PART I
AUSTRALIA
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The world’s largest LNG boom is about to vault Australia into the big league of petroleum nations
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ustralia will enter the big league of the world’s petroleum producers over the next two years with the commissioning of seven new LNG projects costing almost $US200 billion. When the last of the new projects is commissioned in 2017, Australia’s LNG production will have grown more than three-fold to 85 million tonnes per annum (Mtpa). According to local consultancy EnergyQuest, national petroleum production will increase from less than 550 million barrels of oil equivalent (mmboe) in 2014 to an estimated 1,200mmboe by 2017, ranking Australia just outside the top 10 of petroleum nations. Along the way, Australia is likely to overtake Venezuela, Iraq and Brazil. EnergyQuest chief executive officer Dr. Graeme Bethune says Australia’s emerging status as a petroleum heavyweight is a remarkable achievement for a country that is oil-poor. “In fact, we are going backwards rapidly in terms of oil self-sufficiency, but when it comes to gas Australia has massive reserves. The discovery of giant new gas fields over the past decade is just the start of the success story. A whole range of factors — including low sovereign risk, technical innovation and proximity to rapidly growing Asian markets — have come together to create an LNG investment boom of unprecedented scale anywhere in the world.” The rapid growth of the energy sector has come with its challenges. The extraordinary level of demand for skills, labor and goods — exacerbated by a concurrent mining boom in
Australia — has inflated some construction budgets, including the technically complex Gorgon project operated by Chevron on the Exmouth Plateau. The three-train facility involves the world’s largest carbon sequestration project and is within a nature reserve on Barrow Island. This has placed Australia at the upper end of the global cost curve for LNG projects. Project operators have claimed they were still set to achieve their targeted levels of return on capital, although the recent collapse in oil prices has created a new challenge because of oil-linked pricing for LNG. Dr. Bethune says the LNG industry in Australia is set to enter a period of consolidation. “New projects will be much more difficult to approve, although the cost pendulum is swinging back with the downturn worldwide and the end of Australia’s development boom. Floating LNG, which Shell is pioneering at Prelude in the Browse Basin, also promises a new deal for operators in terms of costs, and will be watched very closely.” The industry is also keenly anticipating the first drill results from an exploration rush into the Great Australian Bight, where BP, Chevron and Statoil are investing more than a billion dollars in the hunt for multi-billion barrel oil fields. The Bight has similarities to the Niger Delta and has been rated by BP as one of its top five exploration projects in the world. If BP does strike oil next year, the petroleum-led transformation of Australia’s economy could begin another remarkable chapter.
WA set to remain at the centre of Australian petroleum sector Western Australia’s dominance of the country’s energy industry shows no signs of slackening, despite more than 20 years at the top
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Image Courtesy: Woodside
he state’s petroleum industry is synonymous with the North West Shelf project, which has shipped more than 4,000 cargoes since 1989 and is now one of the world’s largest LNG projects with a five-train capacity of 16.3 million tonnes per annum. Woodsideoperated Pluto LNG followed in 2012, while two major new projects will be commissioned in 2017 - Gorgon (15.6Mtpa) and Wheatstone (8.9Mtpa) - both operated by Chevron. The state has had its difficulties capturing all the benefits of its massive natural endowment of gas. The giant Inpex-operated Icythys project will process gas in the neighbouring Northern Territory, while Shell’s Prelude floating LNG project is being constructed in southeast Asia and will process gas off the coast of Western North Rankin Complex Australia in Commonwealth waters. But the importance of WA is highlighted by the fact that Inpex is headquartered in the capital city of Perth, where much winning edge. Within a few years, Western Australia is set to overtake of the engineering and design for Ichthys and Prelude has also Qatar as the world’s leading exporter of LNG.” taken place. Marmion is leading a major streamlining of the state government Western Australia’s Minister for Mines & Petroleum, Hon Bill approvals process, as well as promoting the development of Marmion, says the state will continue to lead the country’s energy infrastructure and community acceptance for onshore development. sector for a long time. “We are fortunate to have major gas reserves He says his previous career as an engineer is “the best experience I offshore, and we are just beginning to develop our onshore reserves, can bring to the role of Minister for Finance, Mines & Petroleum. where there is estimated to be 280 trillion cubic feet of recoverable In the field of engineering you start with a concept and go through natural gas in shale and tight rock. If even a moderate percentage all the different phases and even post-project evaluation. I know of these estimates are proven, onshore gas resources present a the whole project management routine because I have done it, and remarkable opportunity for the state. Our proximity to major I have run contracts. So I understand the needs of industry and the petroleum markets, our stability and low sovereign risk, coupled with importance of bringing together stakeholders to keep our energy our clear and transparent approval and regulatory systems, give WA a sector expanding in Western Australia.”
