challenges
as well as usher in what managing director Seiya Ito describes a
“new beginning” for INPEX in Australia. “We have been success-
ful as an exploration operator. It is now time for us to shift into a
developing operator and ultimately a production operator. Ich-
thys is an asset that we will grow with towards these new stages
of the company.”
The new paradigm for Australian energyUnequivocally, the project that brings Australia to center stage
is Gorgon LNG, operated by Chevron with Shell and ExxonMobil
holding 25% interests, respectively. Superlatives abound for the
$43 billion resource investment, the single largest in Australia’s his-
tory. Gorgon is estimated to produce 15 million tons of LNG per
year – 8% of current global capacity – every year over its projected
40 year lifespan. “One project; 8% of global capacity. By any mea-
sure, that’s huge,” emphasized Geroge L. Kirkland, Chevron Cor-
poration’s executive vice president of Global Upstream and Gas,
at Gorgon’s FID ceremony in September 2009. According to ACIL
Tasman, an economic consultancy, Gorgon will boost Australian
GDP by A$64 billion and generate government revenues of A$40
billion over its first 30 years. It will also create 10,000 jobs during
peak construction and 3,500 more throughout the project’s life.
Gorgon’s gas processing plant will be developed on Barrow
Island, an A-class nature reserve located 56km off Western Austra-
lia’s coast. As part of its environmental stewardship, Gorgon will
host the world’s largest carbon capture and sequestration project.
Gorgon’s externalities can be felt here and now in Australia in the
way that project planning is categorically elevating the environ-
mental standards and shaping the strategic directions of compa-
nies throughout the entire Australian oil and gas value chain.
An appetite for explorationJust how untapped Australia’s offshore basins are can now come to
light after a change in regulatory framework that has made specula-
tive surveying a growing business in Australia.
In 2007 Australia increased the time under which speculative
survey data becomes public domain from five to 15 years, a move
that is drawing the attention of the world’s top geophysics com-
panies. In practice, oil companies picking up relinquished blocks
could have waited until data became public rather than pay for new
data sets. “Essentially you only got one big ‘bite at the cherry,’”
explains Tony Weatherall, VP geomarket director Australia, New
Zealand and PNG. Weatherall chaired the International Associa-
Oil 36%
0 10 20 30 40 50 60 70 80 90 100%
Black coal 26%
Natural gas 22%
Brown coal 11%
Renewables 5%
Fig. 2: Share of primary energyconsumption, 2007-2008 (%)
Source: ABARE
November 2010 Oil & Gas Financial Journal • www.ogfj.com 9
tion for Geophysical Contractors
for two years which lobbied hard
for the government to change the
regulation. As a result, he com-
ments, “the regulatory change
altered the landscape of seismic in
Australia, probably forever.”
Results of the change are evi-
dent. There were no speculative
surveys shot in Australia after 2002
with Veritas (before the merger
with CGG) being the last to shoot
in 2D. Since 2007 CGGVeritas has shot at least 3,000km of specula-
tive surveys by Weatherall’s estimates.
Boasting the largest fleet in the world amongst geophysics com-
panies and with seven vessels in Asia-Pacific, the goal for CGGVeri-
tas is to bring its first vessel back into Australia since 2008. “We are
certainly going to grow both proprietary and speculative surveys in
Australia,” he asserts. I would like to be shooting surveys up in the
Tony Weatherall, VP Geomarket Director Australia, New Zealand and PNG, CGGVeritas
Australians awoke on June 24 to the surprising headlines of a new prime minister in office. Julia Gillard replaced Kevin Rudd as head of the Labor Party and prime minister of Australia in a swift change of leadership that capped off a precipitous fall in Rudd’s domestic approval ratings. Gillard has since called federal elec-tions and on September 7, 2010 was elected prime minister on her own mandate following Australia’s first hung parliament since World War II.
Rudd’s demise was largely blamed on two factors: first, his decision to delay legislation on an emissions trading plan known as the Carbon Pollution Reduction Scheme (CPRS) until 2013. Having labeled climate change “the greatest moral challenge of our generation,” his abandonment of the CPRS in exchange for budget-balancing issues ahead of federal elections damaged opinions on his principles and eradicated support from climate change advocates.
Second, and more unsettling for the resources industry, was his proposal of a resources “super profits” tax (RSPT) in April. The rancorous debate that ensued between industry and government for two months eventually cost Rudd his job. The debate cen-tered on the rate at which government defined “super-profits.” Any profits above 6% – equivalent to the long-term government bond rate – would be taxed at an additional 40%.
While the RSPT would not have affected offshore projects, it would have drastically altered the economics of onshore develop-ments, including major CSG projects in the works. Also damag-ing was the tax’s retrospective component to apply to existing projects for which investment decisions had already been made. Equally alarming was the absence of consultation between indus-try and government prior to the tax’s proposal. From a macro perspective, Australia’s stable, low-risk environment that had
attracted so much foreign investment had been compromised. Australian “sovereign risk” became an issue.
Since assuming leadership, Gillard has rescinded the RSPT, proposed variations of existing petroleum rent taxes, and opened more transparent communications channels with industry. As of the writing of this publication, no final decision has been reached concerning reforms to the fiscal regime. Below are comments from industry leaders voicing their opinions and concern over the original RSPT.
“Oil and gas is a long term investment. Long term investments need long term certainty. There are enough risks in the business through exploration, development, and oil prices without having to put regulatory and tax risk into it.” – Brent Steedman, partner, oil & gas KPMG
“Investment dollars go where the resources are and where regimes are stable. Australia is blessed with enormous resources, which is good news. But any sort of unexpected change in the tax regime discourages investment because people will wait and see what develops.” – Ann Pickard, country chair, Shell in Australia
“If the return on your investment is 6% and you are going to pay excess tax on anything above that, why don’t you just buy government bonds and sit home and watch television? One thing I know about resources is that it attracts particular sorts of inves-tors who are willing to take risks. It is a risky business and people expect a better than 6% return to be compensated for the risk.” – Norman Moore, Minister of Mines, Petroleum, Fisheries and Electoral Affairs, Government of Western Australia
“A really important point for us is trust and confidence. In Qatar, once we agree on things they don’t get changed. We do not go and do funny things and ruin the market for ourselves.” – Faisal Al Suwaidi, CEO of Qatargas
CPRS & RSPT: politically charged acronyms
CGGVeritas geologist offshore
10 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
Browse Basin and in the Northern Territory. The other growth here
is obviously processing. We have a very strong depth processing
team here and we get a lot of work from Australia.”
If you build it they will come LNG projects pushing the industry further offshore are stimulating
a new generation of marine services. New ships break grounds in
size and design and the importance of supply bases are becom-
ing more apparent to address logistical challenges. Despite being
entirely within Australian waters, the northwest’s offshore gas
fields are equidistant from the industrial hubs of Singapore and
Perth. The competition amongst supply bases can very well see
Singaporean marine yards servicing Australian offshore projects.
WA’s response for infrastructure in support of local industry is
the Australian Marine Complex (AMC). Located 20km south of
Perth the AMC is an industrial cluster of manufacturing, fabrication,
and assembly services for the marine, defense, oil and gas, and
resource industries. Earlier this year the AMC commissioned WA’s
first floating dry dock which will prove critical in servicing upcoming
projects. “We are expecting about 80 vessels to be on the North-
west Shelf over the next few years,” says AMC general manager
Mike Bailey. “A lot of those vessels will be running to and from this
facility. All of them will need repair, maintenance, and dockings.”
In the early 1970s, after a decade of unsuccessful drilling, a small independent Australian company struck 50 TcF of gas off WA to form the basis of the NWSV. While offshore gas might be the big-gest game in town, don’t tell that to Australia’s junior E&P compa-nies actively drilling onshore with the hopes of becoming the next Woodside Petroleum.
“Australian investors like betting on small stocks to see a little bit of exploration luck and watch our share price go up tenfold. They invest in a small company to see it become the next Wood-side,” says Russell Langusch, managing director of Orion Petro-leum with exploration assets in New South Wales. Juniors in Aus-tralia work as scouting agents in a sense for the bigger players whose attention is diverted to offshore basins or, in the case of CSG, liquefaction facility planning. Strategies range as to how to draw the attention of larger farm-in partners. “We generally look at assets that are impaired in some way,” says Langusch. “We would look for assets that companies have walked away from that have been too technically hard to commercialize. That is the edge we can bring – the technical ability to rescue assets that have been suspended rather than a prime A-grade asset.”
A company like Central Petroleum leans on its size by boast-ing the largest acreage package in Australia, predominantly in the Northern Territory’s Amadeus Basin; certainly attractive farm-in potential for anyone. “Independent assessments have given
us estimations of a viable exploration target of over 600 billion tons of coal above 1,000 meters that might be developed either through underground coal gasification or coal-to-liquid proces-sor,” says managing director John Heugh.
Historically, the Cooper Basin has been the main onshore region for hydrocarbon production. As such, it is very crowded with companies looking to leverage off neighboring petroleum plays. “Almost every block in the Cooper Basin has been awarded,” says Mike Scott, managing director of Cooper Energy. “In our portfo-lio we probably have three to four years of prospects left and then we will have to replace those exploration blocks with new acreage. We are active overseas precisely for that reason.”