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World-class engineering base springs from necessity Local know-how exported worldwide thanks to innovative new solutions from the North West Shelf experience
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ustralia’s pioneer pastoralists were famous for their ingenuity. Often hundreds of miles from the nearest town, they made their own repairs and seemed able to fix anything with no more than a length of fencing wire. That same spirit is alive in the engineering community in Perth, which is punching above its weight when it comes to developing skills and solutions for the country’s fast-growing petroleum sector. The city’s petroleum engineering base formed along side the North West Shelf project in the 1980s. Platform pylons driven into the local carbonate rocks - unique among the world’s offshore petroleum regions - sank under their own weight. Local engineers quickly developed new solutions that have since been adopted for similar environments in the Gulf of Mexico. The early lessons from the North West Shelf helped create a core of engineering skills that is now addressing 21st century challenges such as innovative new anchors for Prelude’s floating LNG barge and the world’s largest floating central processing facility at the Ichthys field. Curtin University’s Head of the Department of Petroleum Engineering, Professor Brian Evans, points out that more than $US20 billion will be spent on subsea equipment off the northwest of Australia in the next five years. He said this trend was behind the department’s recent launch of a Masters degree in Subsea
Engineering, which has already won international recognition, as well as the Australian subsea industry award for innovation in 2014. “We need people who understand the complex equipment which will be sitting on the seabed for the next 25 or more years. The trend is to put more and more of the refining and processing plant on the seabed, which can be done at lower cost than onshore and avoids many complexities.” Perth is also the base for a thriving engineering services industry. Home-grown players such AusGroup have grown rapidly over the past decade by supplying the LNG construction boom with fabrication, cryogenic insulation and scaffolding. Chief executive officer, Stuart Kenny, says the construction phase of the boom is slowing, but AusGroup is well positioned due to its established maintenance services and expansion into marine logistics through the acquisition of Ezion Offshore Logistics Hub. Ezion operates a deepwater supply base at Port Melville in the Northern Territory. “The acquisition brings in an extra suite of skills that we can offer the customers of our construction business. In fact, we now have a distinct advantage in being the only company of our kind to cover all customer needs. The customer gets one management team and one culture - no subcontractors, no external providers, no misunderstanding of requirements and obligations.”
Kongsberg: well suited for Perth The rapid growth in offshore petroleum activity has brought one of the world’s largest maritime services companies, Kongsberg of Norway, to Perth. The Norwegian-government controlled company recently established a local office with a mix of engineers who had transferred from Singapore and local recruits. Managing Director of Kongsberg Maritime Australia, Egil Østlid, says a numMr. Egil Østlid ber of the company’s services Kongsberg Maritime Managing Director are particularly well suited to Australia. “Offshore vessel support, and a strong demand for high quality training services such as simulators. Australia also has very high standards for environmental protection, and we have a number of market-leading
products in environmental monitoring. Overall, subsea activity like monitoring and mapping is essential. Demand is rising strongly, particularly in the northwest.”
Kongsberg Maritime’s K-Master Aft Bridge Workstation
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Bold plays help Darwin become a regional hub Darwin is booming thanks to an aggressive strategy to fashion Australia’s most northern capital city as a regional hub for the petroleum industry
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in Darwin Harbour as a two-train facility processing 8.4 million tonnes per annum of LNG, as well as producing 1.6 Mtpa of LPG and 15,000 barrels of condensate a day with a further 85,000 processed offshore. Bladin Point is adjacent to Wickham Point, where ConocoPhillips commissioned the 3.7 Mtpa Darwin LNG project in 2006. The potential for further large-scale development of offshore gas fields is high, either as stand-alone projects or as brownfield expansion of Darwin LNG, which already has environmental approvals for up to 10 Mtpa and includes a further LNG train. The Woodside-operated Greater Sunrise fields, which straddles the border between Australia and Timor Leste, is large (5.1 TcF) and has the bonus of being rich in condensate. Development has been stalled for almost a decade by disputes over boundaries and the best development option, but Woodside says it is committed to going ahead. Other potential gas developments in the Timor Sea include the Shell-operated Evans Shoal field, where joint venture partner ENI estimated in-place gas resources of 8TcF after an appraisal well in late 2013, and the ConocoPhillips-operated Barossa and Caldita fields. While fields offshore the Northern Territory are world class, the potential onshore for both conventional and unconventional hydrocarbons is now also attracting attention. Recent exploration wells in the MacArthur Basin have found what is thought to be the world’s oldest gas and revealed remarkably thick, extensive and organic-rich shales. Gas resources in the Northern Territory’s six onshore basins are estimated to be more than 200 TcF.
Image Courtesy: lngworldnews.com
he city of 135,000 people was named after Charles Darwin by his former crewmates on the HMS Beagle, which sailed through in 1839. So it is fitting a city named after the father of natural selection should thrive because it has outmaneuvered competitors. The $US34 billion Ichthys LNG project is a clear example. The giant gas and condensate fields supporting the project were discovered in 2000 off the coast of Western Australia’s Kimberley region, more than 800 kilometres west of Darwin. Almost a decade later, the state government of WA had been unable to provide approvals, and project operator Inpex was running out of patience. The Northern Territory Government swooped in, clearing the way for an alternative development in which gas would be piped through the longest undersea pipeline in the southern hemisphere for onshore processing at Darwin. Chief Minister, Adam Giles, says the Northern Territory won because it was prepared to legislate and provide certainty for the project. “We could offer cross-government support and certainty around all aspects of the project. One of the issues for WA was third-party appeal rights for environmental approval and the inability to have confidence about the security of land tenure. We could provide land that was unencumbered from indigenous rights issues and the certainty needed to move on with the project. It took out a major amount of risk.” A final investment decision on the project was made by Inpex and partner Total in 2012. At the end of September 2014, the project was 58% complete, on budget and on schedule for first LNG cargoes in 2017. Ichthys is being developed at Bladin Point
Pipeline construction in Queensland
Image Courtesy: NT Govt.
Kitan FPSO
Petroleum fulfilling development dreams for the north
a marine services industry servicing the region. We have recently been to Malaysia to see what we can learn and how we can import that into the Territory. We are doing a lot of investigation with offshore companies and trying to attract them to the Territory to set up operations here.” The Northern Territory is also driving an ambitious pipeline project that would finally realize the dream of transporting gas from the remote north to the population centres in the south. With national support, the Giles government is promoting plans to connect either Alice Springs or Tennant Creek in the Northern Territory to the eastern seaboard gas grid. The proposal has been criticized as an example of government over-ruling market forces, but Giles points out that 16 expressions of interest to build and operate the pipeline have been received. “By creating new market access for NT gas, the pipeline has the potential to unlock investment capital and increase exploration and development across the Territory. The Territory has a growing reputation as a gas hub with most of the services required to plan, construct, own and operate significant pipelines already available here. This is a huge opportunity to expand that reputation further,” Giles says.