The game changer for juniors in Australia could most likely be CSG – just ask junior CSG specialist Metgasco. David Johnson, managing director, describes Metgasco’s acreage position as “similar to that of Queensland Gas Company at the time it was taken over by BG.” Convenient for Metgasco, estimates cite the Bowen-Surat-Clarence Moreton system in eastern Australia to be a major gas producing province for a considerable period of time. “Translating gas in place to reserves and extracting gas commer-cially is an ongoing process that we are now in the middle of.” It is a discussion that would certainly be of interest to a larger company, given the CSG-to-LNG infrastructure planning amongst a consortia of supermajors.
A piece of the pie for everyone
Central Petroleum LimitedABN 72 083 254 308
John Heugh Managing Director
Phone : +61 8 9474 1444
Email : [email protected]
Website : http : //www.centralpetroleum.com.au
• Prospective for oil, gas, condensate, helium, coal
• Surrounds producing fields
• Conventional, unconventional plus UGC, CTL, GTL, LNG potential
• JORC “Exploration Target” over one trillion tonnes coal
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November 2010 Oil & Gas Financial Journal • www.ogfj.com 11
The AMC’s most iconic representation and greatest asset is its
Common User Facility (CUF). Bailey characterizes its enabling role
as a form of “industrial empowerment.” The CUF exists to provide
Australian based businesses with access to
large scale industrial infrastructure. The
CUF was initially funded by $100 million and
$80 million from State and Federal Govern-
ment, respectively, which enabled the con-
struction of wharves, fabrication halls, and a
protected harbor.
“Our role is to enable a company to do
projects that they could not undertake with
just their facilities by giving them that virtual
capacity increase,” says Bailey. “Whereas
they could fabricate something up to 200
tons in their workshop, our role is to give
them the ability to make a module of 2,000
tons. We want to see projects coming to
WA that can and should be done here. We
are very biased in that sense.”
A second piece of vital infrastructure for
servicing Northwest Shelf projects is the Dampier Supply Base
that is owned by Mermaid Marine Australia, the country’s largest
marine services provider for offshore oil and gas. A stand alone
Common User Facility - Australian Marine Complex
12 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
Orion Petroleum Limited
An Ambitious
Australian Exploration Company
��7 onshore exploration licences
��Conventional plus CSG potential
��Prospect sizes to multi – tcf targets
� Always looking for new growth opportunities
Suite 303, Level 3, 10 Bridge Street
Sydney NSW 2000 Australia
T: +61 2 9254 9000 E: o�[email protected]
W: www.orionpetroleum.com.au
CarsOri_OGFJ_1011 1 10/18/10 11:39 AM
$100 million asset, managing director & CEO Jeff Weber also con-
siders it Mermaid’s single biggest competitive advantage. “Peo-
ple often underestimate the challenges of operating vessels in the
northwest compared to Singapore where, if a vessel encounters
a problem there are 20-30 suppliers to help at any time. It is a
tremendous asset for a region where it is hard to operate because
of minimal infrastructure and scarce supplies.”
Mermaid’s core business continues to be the provision of sup-
port vessels and has invested over $100 million in fleet renew-
als over the last five years. Utilizing its vessels for pipelay sup-
port on the Pluto Project not only insulated the organization from
the financial crisis, but triggered growth in 2008-2009. But with
Gorgon and other projects approaching production, supply base
operations are becoming increasingly important. Since 2002 Mer-
maid’s operations have shifted from 95% vessels and 5% supply
base to 70% and 30% this year. “You can move boats around to
meet the market. But with a supply base it creates a ‘build and
they will come’ type scenario,” he adds.
As projects and customers come, Weber sees a host of exter-
nalities driving business. “You get to know your clients very early
on in the cycle. If you are doing offshore work, the first thing that
you do is get an office and a warehouse to store your gear. By
the time a client needs a vessel to begin their offshore work we
already have an established relationship with them.”
Exposure to long-term contracts was particularly beneficial to
Australian marine service companies during the crisis. With Gor-
gon reaching FID in September 2009, losses carried into the cri-
sis years were quickly recouped, if not, evaded altogether. Andy
Cowan, QHSE manager at Bhagwan Marine, light-heartedly com-
ments, “what financial crisis?”
Founded in 1998 with just one ship, Bhagwan Marine has flour-
ished over the past 12 years into the owner and operator of a
fleet of over 35 vessels. Its newest addition will be a custom built
landing craft – the Bhagwan Shaker – to service Barrow Island; the
Shaker’s sister ship, appropriately named the Bhagwan Mover, has
already been in operation for Gorgon for the past 12 months. In
addition to obvious revenues, servicing Gorgon has provided an
immediate opportunity to exploit the strength of Bhagwan’s ves-
sels while positioning it for future growth. “This is a niche market
and there are not many companies dealing in the port services
out to and around Barrow Island, which is largely shallow water,”
explains Cowan.
Made in AustralasiaConstruction of the AMC’s floating dry dock and the Bhagwan
Shaker was done by Strategic Marine, Australia’s largest builder
for oil and gas industry supply boats. Strategic Marine leans on
a rich tradition of shipbuilding born out of WA. Chairman Mark
Newbold explains that WA developed a commercial expertise in
building aluminium boats before anyone else. “There were a num-
ber of companies in WA that became exporters and a host of rea-
sonable sized yards that became experts. We are now exporting
the technology that we developed over the years.”
TSmarine Havila Harmony at work offshore Western Australia
14 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
Adapting to the economics of the industry, Strategic Marine
has exported its capabilities to its four shipyards in Australia,
Singapore, Vietnam, and Mexico. While proximity to Asia allows
operators to satisfy a hungry commodity demand, Australian man-
ufacturers and fabricators benefit from cost-competitive labor and
resources. Globalization and the fully developed Asian supply
chain have shifted industry dynamics forcing Australian manufac-
turers and fabricators to adjust their strategies. John Sheridan,
CEO of AusGroup, the largest fabricator in WA, explains that
“what typically comes local is schedule-critical or a product that
is price insensitive.” Fully developed project modularizations,
meanwhile, are sourced in Asia.
Strategic Marine has followed suit by developing niche spe-
cialties for its Asian yards. “Singapore is very much a special-
ist aluminium yard that is quite mature in its development and is
producing high quality work. The Vietnamese yard has opened
up quite a bit of business for us because of its steel capabilities,”
says Newbold. The Vietnam yard also played an integral role in
the construction and assembly of the AMC’s floating dry dock.
The Australian yard, meanwhile, being located within the AMC, is
shifting more into marine services repair and maintenance mindful
of the future demands of the Northwest Shelf.
Global content, local continentWhile State supported projects such as the AMC provide an
important impetus for industrial development, the synergies from
mature oil and gas provinces are proving equally beneficial in fos-
tering service sector growth. The talent and resources that have
made Aberdeen and Stavanger centers of subsea excellence are
CarsAMC_OGFJ_1011 1 10/18/10 10:08 AMCarsBha_OGFJ_1011 1 10/18/10 11:37 AM
Bhagwan Mover at Barrow Island
November 2010 Oil & Gas Financial Journal • www.ogfj.com 15
now gravitating to Perth. From executive
managers to new global headquarters, WA
oil and gas services are becoming a truly
global mosaic, with a North Sea twist.
Perhaps no greater testament to Austra-
lia leveraging, and ultimately overtaking,
North Sea activity is TSmarine, a subsea
contractor specializing in integrated life
of field services. TSmarine was founded in
Aberdeen in 2004. The Perth office, which
began in 2006 from a Woodside contract,
quickly established itself as one of the best
performing centers and completed a man-
agement buyout of the parent company in
November 2009.
As chief executive John Edwards
explains, “There was a period of nearly two
years when this office was funding the head
office which was in pretty bad financial
shape. We decided that the best way to
ring-fence what we had and make sure that
our success continued was to buy the busi-
ness from the parent company. That also
gave the parent company the needed cash
to resolve their financial issues.” Shortly
after finalizing the deal the Aberdeen head
office shut down. To complete the circle,
TSmarine plans to reopen an office in Aber-
deen on the back of a service contract.
CarsMer_OGFJ_1011 1 10/18/10 11:44 AM
The Mermaid Voyager Berthed alongside the Mermaid Marine multi user wharf facility in Dampier
The technical challenges of subsea field
developments are creating a market for life
of field service providers. TSmarine, how-
ever, explains Edwards, is quite different
from other subsea construction companies.
“We focus most of our activities around
the well. In addition to our rigless inter-
vention capabilities we can do all the low
margin work for a drill rig typically done by
them because no one else has the technol-
ogy to do so. In our business any activity
close to the well is the highest margin work
that we can do because of its value for oil
companies.”
TSmarine’s integrated capabilities
afforded by its vessels and ROVs were a
serendipitous surprise for Woodside when
fulfilling its first contract. Essentially TSma-
rine’s services exceeded their original
mandate. “We did not just do well inter-
vention: we were the first company in this
region to install and run a Christmas tree
thereby freeing the drill rig to fulfil its real
value of actually drilling; we installed flow
bases, tied trees into each other with jump-
16 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
ers, and installed drilling conductors. It is
not typical that a company has all of those
services under one roof,” says Edwards.
Scotland’s North Sea neighbors and fel-
low experts in offshore services, the Nor-
wegians, are also finding a comfortable
home in Australia with multinational com-
panies steadily increasing their presence to
grow alongside major operators. Subsea
specialist Acergy made the full leap into
Australia in 2006 with the establishment
of a permanent office in Perth. “The scale
and complexity of the LNG projects com-
ing to market over the next few years are of
great interest to a company like Acergy,”
says Darren Cormell, managing director of
Acergy Australia.
Well equipped with world class technol-
ogy, Cormell considers Acergy’s greatest
growth driver in Australia to be its human
assets of strong local talent that leverages
the resources of a global corporation. “The
Acergy model is around having the right
mix of local knowledge that is backed by a
global consistency,” he explains. “We have
been building a local track
record over the past sev-
eral years to understand
the local issues. You back
that up with a company
that understands how to
deliver very large projects
and I think it is a model for
success.”
Acergy has been strate-
gically building its portfo-
lio of assets to support its
local talent. SapuraAcergy,
a JV between Acergy and SapuraCres, com-
mands the Sapura 3000, a regionally based
vessel with leading capabilities in heavy lift
and deep end pipelay. A proposed com-
bination with Subsea 7, currently awaiting
regulatory approval, will see an enlarged
global fleet of 42 vessels with the full spec-
trum of pipelay capabilities, several of which
would likely be bound for
Australia. According to
Cormell, “the enlarged
fleet will have the opportu-
nity to make more vessels
resident in certain parts
of the world. As Australia
becomes an ever increas-
ing part of the world, it is
likely that we will look to
optimize the fleet to make
them as attractive as pos-
sible in the region.”
With over 20 years experience provid-
ing mooring solutions to the harsh condi-
tions of the North Sea, Norwegian incorpo-
rated Viking Moorings now brings its suite
CarsStr_OGFJ_1011 1 10/18/10 10:16 AM
Mark Newbold, Chairman, Strategic Marine
November 2010 Oil & Gas Financial Journal • www.ogfj.com 17
of offerings to Australian waters. “In Australia we have not had
the high caliber technical mooring solutions that we have now,”
explains Perth branch manager Trond Watland. “We have intro-
duced different methods for semisubmersible rig mooring such as
fiber ropes which are new to Australia.”
A premium on safety has placed a strong emphasis on expert
training. With the training still sourced from Norway, Viking Moor-
ings embodies North Sea-Australian knowledge transfer. “Training
people in anchor handling, fiber rope management and being able
to certify, qualify, and repair on deck is a trait that the Australian
market does not yet have, so most of our training has come out
of Stavanger,” Watland explains. “We have an all-Australian crew
in Karratha and Dampier that is being trained by Viking Moorings
staff that has come in from Norway. Everyone on that crew are the
only ones who can do what they do in Australia. It is a valuable
input that is coming into our workforce.”
When combining North Sea know how with Asian manufacturing
and a strong local industrial base, the oil and gas sector’s organiza-
tion has a truly multinational dimension. As Christian Lange, CEO of
Neptune Marine Services, argues, “I am intolerant of people saying
that Australia lacks the technology or expertise as the Gulf of Mexico
or North Sea. Australia has a fantastic education system and most
of the industry here have either come from those regions or have
worked there and repatriated. In many cases we lead the charge.”
Structured for successMajor multinationals with established expertise in their fields are
finding that success in Australia comes as much from their corpo-
rate structuring as from their product offerings. Oilfield services
giant Baker Hughes, for example, is comfortable accepting the
challenges of Australia with the backing of an internationally inno-
vative body of work. “A priority is to focus on more deepwater and
high-temperature reservoirs, aligning with the work undertaken by
major operators in the area. Most of the high-tech infrastructure
required is very familiar to Baker
Hughes,” says managing director
Bernie Kelly.
The biggest difference, how-
ever, for Baker Hughes in Aus-
tralia has been the efficiencies
generated from their geomarket
model, developed over one year
ago, which shifted vice-presi-
dents to regions and consoli-
dated the management of vari-
ous product lines.
T | +61 8 9218 8400 E | [email protected] www.ctcmarine.com
Project-driven solutions and
specialist technology for subsea
construction, installation and
trenching in the international
offshore industry
A M E M B E R O F
TRICOMARINEG R O U P
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CarsCTC_OGFJ_1011 1 10/18/10 11:35 AM
CTC Marine RT1 Rock TrencherChristian Lange, CEO, Neptune Marine Services
November 2010 Oil & Gas Financial Journal • www.ogfj.com 19
Historically, Baker Hughes’ product lines
were managed separately and entered the
market at different times to coincide with
stages of clients’ oilfield production. “In
Australasia, we inherited seven different
offices and five different sites,” says Kelly.
“One of the areas we are
focusing on is consolida-
tion of our separate opera-
tional bases, which were
the result of our previous
divisional approach, to
provide improved efficien-
cies to customers.” New
efficiencies now ready
Baker Hughes to capitalize
on both the offshore and
CSG segments of the Aus-
tralian market.
“Deep water and
high temperature
reservoirs are the
areas in which there
is a lot of explora-
tion to come. The
level of tools that
we are going to run
down in Australia
are becoming much
more high-tech than
we have seen his-
torically. We can
export our learnings
here to other areas,”
says Kelly. The
immediate impact
of Baker Hughes’s
offshore reservoir
services will be com-
plimented by future
growth in the CSG arena by way of its
September 2009 acquisition of BJ Services
and its large CSG portfolio. Notes Kelly,
“Baker Hughes will be reassessing its strat-
egy in servicing CSG, leveraging the syn-
ergies gained with BJ Services’ customer
Darren Cormell, Managing Director Australia & New Zealand, Acergy
Acergy Team working Offshore
base, infrastructure and expertise.”
Integration, meanwhile, is the defining
feature of professional services giant Ernst
& Young throughout Asia-Pacific. Just
as major operators have set up regional
centers for value chain operations, Ernst
& Young has replicated
its approach by estab-
lishing hubs of exper-
tise for its practices: an
upstream business in WA
and Queensland; a trad-
ing business in Singapore;
and a specialist service
business to support buy-
ers in Beijing. The result,
as Perth’s managing part-
ner and oil and gas sector
leader Jeff Dowling notes
is that, “of the ‘Big
Four,’ Ernst & Young
is the only firm that
is financially inte-
grated throughout
the whole Asia-
Pacific region.”
“Shell is a very
good example of
this,” he adds.
“Shell has relocated
its upstream busi-
ness in Oceania to
Perth. They also
have a trading hub
in Singapore and
they are interfac-
ing with customers
in Beijing. All of
the global majors
are doing the same
and we are replicating our business model
accordingly. We have evolved into three
hubs with oil and gas specialists across our
disciplines in those three areas to provide
a seamless service between the producers,
buyers, traders, and support services.”
Acer_OGFJ_1011 1 10/14/10 5:03 PM
20 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
Innovation down underThe subsea systems for the Gorgon Proj-
ect in the heart of the Northwest Shelf face
combinations of high pressure, high tem-
perature, and corrosive product. “One of
the biggest challenges is the deep water
element, and especially the continental
shelf. It is effectively a subsea cliff 100km
offshore across which you need to install
a pipeline,” explains Phil Brown, director
& performance team leader of J P Kenny
Perth.
“The environmental conditions there
are possibly more challenging than any
other place in the world,” he adds.
“The cyclones generated in the area are
extremely powerful. You have a num-
ber of other interesting features like the
solitons – giant subsea rolling waves that
are within the water column – which you
would not encounter in many other parts
of the world. Adding the extreme tides,
currents, and cyclones all together, it is a
tremendous metocean design challenge.”
Responding to these challenges, J P
Kenny has applied its FEED expertise on
some of the biggest and most difficult
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CarsVik_OGFJ_1011 1 10/18/10 10:11 AM
Viking Moorings personnel in action on prelay vessel
November 2010 Oil & Gas Financial Journal • www.ogfj.com 21
subsea projects in Australia: Gorgon upstream development in
partnership with Technip; subsea development for the Julimar
Project, Apache’s largest ever gas project; and INPEX’s Ichthys
Project. “We have always had a focus on optimizing and eliminat-
ing the layers of design conservatism that have
historically existed,” says Brown. “We have also
expanded that philosophy into other design fea-
tures such as lateral buckling, for example.” All
of this has branded J P Kenny Perth an emerg-
ing center of excellence amongst it global offices
for pipeline stability. Considering Wood Group
Kenny’s global presence and identity as the spe-
cialist of its kind in the world, the Perth office’s
recognition speaks to the degree of difficulty of
subsea Australia.
Adding another dimension to subsea pipelines
is the difficulty in their design, yet the ease in
which they can be altered, even scrapped, from a project’s plans.
Eric Jas, managing director of Atteris, a design engineering com-
pany, cites that despite the difficulty of pipeline engineering, “it
doesn’t seem to me that offshore pipelines between a field and
an onshore treatment facility are at the top of a developer’s list.
A lot of the focus from an engineering and developing point of
view is at the field itself – wells, platform, onshore plants and the
marine facilities to export LNG. The pipeline is often seen as the
detail that connects the two. It is not underesti-
mated infrastructure, but normally where we put
the pipeline on the seabed depends on where the
plant will be built.”
In April Woodside announced plans to develop
its Sunrise Field with a floating LNG facility rather
than a pipeline to either East Timor or the North-
ern Territory. “That is how easily a pipeline can
be eliminated on paper,” asserts Jas. Several
large projects are currently in the planning phase
for pipeline design, construction, and first gas.