Massive investment in petroleum projects is opening up northern Australia and helping the country realize decades-old dreams of development of “the top end”. Federal governments since the 1960s have held bold visions for land north of the Tropic of Capricorn, which covers an area of three million square kilometres but has a population of only one million people. The current Federal Government led by Prime Minister Tony Abbott has made development a high priority, with the emergence of Asia as a global economic powerhouse on Australia’s northern doorstep adding urgency to the task. The Abbott Government is hoping to avoid a repeat of past mistakes by consulting widely with local communities and seeking the advice of an expert committee on a 20-year plan. While the committee works on its recommendations, private industry with the help of the Northern Territory Government is already pushing ahead. Infrastructure development is being driven directly by major petroleum projects and rippling outwards as major upgrades of ports, airports and roads. Chief Minister Adam Giles lists a series of projects that have already been implemented to support the Ichthys develop-ment. This includes a $A110 million Marine Supply Base at East Arm Wharf in Darwin Harbour, with an additional 265 metres of berthing space, quay line, and a doubling of cargo container handling capacity. He says infrastructure development is also being driven by Shell’s world-first floating LNG project at Prelude, near the Ichthys field. “We are constructing a supply base for Prelude and Infograph of Ichthys Onshore LNG facilities constructed by Inpex at Bladin that will be a foundation for
Marine services and subsea emerge as key industries The vast size of Australia’s coastline and the remoteness of many offshore energy projects have driven the growth of major local industries in maritime services and subsea technology
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Stewart says the northwest coast of Australia, with its large tides and cyclone seasons, presents many challenges and often demands innovative solutions by companies servicing the oil and gas sector. “A great example is a permanent floating wharf we designed for Apache Energy, which we believe is the largest of its kind in the world. We have also developed and patented a remote operated barge emergency anchor release (BEAR) for barges. This came out of a request by Chevron to find a safe way to double two barges to Barrow Island for its Gorgon project. I have to say that I really appreciate the support Chevron and others gave us, but we designed, developed and upgraded the system. It has been very successful and is another achievement that we are very proud of.” Home-grown MMA Offshore, formerly Mermaid Marine, is one of the largest marine service providers to the oil and gas industry in the Asia-Pacific region. The company gained its start with the North West Shelf project in the 1990s. The company last year acquired Singapore-based Jaya Holdings, creating an international base and increasing the size of its fleet to 60 owned and operated vessels. Bhagwan Marine is another local company that has prospered with the growth of Western Australia’s petroleum and resources industries. Fendercare Marine is a more recent entrant, arriving in Australia in 2009 through a local acquisition. The company is known worldwide as a leading supplier of chain, ropes, buoys,
Image Courtesy: AMC
remantle-based Maritime Engineers is a case study in the evolution of the sector, growing in the space of only two decades from a one-man consultancy to an international player with offices in Darwin, Singapore and Japan. The business was acquired by UKlisted James Fisher & Sons in 2010, but remains under the management of founder, Kent Mr. Kent Stewart Stewart. He says the growth of Maritime Engineers maritime and subsea has been Executive Director driven by international demand for Australian gas. “We still have a lot of LNG reserves in Western Australia. Japan, for example, has an enormous demand for LNG at the moment after they closed down something like 30 nuclear power stations and put them back on LNG after the tsunami that hit Fukushima. The demand is there and there are other markets in China, India and elsewhere. So, I think the demand will keep growing with market corrections from time to time. We’ve had massive growth in skills and support services both onshore and offshore thanks in particular to Chevron’s Gorgon project.”
Australian Marine Complex
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Other companies at the complex such as CIVMEC and Westralian Engineering have also expanded into the subsea sector. AMC’s General Manager, Marine & Defence, Oil & Gas, John O’Hare, says the subsea industry is quickly developing into an important industry for Australia, capitalizing on a strong local effort in research and development. “In terms of products and services that we can do – is critical to the industrial development of the AMC, Western Australia and ultimately the nation.”
AMC experiment pays off The Australian Marine Complex began as a bold experiment by the Western Australian government to promote local construction for the oil and gas, defence and naval sectors. A decade later, AMC is home to 150 companies that have completed almost 400 major projects. General Manager, Marine & Defence, Oil & Gas, John O’Hare, said a key to AMC’s success was independent management of a common user facility. “I cannot stress enough the importance
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but also has a number of marine services divisions. In 2013, the company changed its approach to focus on offshore petroleum rigging, lifting and inspection, under newly appointed Director and General Manager, David Flatman. “The past year has seen a huge change in how we approach the market, with our products and services both in the marine division, the flotation division, and our material handling division.” Flatman says Australia’s high cost structure has been a deterrent to investment by international oil companies, but there is much that can be done to improve the competitiveness of local products and services. “We work extremely hard to manage costs and meet the expectations of customers in this area. For example, we deal directly with original equipment manufacturers worldwide, and add value to the products we bring in with the skilled people and equipment on the ground here.” The growth in the subsea services sector has been clustered around the Australian Marine Complex, which established a dedicated subsea precinct several years ago and is home to Matrix Composites and Engineering and FMC Technologies.