Those whole views could easily change over the
next year, Jas believes.
Meanwhile, for those pipeline projects that do go ahead, the
northwest’s seabed poses considerable challenges. Brown char-
acterizes its unconsolidated limestone materials at the top and
hard rock beneath as very difficult foundations for installing big
CarsJpk_OGFJ_1011 1 10/18/10 10:48 AM
Phil Brown, Director and Perfor-mance Team Leader - J P Kenny
22 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
platforms or trenching pipelines.
“There is significant variability
from calcarenites and limestone
to deep sand,” agrees Marcus
Hemsted, technical sales man-
ager of CTC Marine. “There are
not a lot of trenching machines
capable of burying trunk lines in
these seabed conditions in the
current marketplace.”
Recognizing this void, CTC
Marine established a local pres-
ence in Perth in 2008 to grow its Australian operations bringing
with it cutting edge technology that is customized for the North-
west Shelf. Operating one of the biggest trenching fleets in the
world, the specific feather in the asset cap of CTC Marine is RT-1,
a potential game changing technology for large diameter subsea
pipeline stabilization. Weighing over 200 tons and capable of
trenching pipes up to 1.5 meters in diameter, Hemsted described
RT-1 as the biggest mechanical subsea pipeline trencher in the
world. “With 2.3 megawatts of trenching power she is the most
powerful mechanical rock trencher in the world. RT-1 is the pre-
mier reason for CTC Marine’s increasing presence in Australia,”
he comments.
Traditionally pipeline stabilization in the Northwest Shelf has
been done by rock dumping – an expensive exercise that carries
environmental concerns. Using RT-1, CTC Marine’s technique to
bury pipelines is used in conjunction with dumping to minimize
the effect of rock. “In sum,” Hemsted concludes, “there is no
other hard ground trencher like the RT-1 at the moment that can
productively trench pipes as big as the ones she does in the hard
seabed.”
The local innovator turned global playerLocal innovation ultimately built a growing international business
in the case of Neptune Marine Services. What is today a broad-
based subsea engineering company providing a suite of life of
field services and bespoke engineering solutions across four con-
tinents, began with one proprietary technology. “Neptune was
incorporated in 2003 in order to develop our underwater welding
technology, NEPSYS®,” says Lange. As Neptune’s flagship tech-
nology, NEPSYS® was developed to provide a low-cost perma-
nent weld solution equal to dry weld standards that was believed
to be missing in the Australian market.
Lange joined Neptune in 2006 with the task of growing a busi-
ness out of the technology. “My goal was to build a service orga-
nization with the NEPSYS® technology as the key differentiator.
After spending six months reviewing the marketplace, I felt that
there was a role for a domestic Australian company that offered
our broad range of services; and that model could be expanded
to key offshore areas,” Lange explains. Neptune’s growth and the
development of a business from its technology has been largely
fuelled by international acquisitions. Today operators look to
Neptune for engineering prowess while construction companies
are supported by surveys, diving, ROVs, pipeline stabilization ser-
vices, and upfront engineering to support detailed design.
However, Neptune’s diverse capabilities often put them in
nebulous and unintended competition with traditional EPICs that
is consequently is reshaping the traditional EPIC model. Explains
Lange, “one thing that we that we need to address and contend
with is a lot of EPIC companies looking at us as competitors. We
have made the separation between ‘church and state’ so we very
clearly support them and do not compete with them on the con-
struction scope. That is not to say, however that they do not
compete with us. A lot of those companies are looking at various
life of field services – from seismic drilling to decommissioning –
which is our sweet spot.”
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CarsAtt_OGFJ_1011 1 10/18/10 10:06 AM
Eric Jas, Managing Director, Atteris
November 2010 Oil & Gas Financial Journal • www.ogfj.com 23
CSG, LNG, Gas Transmission complementingour Thailand and Western Australianbusiness.
- Marginal field development- Multi-discipline engineering- Turn-key control & safeguarding- Turn-key PIMS- Metering
www.plexalgroup.com
Expanding Regional Portfolio.Opening our Third Office - Brisbane
Australia.
CarsPle_OGFJ_1011 1 10/18/10 11:25 AM
Power of the peopleThe fiscal uncertainty that is still looming
as many LNG projects approach FID will
likely “change development timeframes
until people get a better handle on how to
bring these projects on,” predicts Dowling.
Fiscal uncertainty notwithstanding, project
timetables could be delayed on the basis
of another major industry concern: a labor
shortage. The construction boom for Aus-
tralian LNG projects is estimated to create
55,000 new jobs. Additionally, projects
moving into brownfield environments will
place an increasing need on local services
leaving many in the industry pondering
about how to fill labor needs.
“I am concerned as to the collective
plan of both industry and government to
be ready for this without driving inflation-
ary wage pressures, the flow on effect to
cost of living, and production target assur-
ance for the operating companies,” adds
Plexal Group CEO Steve Jones.
Construction for many LNG projects is
not scheduled to begin for another few
years so industry and government still have
the silver lining of time on their side. Rob-
inson points out that not all 55,000 jobs will
be created at once. “There is going to be
an elevation of a need for resources over
a much longer term. Fortunately we will
have time to work on mid-term and long-
term solutions,” notes Craig Follett, Aus-
tralasia regional director of Brunel Energy,
the global leader in white collar placement
and the Australian leader for blue collar
placement for the oil and gas industry.
However, time cannot breed compla-
cency. Follett highlights a three pronged
approach to address labor shortages.
“The longer term solution is the stimulus
of technically skilled people” to align stu-
dents’ technical directions with industry
requirements.
Second are apprenticeships programs
to transfer traditional heavy industry skills
into oil and gas spe-
cific needs such as
reservoir engineering
or drilling. Third, is
the continuous devel-
opment of Australia’s
supernumerary pro-
gram to team interna-
tional specialists with
local graduates and
accelerate the knowl-
edge program.
Australia’s 457 Visa is a process in place to
facilitate this type of transfer. “We even think
that you can cherry pick certain projects of
national significance and create a highway for
them whereby the immigration process is tai-
lored to match project requirements. That is
where government and industry need to align
their needs. If that highway is fabricated, Bru-
nel is ready to travel on it,” he adds.
A turning point in the industrial relations
challenge could very well be the new Labor
government. While still too early to tell,
Brunel believes that positive signals have
been sent regarding more active engage-
ment between industry and government
on this issue which could realistically inhibit
the full development of Australian oil and
gas.
Len Bunn, Executive Director; Steve Jones, CEO and Dean Paton, Executive Director, Plexal Group
24 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
wants to perform as the best in the
world,” says Brendan Fitzgerald,
managing director and co-founder
of safety and risk engineering con-
sultancy Vanguard Solutions. In its
10 years of operations Vanguard
and its personnel have taken the
lead on safety engineering for
many of Australia’s largest projects
such as Woodside’s Chinguetti,
North Rankin B, and Pluto. “The
problem though is that sometimes
people become overly focused on the slips, trips, and falls part of
safety – which are easy to identify – rather than the management
and process risk.”
Any regulatory changes will add to an already progressive five
years for safety standards in Australia. The National Offshore
Petroleum Safety Authority (NOPSA) began operations in 2005.
Today Australian law requires every offshore facility to have a
NOPSA accepted safety case. The mandatory introduction of the
safety case, Fitzgerald notes, is one of the biggest changes he has
seen in his over 25 years in the industry. However, he believes,
more action needs to support the plans. “A lot of people think
that the job is over when the safety case is delivered. Producing
the safety case and having it accepted by the regulator is just the
first step. You then have the lifetime of the facility to operate. The
safety case is a roadmap and you have to walk the talk.”
Safety issues for drilling are an obvious concern with industry
penetrating harsher environments and increasing water depths.
Well designs are becoming more complex through extended
reach, horizontal, and multi-lateral wells; all pose high risks and
enormous costs of failure not previously encountered in Australia.
The best accident prevention and safety enforcement is quality
training as viewed by Welltrain,
a rapidly expanding school for
operationally relevant well con-
trol training. Welltrain addresses
both the human element of acci-
dent prevention and harnesses
the transferrable skills between
offshore, onshore, and CSG
drilling.
“Improved levels of train-
ing are required to match the
skills necessary to operate more
complicated equipment and well
Safety first and alwaysThree converging issues have heightened the safety mindset in
Australia to new levels. In August 2009 the Montara rig, owned
by Thai exploration company PTTEP, began leaking oil for two
months off the coast of WA. The final results of a federal gov-
ernment inquiry into the report are expected by year’s end with
likely regulatory changes to follow. Second is Deepwater Horizon
with its impact reverberating around the world. In response, 30 of
Australia’s biggest oil and gas producers are preparing an industry
wide agreement to allocate financial resources in the event of an
oil spill in Australian waters. Third, and perhaps most challenging,
is the integration of a multitude of new workers under one com-
mon safety culture.
Lange asserts this might be easier said than done. Australia
“will have a large influx of people who may not speak the lan-
guage and have different cultures, educational backgrounds, and
expectations. When you put all the new backgrounds, cultures,
and expectations together, the management of the integration of
all of these people is my main concern.”
Specific changes to the regulatory landscape are still unclear.