of that: it means if you are bidding to undertake project work at the facility, you are not competing with the facility manager,” Mr. O’Hare said. Companies based at AMC have played a large role in work associated with the Gorgon and Wheatstone LNG projects, and are also closely involved with the Shelloperated Prelude floating LNG project. Mr. O’Hare said perceptions Australian construction activity was crippled by a high cost structure were not completely correct. “A number
of local constructors are doing well against offshore competitors by using innovation, technology and good management. We do not underestimate the barriers, but it is not such a desolate desert as has been made out. Australian companies are innovative and rise to the challenge. Particularly here in the West, where historically we have been at the end of supply chains, we find new ways to deliver quality, competitive products and services for the oil and gas sector.”
Growth for Fendercare
Breakthrough for AusGroup
Fendercare Marine Australia has gained market share rapidly in Australia following a direction change in 2013. Director and General Manager, David Flatman, says the company’s growth followed the opening of a specialist divisional operation in Karratha on the northwest coast. “One of the strengths in our business it that we were meticulous in selecting the skills and technology that we felt was required for the local offshore oil and gas industry. It has only been two months since we officially opened our Karratha operation and, in that very short space of time, we have managed to stamp our identity in a fairly major way with two of the major Mr. David Flatman offshore marine supply Fendercare Director & General Manager companies.” Flatman added that the company had worked very closely with Chevron Shell Prelude to provide offshore hotel accommodation as a result of its decision to have a permanent mooring facility with a cruise liner. “We were selected because of the quality of our products and our skilled technicians. They provide unique know-how as they are working with specific equipment manufactured in Holland. We installed and are managing a special shore tensioning system for the permanent mooring of a cruise liner for the next two or three years.”
AusGroup has continued to improve its safety performance through their innovative Perfect Day program. The asset maintenance, fabrication and construction company last year achieved an industry-leading recordable injury frequency rate of 2.38, a reduction of 40% from the previous year. Chief executive officer, Stuart Kenny, says he is probably more proud of this result than Mr. Stuart KeNny any other aspect of the business. AusGroup, CEO & Managing Director “The Perfect Day program asks new employees during their induction to think about the best day they could possibly have, which could be anything from riding their Harley to spending the day with family at the beach. What we do at work today, can have a direct impact on how we enjoy our lives tomorrow. The goal is to reinforce every day the importance of working safely and what that really means to each and every individual.” He says that employee engagement of Perfect Day has been positively received, with high participation levels across the business. Kenny says the challenge to industry is that many workers have almost become deaf to the call for safety. “When we implemented Perfect Day we found it created a personal connection for each of our employees and provided a point of reference for them to focus their behavior and enable them to achieve their Perfect Day. It is something our customers also want and have responded to. It is really quite a competitive advantage that we are continuing to develop for all workers across AusGroup.”
Bunda 3D seismic survey and oil beam pump, Canning Basin
CelebratiNG
2o yearS of exCelleNCe
maritime engineers takes pride in the scope of our services in the maritime industry. We are now a global operation with recent expansion to darwin, Singapore and japan.