“I think there is no doubt that the Australian oil and gas industry
CarsVan_OGFJ_1011 1 10/18/10 11:33 AM
Bernie Kelly, Managing Director, Baker Hughes Australia
Brendan Fitzgerald, Managing Direc-tor, Vanguard Solutions
November 2010 Oil & Gas Financial Journal • www.ogfj.com 25
designs,” says training manager Dave Pol-
lack. “Today, we have cyber-outfitted drill-
ing rigs where the work for a driller is all
done through joysticks, not brake handles.
The driller is more removed from the drill-
ing process by being insulated inside a
quiet, high tech environment.”
Pollack notes that existing well control
training tends to be more academic and
does not provide sufficient practical and
operational training. Welltrain aims to
plug that gap by blending the practical
with the theoretical.
Third party drilling training is still an
evolving market in Australia that is neces-
sarily driven by industry changes. “Previ-
ously, in-house training courses were a
feature of working for major oil and gas
operators,” explains Welltrain managing
director Tom Brand. “In the last 10 years,
however, companies are tending more
towards outsourcing training. There are
also a lot of smaller rig owners who just
don’t have the resources or specialized
skills to run their own training department.”
Specialized training is also required
in the comparatively new CSG industry.
“Whilst the mechanics of the drilling pro-
cess are essentially the same, crew mem-
bers may not be aware of the hazards that
are involved in drilling CSG wells where
hydrocarbons are being exploited,” adds
Brand.
Engineering the futureWhile Australia is preparing for an eventful
decade of major LNG projects whose pro-
duction and economic impact will extend
decades more into the future, the head of
one engineering firm is looking ahead to
life after LNG. “We have this unbelievable
LNG energy source from which we hope to
be the number two provider in the world,”
says Steve Jones, CEO of Plexal Group.
“But it is a finite resource. Where will Aus-
tralia be in 50-60 years when these fields
are seriously depleted?”
No stranger to conventional hydro-
carbon engineering, the Plexal Group’s
expertise is in brownfield expansions,
upgrades, and marginal
greenfield developments
with a focus on control
and safeguarding systems.
Jones cites Plexal’s work
on Woodside’s Goodwyn
A Safeguarding System as
a critical experience that
underpinned its extension
into Thailand and its con-
tinued expansion through-
out Southeast Asia. Plexal
proved its ability to
upgrade and transfer under full production
conditions, with no dedicated shutdowns,
a gas platform of 3,500 safety devices.
But driven by a larger purpose – and a
clear business opportunity – Jones is posi-
tioning Plexal to leverage technical IP from
LNG and transfer it into renewables which
he believes is the next big industry for Aus-
tralia. “The LNG business
is going to produce a lot of
revenue. It is also going to
bring in a lot of technical
expertise. In the medium
term, we would like to
grow a lot of this exper-
tise and get ourselves
involved in geothermal
energy, tidal power gen-
eration, or concentrated
solar power,” says Jones.
Indeed WA’s total natural
resource endowment creates many syner-
gies between conventional fossil fuels and
renewable energies. “There are massive
water and power issues in the northwest
Brunel Energy provides specialised
knowledge to the international oil & gas,
petrochemical, power generating, fabrication
and construction industries. Our parent
company, Brunel International NV, is publicly
listed on the Amsterdam Stock Exchange
with operating offices in 35 countries.
Since 1975, we have been providing
qualified personnel in all disciplines and
throughout all project phases whose
experience and knowledge has enhanced
client performance.
Providing Professionals Globally
www.brunelenergy.net
CarsBru_OGFJ_1011 1 10/18/10 11:27 AM
Craig Follett, Regional Director Australasia, Brunel Energy
26 www.ogfj.com•Oil & Gas Financial JournalNovember 2010
The best place on the planet for oil and gas Natural gas is still the biggest game in town. With declining pro-
duction in the North Sea, a drilling moratorium casting a shadow
on the Gulf of Mexico, and Brazil still years away from first oil in its
pre-salt fields, Australia is the darling of the offshore oil and gas
world. “This is such an exciting and dynamic time,” says Belinda
Robinson. “This is the industry that has helped Australia evade
some of the more negative consequences of the financial crisis.
This industry provides so much optimism for the long-term eco-
nomic sustainability of Australia and in doing so, supplying clean
energy. It has so much going for it that it is hard to not be excited
for it.”
Perth, the capital of oil and gas Australia and this year’s host
of the World Energy Cities Partnership, is certainly reaping the
benefits of the rising tide of the industry. Beyond the quantifiable
returns on multi-billion dollar projects, a walk down St. George’s
Terrace or a stroll through an engineering office will bring to life
the international face of oil and gas in Perth. “The industry is
really putting us on the map in a global sense – it is profiling WA
and the city of Perth to the world,” beams Dowling, a native of
WA. “The oil and gas industry being a global industry is really
helping drive that cultural change in our society and it is a benefit
that should not be underestimated.”
Australia has all of the necessary assets to become the premier
oil and gas province for the foreseeable future. Voracious Asian
demand for preponderant natural resources has attracted global
talent and capital which in turn are stimulating innovation and
enhancing service industries. A very favorable picture is painted
for Australia’s future as an exporter of cutting edge technology
and leader in clean energy if it can surmount today’s obstacles
of fiscal uncertainty and human resource deficits. The mixture
of future promise and current challenges present unprecedented
opportunities for coordination and collaboration between industry
and government. All things considered, the right place, right time
for exciting oil and gas activity is Australia, today.
so it is rewarding to be involved in sustaining that cornerstone of
the Australian economy in a way that has a lower environmental
footprint. If we can really leverage off this industry maintaining
an energy production or delivery focus to the world, that will be
Australia’s next fantastic export.”
Oil 36%
0 10 20 30 40 50 60 70 80 90 100%
Black coal 17%
Natural gas 33%
Brown coal 6%
Renewables 8%
Fig. 3: Forecast share of primary energyconsumption, 2029-30 (%)
Source: ABARE
CarsWel_OGFJ_1011 1 10/18/10 11:32 AM
Tom Brand, Managing Director and Dave Pollack, Training Manager, Welltrain
AUSTRALIA:In any continental sized country there exists room for several mega-industrial
regions. Not to be outdone by surging offshore activity in Western Australia, the
eastern seaboard states of Queensland, New South Wales, and Victoria are devel-
oping their own prized assets at a frenetic pace. Onshore coal seam gas (CSG) deposits
estimated at 250 trillion cubic feet have the industry abuzz. The viability of their conver-
sion to liquefied natural gas (LNG) received major votes of confidence with recent final
investment decisions for two large-scale projects. Meanwhile, Victoria, the birthplace
of Australia’s oil and gas industry, will soon commence another 40 years of offshore gas
production, adding to its already rich history as the source of 30% of the country’s gas.
Eastern rising
PT.II
This sponsored supplement was produced by Focus Reports.
Editorial Directors: Karim Meggaro, Manuel Felipe B. Mendoza
Project Coordinator: Merlin Ozkan For exclusive interviews and more
info, plus log onto energy.focus-reports.net or write to contact@
focusreports.net
www.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 1
Fairview compressor sta-tion, Queensland Australia. Courtesy of Santos
advertisement
2 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
“We see the LNG industry as
an opportunity to create a new
generation of employment and
prosperity in Queensland,” says
Anna Bligh, the state’s premier.
“We have just come out of the
global financial crisis, and are
still building the recovery. We
identified the LNG industry as a
very important part of rebuild-
ing and creating new industries.”
Despite the challenges confront-
ing Queensland from devastating
floods in early 2011, the burgeon-
ing CSG industry is still gaining
momentum. The government
has played an instrumental role in
creating the correct environment
to encourage the development
of the world’s first CSG-to-LNG
projects, and today four liquefac-
tion terminals are planned for the
coastal town of Gladstone. Speaking in December 2010, Bligh
explained that “the emergence of the CSG and LNG industry is
a natural progression from our gas policy – our energy policy – in
the early part of this century. But it is equally true that it could not
have reached the stage that it has, as quickly as it has in the last 8
months, without enormous focus from government.”
As a well-established coal exporter for several decades,
Queensland has taken advantage of relatively new technologies
to bring gas out of the state’s coal seams in response to global
shifts towards cleaner energy. As Bligh explains, “these projects
are, in both resource and investment terms, as big as the Gorgon
Project in Western Australia. They have been brought to regula-
tory approval and financial decision stage within 2-3 years which in
world terms is remarkable.”
Eastern flagshipsOver the past year huge progress has been made to ensure that
Australian CSG-to-LNG will deliver. Of the four mega-LNG projects
planned, two have reached final investment decision (FID) total-
ling over $30 billion, and one has crossed the crucial threshold of
environmental approval.
Queensland Gas Company, a subsidiary of British Gas, reached
FID for its $15 billion Queensland Curtis LNG Project (QCLNG)
in November 2010. A 380 km pipeline will link CSG fields in the
Surat Basin to its 8.5 mtpa LNG plant on Curtis Island with first gas
expected in 2014.
The Santos-Petronas-Total-Kogas consortium rang in 2011 with
FID for its $16 billion, 7.8 mtpa Gladstone LNG (GLNG) project.
With first gas expected for 2014, Mark Macfarlane, ceo of GLNG,
describes it as “a world class CSG-to-LNG project that will put
Gladstone and Queensland on the world LNG stage. It is a project
of great significance for Queensland and all of Australia.”