www.maritime-engineers.com.au Ship, CommerCial VeSSel & NaVal hull SurVeyS · offShore oil & GaS iNduStry Ship VettiNG · CarGo SurVeyS · oN hire/off hire SurVeyS · mariNe WarraNty SurVeyS loSS adjuStiNG · maChiNery failure aNalySiS · Ship ValuatioNS · damaGe SurVeyS CyCloNe aNd offShore mooriNG deSiGN · expert WitNeSS
Education booms with Australia’s petroleum industry
Image courtesy: Curtin University
Australia is carving out a place as a global centre of education and research in the petroleum industry
Curtin University in Perth, Australia
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ducation is one of Australia’s largest exports, with more than 500,000 overseas students attending its universities and colleges, and many more studying from offshore. This strength in learning is now being combined with the nation’s growing stature in the petroleum industry. Centres of excellence in engineering, geoscience and processing technology are popping up around the country and already exporting their know-how to students from around the world. Curtin University’s Department of Petroleum Engineering in Perth is a leading example of the marriage of the education sector and the petroleum industry. It has grown from 18 students in 2008 to 450 students in 2014, and is turning out graduates with skills in subsea engineering that are in high demand worldwide. Head of the Department, Professor Brian Evans, recently received an international award from the Society of Petroleum Engineers for making a global contribution to the field. He was instrumental in establishing Curtin’s first Bachelor of Petroleum Engineering program and expanding a Masters program for local and international students. He says Curtin’s success reflects its commitment to high quality research that is directly applied to the needs of industry. “As projects relying on subsea systems and floating LNG facilities increase, the need for professionals to meet the many challenges that exist in the harsh and extreme environment on the deep water sea bed has also increased. I am proud to see Curtin become the first university in Australia and New Zealand to produce graduates who will help develop future technologies for the highly complex field of subsea engineering.
Curtin is now the southern hemisphere leader in high quality oil and gas graduates, not just the Australasian leader.” Charles Darwin University is among the most recent additions to the nation’s petroleum schools, with the opening two years ago of the North Australian Centre for Oil and Gas in Darwin. Vice-Chancellor of Charles Darwin University, Professor Simon Maddocks, says the center has worked closely with the partners in Ichthys Pty Ltd to offer the kind of skills and training that local industry needs. “We are providing vocational education and training as well as higher education and postgraduate training across the relevant oil and gas industry needs. We need to understand what sort of skills this industry needs in creating and developing a workforce to support this development, but also giving people opportunities to improve, as careers grow, that they can continue to upscale and develop with the industry. That’s a critical part of the relationship and the engagement.” Professor Simon says the center is developing its services for the South-East Asia region, in line with Darwin’s emergence as a petroleum hub for the region. This is being achieved by offering in-country training in places such as Indonesia and Timor Leste, and by innovative delivery of online courses. “We’ve got the first chemical engineering degree available online in Australia and what I understand is only the third of its kind in the world. And we recently received notice that our engineering courses have been accredited by the German body, ASIIN, which is another first in Australia. It shows that our graduates are going to be globally relevant to the industry.”
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The Northern Territory provides greater level of expertise and protections of sovereignty Hon Adam Graham Giles, Northern Territory Government Chief Minister Q: FLNG is pioneering here in Australia. What would be your main concern and where do you see opportunities? A: We do not see concerns around FLNG. It is a new technology moving forward. You cannot stop technological advancement - it is a way we can rationalize better efficiencies in the market. But it also represents an opportunity for onshore gas development to identify better cost structures so they can start to compete with FLNG if they want to do that. FLNG is still an unproven and untried product at this stage. We might see if it comes forward with cost efficiencies which can drive up the price of gas around the world and increase supply. Q: How confident are you that the LNG of Darwin can compete with the new source of gas in North America and Russia? A: We are still waiting to see how the prices around the world are going to settle. Asia has one pricing structure, Australia has a pricing structure, the US through the Henry Hub model has a pricing structure. I do not think the water has found its level at this point. When that happens and there is a pricing structure - whether that means an international pricing model or domestic