The ConocoPhillips and Origin Energy joint venture, Australia-
Pacific LNG, gained federal environmental approval in February,
paving the way for FID by mid-2011. Still waiting in the wings is
environmental approval and FID for Royal Dutch Shell and Petro-
China’s Arrow Energy LNG project.
Economic studies indicate that a medium-sized 28 mtpa LNG
industry – far below what Queensland will produce – could create
over 18,000 jobs, generate $40 billion of private sector invest-
ment, and increase gross state product by one percent. Output
from these four projects will propel Australia to become a top-two
global LNG exporter over the coming decade.
A rising tideMovement from the majors is mobilizing industry across the greater
eastern seaboard. Much of the buzz about Queensland and New
South Wales CSG stems from the relative proximity of fields to
mass markets and their connectivity to existing infrastructure.
Feedstock for LNG is an enticing option. But when considering
domestic clean energy targets which favor investment in gas-fired
plants, then asset prospectivity becomes highly valued for internal
2000
1750
1500
1250
1000
750
500
250
0
Mm
bls
bcf
300
250
200
1501998 2000 2002 2004 2006 2008 2010
Liquids (oil, condensate, LPG
Gas (bd):
CSG
Conventional gas
LNG
Historical Australian oil and gas production
Source: APPEA
Hon. Anna Bligh, Premier of Queensland
Mark Macfarlane, CEO, GLNG
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CarNac_OGFJ_1108 1 7/14/11 11:24 AMwww.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 3
consumption. “New South Wales
currently imports 7% of its energy
requirements and consumes
about 27% of Australia’s total
energy,” states Ian Halstead, ceo
of Sydney-based junior Planet
Gas. “Another 12-14 gas-fired
power plants are projected for
construction between now and
2016. Additionally, large scale
LNG projects in Queensland will
consume much of the gas produced in the eastern Australia, leav-
ing a potential deficit in the domestic market. Planet is targeting
that deficit.” Backing Halstead’s assertion are Planet Gas’s well
addressed CSG licenses in the Sydney and Gunnedah Basins that
are adjacent to existing discoveries; Cooper Basins blocks contain-
ing significant thicknesses of coal with high gas formations; and
exploratory shale potential in its Cooper reserves. With a diversi-
fied portfolio of asset classes in strategically proximate areas to
market and infrastructure, Planet Gas embodies the strategy for
success of the next generation of
CSG-minded juniors.
While gas-fired plants are in
the planning phases and the major
LNG projects ramp-up construc-
tion, some companies have more
independent ambitions. Rather
than waiting for the big consortia
to bring LNG facilities online,
Eastern Star Gas is building one
of its own. Originally focused
on conventional oil and gas, Eastern Star Gas shifted to CSG in
2005 in New South Wales – away from the traditional hotbed of
Queensland. David Casey then joined as managing director to
apply his 20 years experience in CSG to the company’s new assets.
The company currently has three agreements to provide over
1,700 petajoules to domestic power generation companies. But,
as Casey explains, “the challenges from a CSG perspective were
produceability: the fact that unlike a conventional reservoir you do
not get maximum production on day one. Looking at those chal-
David Casey, Managing Director and CEO, Eastern Star Gas
Ian Halstead, CEO, Planet Gas
4 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
lenges, we realized that you cannot change how a CSG field can be
developed; so we looked at how to liquefy it, and not necessarily at
the liquefaction process itself, but rather the size and scaleability.”
The company is now progressing to front-end engineering and
design on a mid-size LNG plant with Hitachi and Toyo. This is
particularly groundbreaking given the size of the company and their
ambitions for the future scale of their plant. “Small scale has been
done elsewhere,” says Casey. “What hasn’t been done is looking at
a large project using small-scale technology: genuinely looking at
a project that could deliver four million tons, but doing it in half mil-
lion ton increments. One of the attractive qualities for Hitachi and
Toyo in dealing with Eastern Star Gas is the opportunity to prove
that their technology and their skill sets can actually match world-
scale projects, only with smaller trains. The more we look at it the
more we get excited by the prospects and the benefits of using
smaller scale technology.”
Start local, think globalIn addition to innovative methodologies, international players have
been converging on the state to strengthen their global brands.
“In terms of development oppor-
tunities there is nowhere in the
world that has as many opportu-
nities as Queensland does right
now,” says Terry Bayliff, Laing
O’Rourke’s global leader for oil
and gas. The British construc-
tion giant recently made its first
foray into the hydrocarbons sector
bringing Bayliff on board to lead
the charge after a distinguished
career at Bechtel.
The global oil and gas move
began in Australia with a contract
to build a liquefaction plant for
mid-scale specialist LNG Ltd. The
deal was suspended when Arrow
Energy, the plant’s originally slated
buyer, was acquired by a Royal
Dutch Shell-PetroChina joint ven-
ture. Undeterred, Laing O'Rourke
has since been awarded contracts
for a Gorgon Gas utility project and a BG water treatment plant.
The company also recently completed the Dalby Power Project for
Origin Energy, which is powered by gas from unconventional fields.
Bayliff is confident in Laing O'Rourke’s strengths to compete in a
crowded oil and gas construction market. The company special-
izes in multi-discipline, self-perform construction for which there
are few general contractors in Australia. “Most contractors are
single discipline,” says Bayliff. “They are either civil, mechanical, or
they are electrical disciplines. Laing O'Rourke offers a full suite of
packages.”
Bayliff hopes to use Australia as a springboard for launching
Laing O'Rourke’s oil and gas offering across the world. “I expect
that there will be a period of up to three to five years of growth
here in Australia: winning projects and demonstrating excellence
in execution. This is the offering we are going to take around the
world and it has to be grown here in Australia initially.”
The Australian experience that Bayliff aims to replicate at the
global level has already come to fruition for another multinational
resources contractor, Nacap. The Dutch pipeline construction
company looks to Australia for a high benchmark of technical learn-
ings and, more lucratively, 30% of total global turnover. “Australia
is somewhat unique in our global pipeline market,” says Mark
CarPla_OGFJ_1108 1 7/14/11 12:00 PM
Mark Bumstead, Managing Director, Nacap in Australia
Terry Bayliff, Global Oil & Gas Leader, Laing O'Rourke
6 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
Bumpstead, managing director
of Nacap Australia. “Contrary to
most other Nacap markets, our
pipelines here are characterized
by long distances.” Indeed, the
tyrannies of distance and strict
environmental codes in Australia
require many service companies to
streamline logistics and innovate
their operational models. These
models will certainly be tested
with the construction wave of transmission infrastructure to connect
CSG fields to markets. “When considering not just the trunk lines
but the upstream gathering facilities, there are many thousands of
kilometers of pipelines to be built to support these CSG projects,”
says Bumpstead.
Daunting as the challenge might be, a company such as Nacap
leans on paramount experience. Nacap is currently construct-
ing pipelines for two nationally significant projects – a $5.4 billion
desalinization plant in Victoria and 940 km of looping for an Epic
Energy pipeline from Queensland
to South Australia. Traversing vast
stretches of Australian outback,
the Epic Energy project, QSN3, is
being constructed at astonishing
rates of 4 ½ - 5 km per day. As
Bumpstead notes, “it is a long
way to even walk each day much
less construct a pipeline.” As a
result of successful execution and
project delivery, “Nacap world-
wide has benefitted very much from its presence here. A lot of the
risk management systems, procedures, and practices that we have
developed for ‘business as usual’ in Australia have been taken to
Nacap globally.”
Aussie rulesDespite Laing O’Rourke and Nacap’s success, the trap for new
players in the sector can be huge. Australia’s rich resources can
naturally invoke exuberance amongst service companies from afar.
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CarSyn_OGFJ_1108 1 7/14/11 11:58 AMCarEas_OGFJ_1108 1 7/14/11 11:30 AM
Michael Carroll, Managing Director, Synertec
Troy Campbell, CEO, Easternwell Group
Integrated Seismic
Technologies
Integrated Seismic
Technologies
Design ñ Drilling ñ Acquisition ñ Processing ñ Interpretation ñ R & D
www.velseis.com
CarVel_OGFJ_1108 1 7/14/11 11:55 AM8 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
Mat-supported jackups fared well in hurricanes
Steve Hearn, managing director and chief geophysicist of Velseis, a Queensland-
based geophysics company explains the merits of a local company over larger seismic players, and the challenges of bringing a science-focused company to the market. For the full interview, log onto energy.focusre-ports.net.
What can Velseis offer to clients that they cannot get from the bigger geophysi-cal companies?
There are definitely some things that the bigger players can offer that are arguably more difficult for us, one of which is volume. Sometimes there will be a need for a com-pany to supply a huge amount of equipment for a very big project. It is possible for Velseis to compete for these projects. We have some long-standing arrangements with rental orga-nizations – when we want to push our channel count up we bring in more gear. However, it is perhaps easier for the larger players to do those types of projects.
Velseis’s unique offering comes in the com-pany’s ability to tailor a service to a particular
problem or technical requirement quickly and efficiently. The company has an effective in-house R&D division, which is perhaps unusual for a company of our size. We routinely do specialized software devel-opment - this might be to tune a particular acquisi-tion program, or to model a particular geological problem. This is all about giving our clients custom-ized, scientific service. I am a geophysicist and am always willing to explore something interesting or something new, and I am the one that has to sign off on it. Arguably this enables more flexibility than in some bigger companies where developmental work might be subject to more formal procedures.