pricing which partially interacts with the domestic market - we will wait and see. Now in Australia we have international markets which are putting upward pressure on domestic market pricing with domestic gas going to international markets. I think we will see the water settle at some point. As some of the Asian countries start to reach the supply requirements for their demand, that is when you will see pricing pressures come down and that is where competitiveness starts to come into play. Q: Are you concerned that in Alaska they are building one of the biggest LNG plants? It is very close to the Asian market. What do you think about this? A: It is not a concern. Competition is good. It advances technological change. We also have to keep in mind the Australian dollar and what the exchange rate is and how that will have an affect into the future as well. The lower the Australian dollar, the better it will be for Australia itself. As a general consumer, the more supply puts downward pressure on price. Of course an industry wants to make sure they get their returns. The market will work itself out anyway we allow ourselves to operate. As anyone comes on, we need to be in a mindset
of working to attract industry here as much as possible, making sure we are an attractive environment. I know that Darwin now is an attractive environment for future operators. More and more people want to come here. We have to continue to advance in our skill set to make sure we are competitive on a global basis. Darwin many years ago might have been seen as an outpost of Australia. It is now Australia’s Asian capital city with international airports, leading universities, modern ports, industrial parks and supply bases. We have the social and economic infrastructure to compete. Q: Apart from offshore LNG, what other major opportunities do you see for energy companies in NT - onshore or conventional gas? A: We have six basins in the Northern Territory. 1.3 million square kilometers, 130 million hectares, six basins around 240 to 260 estimated TCF. To date we have had relatively isolated basins and deposits in conventional and unconventional natural gas locations. We are very keen to develop that. Around 85 percent of all areas are under exploration lease right now, or under application. We are encouraging companies not to just sit on those leases but to get out there and actually explore. We have
put in place a new regulatory regime which we call “useit-or-lose-it” - use your lease or we are going to take it off of you. We have just taken the first fifty percent off of someone in a very good basin. The fifty percent was put out to tender and this is an example of the policy in action. The idea being that we want onshore gas developed for either domestic or international markets. As you may know there are a lot of stranded gas assets in the territory and they do not have a market to get to. Q: What would you tell potential companies that are looking at this part of the world frightened by costs in Australia? A: I would say that the Northern Territory for a long time has never held out the “open for business” sign. We have done so on a piecemeal arrangement to parts of the territory but now we are holding it open to all of the broader territory. From a costcompetitive point of view, we acknowledge our costs are higher, but that is because we have a greater level of expertise and protections of sovereignty that surround us as a jurisdiction and a nation.
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Western Australia holds the lion’s share of Australia’s oil and gas production Hon Bill Marmion, Minister for Finance, Mines & Petroleum Q: Western Australia, you have the lion’s share of Australia’s oil and gas production with 65 percent of Australia’s conventional natural gas and 73 percent of crude oil and condensate production. In 2013 petroleum sales reached 24.5 billion Australian dollars but other states and territories are competing very hard to attract investment. What is the state government doing to help reduce costs and how can you ensure WA is cost competitive in a global market? A: We have had pressure over the last five years in terms of petroleum industry labour costs and that has been exacerbated by pressure from our mining industry as well, particularly iron ore. We are one of the largest exporters of iron ore in the world and that has pressurised our relatively small labour market. But construction across WA’s resources sector is dropping back somewhat, so labour costs are coming down which has been one of the main concerns for industry. The other concern, which the government has a lot more control over, is the cost of approvals. There are environmental approvals, Native title approvals, there is a whole range of approvals. And they are handled by a number of different departments within the Western Australian government. In my Department of Mines and Petroleum we have greatly reduced the
waiting time for approvals since 2008. On the mining front, for example, there were 19,000 tenements to be approved when we came to office, and we have that down to 4,000 which is a normal time cycle. We have cut the approvals waiting list by 75 percent since 2008 and dramatically boosted online approvals processing for more efficiency and transparency. We are also looking at areas where there is unnecessary duplication. We are going to a risk-based environmental and safety approvals process. Q: You are coming from the environment portfolio. With this experience, are you able to build bridges and maybe bring more facility, or flexibility? Q: Well, I am lucky. I am also an engineer. That is probably the best bit of experience that I bring, as there are not many engineers in politics in Australia. In the field of engineering you start with a concept and go through all the different phases and even post-project evaluation. I know the whole project management routine because I have done it, and I have run contracts. So that is important. And a lot of those projects had to get environmental approval, Native title approval. So I know all the things you have to do in other sorts of projects. The other interesting thing, Western Australia is relatively small – it is like a large country town. So if you are a fifth genera-