A lot of geophysical start-up companies are very science driven, very into innova-tion, but trying to commercialize that in a
competitive marketplace can be difficult. Why is Velseis different?
It is quite possible that if more entrepre-neurial people had been running the company, it might have had a totally different direction, but this is the way that it has come out. The people running the company generally make reasonably intelligent decisions on the basis of information available to us. We like to think that there are upsides to the model that we have. There have been plenty of cases with the big geophysi-cal companies starting out as technology driven companies, and at some point in the growth cycle they have moved to having
more professional business people running the companies, which hasn’t always worked out for the better.
Steve Hearn, Managing Director and Chief Geophsyscist, Velseis
0 10 20 30 40 50 60 70 80 90 100Percent
WA55%
VIC19%
QLD14%
JPDA7%
SA4%
TAS1%
(NSW,NT<1%)
Western Australia and Victoria remain the largest gasproducing states in Australia, while Queenslandproduction, predominantly from coal seem gas,continues to increase its share.
Source of gas production
Source: APPEA
www.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 9
quite well. We specifically design our kit to be compliant to local
regulations, but with the restrictions in work crews we innovate the
rigs and design the equipment to have the least amount of people
operating them.”
Local market insight paid dividends for another Australian
company further down the value chain. In February 2011, multi-
But the country’s array of regulatory and environmental codes can
prove difficult for new companies who do not fully comprehend the
impact of regulations on project delivery. Troy Campbell, ceo of
Easternwell Group, Australia’s largest integrated well servicing and
drilling provider for CSG and mining, concurs. “Foreign companies
are entering a very restricted market. There is also a complexity
around the logistics and management of operations.”
An established local presence and strong market familiarity
breed an Australian advantage. Easternwell Group’s industry
standing is a result of a series of diversifications in response to mar-
ket needs. Originally focused on well servicing and drilling since
1976, the surge in CSG exploration from 1999 onwards and an oil
price spike that attracted foreign players led Easternwell Group
to enter new service sectors. By merging into a broader mining
services group in 2009 and most recently, joining forces with main-
tenance and service heavyweight Transfield Services, Easternwell
Group now has access, as Campbell describes, “to the front and tail
end of projects.” Integrated services combined with local market
knowledge produce a winning formula for Easternwell Group.
“Obviously being an Australian contractor we know the conditions
CarUndeRev_OGFJ_1108 1 7/25/11 2:18 PM
10 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
discipline consultancy and special-
ist engineering firm Synertec was
awarded a landmark contract for
the QCLNG project. In one of
the largest orders to an entirely
Australian systems integrator, Syn-
ertec will engineer 45 analyzers
for lead EPC contractor Bechtel.
Managing director Michael Carroll
specifically noted Synertec’s Aus-
tralian edge. “In terms of process
analytics, one of our big differentiating points is local knowledge
which starts with standards and follows right through to environ-
ment. Curtis Island, sitting in a hurricane prone area, calls for very
complex Australian standards which are not just a derivative of the
US or Europe. Bechtel was very engrossed in the rigidity of Aus-
tralia’s standards and dove into specific details with our experts.”
Originally specialized in process analytics for pharmaceuticals,
Synertec diversified into oil and gas as the pharma market consoli-
dated and CSG expanded. The commonality that enabled the shift
was expertise in equally complex,
risky, and stringently regulated
Australian industrial environments.
A growing company still break-
ing into the CSG market with IP
in sampling systems, Carroll is
confident that local knowledge,
local presence will pave the way
for Synertec. “International play-
ers are converging on Australia.
Australian engineering is innova-
tive and has an in-depth understanding of the regulatory environ-
ment that will overlay all of these projects.”
Victoria: back to the futureWestern Australia and Queensland fittingly grab the lion’s share of
headlines given the size of their offshore and CSG industries. Yet
as the state of Victoria demonstrates, size and industrial weight do
not necessarily go hand-in-hand. Resting at the foot of continental
Australian and smaller than every state except Tasmania, Victoria
CarBas_OGFJ_1108 1 7/14/11 2:45 PM
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CarUni_OGFJ_1108 1 7/14/11 11:57 AM
Mark Paton, CEO, Cue Energy Neil Doyle, CEO, Oil Basins
CarEne_OGFJ_1108 1 7/14/11 11:45 AM
www.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 11
was the birthplace of the country’s petroleum industry and is still
very much a cornerstone of its future.
“Victoria has up to 30 years in proven conventional gas reserves
spread across three producing basins – Gippsland, Bass and
Otway,” says Michael O’Brien, Victoria’s minister for energy and
resources. “GeoScience Victoria estimates that 4-8 trillion cubic
feet of gas remains to be discovered along with up to 600 million
barrels of liquids.”
Australia’s first oil discovery was in Victoria
in 1924 at an onshore field with an estimated
50 million barrels of oil in place. In December
1964 the Glomar-III exploration vessel drilled
Australia's first significant offshore well and
discovered gas. In 1967 the Kingfish-1 well
encountered Australia's largest oil field with
1.2 billion barrels recoverable. Fifteen of the
Victoria’s first 16 offshore wells were success-
ful, yielding three major gas fields and Austra-
lia’s two largest oil fields to-date.
ExxonMobil, the country’s oldest oil and
gas company, was instrumental in all of these
discoveries. John Dashwood, chairman of
ExxonMobil Australia notes that “we have
a long history and heritage of developing
resources for the benefit of this nation. We
have produced two-thirds of the country’s oil
out of the Gippsland Basin and one-third of
the country’s cumulative gas. There is indeed
a legacy feeling that Australia has been a real
jewel in ExxonMobil’s history.” Modeling the
economic impact of its Gippsland Basin Join
Venture’s operations, ExxonMobil calculates
that its Bass Strait hydrocarbon production has generated over
$200 billion to Australian GDP over the past four decades.
As Bass Strait oil production declines, gas output still has
substantial life ahead. “We are only about halfway through the
gas reserves and have a significant number of years to continue to
extract gas,” adds Dashwood. While production in the Gippsland
Basin is 40 years old, we are about to put the biggest steel
structure in the Bass Strait – the Marlin B platform – to develop
the Turrum field.” ExxonMobil Australia’s Kipper Tuna Turrum
Project is currently one of the largest domestic gas developments
on the eastern seaboard. An estimated $4 billion project which
holds enough natural gas to power a city of one million people for
35 years, Kipper facility construction is expected to be complete
by 2012 and Turrum in 2013. “There are still another couple of
decades of production to come from the Bass Strait and a lot of
business yet to be done here.”
Eyes fixed northWhile Victoria’s offshore basins are largely the plays of majors such
as ExxonMobil, BHP Billiton, and Santos, there is still substantial
SE Gobe production facility
activity amongst juniors who
accumulate acreage through joint
ventures and proprietary bid-
ding. Juniors such as Bass Strait
Oil Company, Oil Basins, and Cue
Energy are all active in coastal
Victorian waters.
However, the compelling
presence of majors in a relatively
confined offshore space leads
many Victorian-based juniors to
seek more distant markets. Leading the charge of Melbourne-
based companies with eyes fixed north is Cue Energy behind its
new ceo Mark Paton. With an extensive background in produc-
tion and operations Paton joined Cue Energy in early 2011 keen
to build on its already successful corporate foundation. While
Cue joint ventures in the Bass Strait, its operational strengths stem
from international markets. Cue Energy is among the rare batch
of Australian juniors that enjoys mature production – slightly over
half a million barrels in 2010 – through tenements in New Zealand,
Indonesia, and Papua New Guinea. The company will see a further
production boost when its joint venture Wortel field, operated by
Santos, comes onstream in December 2011 in Indonesia.
Paton is now targeting $1 billion market capitalization over the
next 3-5 years by combining new exploration plays with maximiza-
tion of existing assets. “Rather than meteoric growth from a zero
base asset, we see value in assets that are near to or in production.
We are long on exploration opportunities but short on near term
additive production opportunities. I do not want to wholly rely on
exploration success for growth.”
Although keen to maximize existing production, Cue is
CarAus_OGFJ_1108 1 7/14/11 11:53 AM
John Bell, CEO, Australian Drilling Associates
Cue Energy Maari drilling activity with wellhead platform and FPSO
www.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 13
equally well-poised to capitalize off exploration in the Carnar-
von Basin – Australia’s “hot” offshore LNG province. “We have
extremely good partners in these blocks,” admits Paton, refer-
ring to Woodside and Apache. Having firm partnerships with the
companies who are looking to aggregate additional gas and build
more LNG trains speaks a great deal to the fine work done by my
predecessor.”
Operating under a similar philosophy is Oil Basins Limited which
explores in the offshore Gippsland Basin; offshore Carnarvon
Basin; and onshore Canning Basin in Western Australia. Like Cue
Energy, Oil Basins’ acreage is in strategically proximate areas to
existing or future development infrastructure. Since listing on the
Australian Stock Exchange in August 2006, Oil Basins has signifi-
cantly expanded its initial portfolio of two permits and now stands
to earn interests in
drill-ready assets in
both the Gippsland
and Canning Basins.
The company’s
upstream interests
which hold game-
changing potential
include 100% rights
to Backreef, a low
cost oil play in the
Canning Basin,
and 100% equity in
R3 situated in the
Carnarvon Basin. Oil
in place for the undeveloped Cyrano Oil Field within the R3 block
was upwardly revised by 250% in April 2011.
Oil Basins aligned with LNG Ltd last August to evaluate projects
in the Canning Basin using future Oil Basins gas as feedstock. Oil
Basins will have the right to invest up to 20% on an at-cost basis
in any LNG project, with a maximum of 30% should the company
deliver certified 2P gas reserves of at least 1 Tcf. A potentially
significant long-term investment opportunity, it is consistent with
the company’s strategy of “sweating the value of its assets” nearby
existing or future infrastructure. With the agreement in place,
Oil Basins is confident in its ability to attract farm-in interest in its
strategic and untapped CSG and shale gas portfolio.
The enablerDespite the promise and potential of attractive petroleum plays,
life as a junior can be tough in
Australia. A long coast, huge
mobilization costs, and hefty
compliance fees make it difficult
for naturally cash-strapped juniors
to fund offshore campaigns. The
commodity price spike of 2006-
2008 exacerbated cost dilemmas
while engendering a new model
of consortium management to
assist juniors exploring offshore.
“The rapid rise in oil prices in 2006 created a worldwide short-
age of offshore drilling rigs,” says John Bell, ceo and founder of
Australian Drilling Associates (ADA). “Every oil company wanted
to drill and the
demand in Australia
was unprecedented.
It was also difficult
for the smaller inde-
pendents to get the
attention of drilling
contractors for a one
or two well program,
particularly when rig
utilization worldwide
was peaking at 98%.”
Recognizing the
synergies of scaling
costs, the oppor-
tunity arose for Bell in 2006 to create consortiums comprised of
junior independents and medium sized E&Ps with sufficient terms
to attract drilling contractors with rig availability. “The consortium
model spread the mobilization and demobilization costs, reduced
third party costs as a direct consequence of purchasing volume,
and gave flexibility for campaigns to drill more wells with the added
commercial benefits normally expected for major oil companies,” he
explains.
Over the past two years ADA has managed several consortiums
which equated to $1 billion worth of exploration and appraisal
wells. By coinciding with diminishing recruitment rates of drilling
personnel by the majors over the past 20 years, ADA functions, as
Bell describes, as “a virtual traditional drilling department where we
could make a contribution to the industry by optimizing on person-
nel resources and drilling equipment. We provide well engineering
Ron van der Schalk, Managing Direc-tor, Uhde Shedden
GLP Micro LNG Plant in Westbury, Tasmania
14 energy.focusreports.net August 2011 Oil & Gas Financial Journal • www.ogfj.com
and well planning; materials and logistics management; procure-
ment of well consumables; contracting of all associated services to
drill; HSE management; and well operations management just as
any oil companies drilling department would.”
Victorian innovation “Melbourne is Australia's knowledge, innovation and technology
capital and is home to a large cluster of research institutes ready to
collaborate on innovative cross-sector projects,” asserts Minister
O’Brien. Outmatched by Western Australia and Queensland on
resource size, Victoria’s culture of innovation gives it a comparative
advantage in cutting-edge hydrocarbon infrastructure. Several gas
process engineering firms lead the way in revolutionizing Australia’s
downstream landscape.
Uhde Shedden, a ThyssenKrupp company specialized in gas
processing and multi-disciplinary engineering for the oil and gas and
petrochemical sectors, relies on Australia as a fulcrum for rotating
talented labor amongst its global projects. “We very much benefit
by utilizing Australia as a skills base from which to move smart peo-
ple around the region for various projects,” says managing director
Ron van der Schalk. Already a major player in CSG processing, van
der Schalk is looking beyond traditional industry to other avenues
where Uhde Shedden can build sustainable legacies. According to
van der Schalk, Australia lacks a robust national chemical complex to
turn energy from natural gas to downstream projects, a void which
Uhde Shedden and ThyssenKrupp technologies can fill. Having pre-
viously managed Uhde Shedden in Thailand, he admires Thailand’s
ability to turn natural gas into specialty chemicals through a serious
of processing stages whereby converting several dollars per giga-
joule of gas to thousands of dollars per ton of chemical product.
Another Achilles heel of Australian oil and gas, and potential
Uhde Shedden breakthrough, is the unanswered question of utiliz-
ing salt in water that is co-produced with CSG. “We are inter-
ested in finding those solutions since part of our business involves
understanding how to turn salt into chlorine through the technology
of our parent company. We are looking at how to develop solu-
tions that deal with salt and convert it to a potentially marketable
product.”
More than wishful thinking these technological revolutions have
tangible inroads through synergies with parent company ThyssenK-
rupp’s knowledge and expertise. “Because we are part of a larger
conglomerate we are looking at how to integrate other ‘family
company’ expertise into our solutions. We are always trying to look
for a unique problem and determine the issue at play.”
A big stimulus for new technologies is the potential introduction
of Australia’s much-mooted but still elusive carbon tax which many
believe will provide investment certainty. Until that comes, however,
Australian companies are taking the lead in creating new markets
and forging new trends.
Pandora’s Box“All I wanted to do was produce facilities and service our customers
in a more professional manner than what I had seen in the past,”
admits Peter Ramsey, founder and managing director of The GLP
Group (GLP). “My initial vision was to move into larger projects in
alternative energy. However, with the picture being drawn up about
the energy boom we quickly got involved with natural gas process-
ing.” The pinnacle of that trajectory was launched in February
2 questions about LNG to David Dennison, managing director – Wood Mackenzie – Australia
Do you think that Australia’s gas con-nectivity to foreign markets and the true globalization of LNG will eventually lead to pricing parity between Atlantic and Pacific Basin LNG?
The key question on peoples’ minds will instead be, “what will happen to gas prices in Australia?” Anyone who has a gas /LNG project on the eastern side of Australia exposes themselves to oil price linkages. We have a positive view on oil prices in the medium to long term therefore having an attractive LNG project in eastern Australia
and exposing yourself to international gas pricing with its inherent oil price link would have its appeal.
The global LNG market has many lump-sum projects coming on stream . Considering increasing supply, voracious Asian demand, and declining LNG pro-duction out of Southeast Asia over the next decade, is LNG a buyer’s market or a seller’s market?
Actually we see the market is quite well balanced. We have however seen prices
come off the highs of 2007/08 and there appears to be downward pressure on prices for proponents of the CSG to LNG projects versus the more conventional. The key issue is around cost inflation and the challenge to the more recent projects is to deliver on time and as close to budget as possible. The LNG business is cyclical in nature and not so long ago the race was on to fill the perceived shortfall of gas in the large US gas market. Subsequently we saw the meteoric rise of unconventional gas that has negated the pressing need for LNG into North America.
www.ogfj.com • Oil & Gas Financial Journal August 2011 energy.focusreports.net 15
with the opening of Australia’s
first micro-LNG plant in Tasma-
nia, constructed by GLP. Using
BOC/Linde’s liquefying phase
technology, the country’s flagship
micro-LNG plant will provide fuel
for over 120 natural gas-powered
heavy vehicles in the state.
Initially looking to import units
from overseas, BOC recognized
GLP’s engineering flexibility and
ultimately contracted with the family-owned company to design,
build, and commission the Westbury Micro-LNG plant. According to
Ramsey, while GLP originally designed the plant for 50 tons per day
of output, recent runs have pushed capacity up to 55 tons per day.
“This can be attributed to our optimized process plant design and
careful quality control during construction,” he notes.
As CSG-to-LNG projects break barriers in size and scale, BOC and
GLP are proving that micro-LNG has boundless potential to usher in a
mega-trend for transport fuels. With proven technology, micro-LNG
Process Plant Solutions ï LNG Plants ï CO2 Capture
ï Clean Fuel Technology
ï Scrubbers
ï Natural Gas Dehydration and Fuel Gas Conditioning
Engineered Products
ï Demisters
ï Internals
Vessel Internals ï Mist Eliminators
ï Ejectors and Eductors
Process Materials ï Catalysts Absorbents
ï Ceramic and Alumina Supports
Design
Consult
Construct
Install
Commission
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www.glp.com.auPhone:Fax:Email:
(03) 9335 9000(03) 9334 [email protected]
CarGLPRev_OGFJ_1108 1 7/22/11 10:19 AM
is currently used for long haul transport applications. Ramsey, how-
ever, believes that future LNG plants will be able to service any fuel
consuming commercial transport. “The diesel market in particular
will dry up in 5-10 years especially if India and China continue rapid
energy consumption growth. The mining sector sees the benefit to
convert from diesel to LNG with the idea of having a central LNG
processing facility that links to satellite stations for fuel dispatch. I
believe that this is where the micro LNG market is headed in the
future for Australia.” Beyond Australia Ramsey sees micro-LNG as
greatly beneficial for countries that cannot afford to build extensive
gas pipeline networks. “It is much cheaper to build a central micro
LNG processing facility and distribute the LNG by tanker trucks, and
get those areas to convert their transport to LNG.”
As one Melbourne-based engineering executive confident in
the country’s ability to continuously break new grounds, stated, “I
like to think of Australians as innovative because we challenge the
norm. We are an isolated country so we must be ingenuous. When
people think of Australia I would like for them to think ‘innovative,
thorough, and well built.” The degree of innovation coming out of
Victoria indeed justifies this Aussie assessment.
Peter Ramsey, Managing Director, GLP
email: [email protected]