tion Western Australian like me, you have contacts, you know what is going on in the community and in other government departments. So Western Australia is lucky – while we work hard to ensure responsible development of our resources, there are fewer barriers. Q: Human scale is what I call it. You are a human scale government. Let us go back to Western Australia, let us talk about the Phoenix South one discovery that has created a lot of excitement about the untapped petroleum potential in Western Australia in the Carnarvon Basin. Do you think the state has much more potential and what areas would you highlight? Q: Western Australia’s potential never ceases to amaze me. We have gas areas offshore in the Carnarvon and Browse basins. Phoenix one is in a new area, north of the Carnarvon Basin, and there now appear to be major oil reserves in the north end. Onshore, there is the Canning Basin, where we believe there is about 240 trillion cubic feet of gas, much of this in the Great Sandy Desert. As a civil engineer I built the main local road, so I know that area quite well. There is almost no one living out there and there is great potential, both for local communities and the broader WA community. Another major focus is on the Perth Basin, north of our
capital city. Indications are there is another 45 trillion cubic feet of gas there. Its potential was highlighted by the discovery of a significant free gas field during a recent shale drilling program. We are also encouraging offshore frontier exploration in the south, in the Eyre sub-basin, and the Great Australian Bight. In general the resources industry is a catalyst for progress and our vision is to make Western Australia a global petroleum leader. The investment in Western Australia by international companies such as Chevron, Shell, ENI, BP, Conoco Phillips, INPEX and Mitsubishi highlights the importance of WA as a base for Asia-Pacific operations. Not only are we home to major company headquarters, we are also home to ground-breaking research and development, from IT to deep sea piping technology. An outstanding example is the growing WA Energy Research Alliance between the CSIRO, Curtin and the University of Western Australia. Shell has just joined Woodside and Chevron in the Alliance and there is big potential for WA to capitalise on future FLNG projects.
Common User Facility Fabrication, assembly and loud out facility
The Australian Marine Complex Common User Facility The Common User Facility (CUF) is a unique multi-purpose fabrication, assembly and loud out facility in the heart of the heavy industrial area in Western Australia. Located in the Australian Marine Complex and only 30 minutes south of Perth, the CUF has supported local industry participation in Australian Oil & Gas projects for 12 years. The CUF has a range of laydown areas and facilities for hire to companies to enable them to undertake their projects in a convenient, safe and secure environment. The facility comprises over 60ha of laydown area, deep water access to 680m load-out wharves, 12,000t floating dock, 4,600t SPMT’s, large fabrication halls, site offices and workers amenities. Contact us for information on how to bring your project to the Common User Facility.
AMC Management (WA) Pty Ltd 124 Quill Way, Henderson, Western Australia +61 8 9437 0500 - info@amccuf.com.au Certified to ISO 9001:2008 & ISO 14001:2004 www.australianmarinecomplex.com.au
Trends in marine services Mr. Kent Stewart, Maritime Engineers, Executive Director Q: Where do you see the trends in marine services going? A: From our point of view, and as marine consultants, we have a number of divisions; a small engineering design section and an oil and gas division that services the demand of offshore vessel operators and the large projects. The most significant trend change is the adoption of the OCIMF OVID vessel inspection regime, which may gradually gain favor and replace the IMCO Common Marine Inspection Document. We’ve had massive growth in skills and support services for both onshore and afloat, which
are thanks to Chevron’s Gorgon project. There is so much more to offer in WA. We are a service company and as such we will always have peaks and lulls as the demand fluctuates. We still have a lot of LNG reserves in WA and we are demand driven. Japan, for example, has an enormous demand for LNG after they closed down 30 nuclear power stations and put them back on LNG after Fukushima. Q: Tell us about Maritime Engineer’s involvement in the construction of one of the largest floating wharf facilities in the world. A: Essentially Apache Energy
needed extended wharf facilities for their drilling program and the Dampier Port Authority sent out tenders for providers to design, construct and operate a floating wharf facility. There were three bidders and we did a conceptual design that won the tender for Apache. From there we went on to be appointed to do the design work and we did not realize the magnitude of the job. With all the web searches we have done, we have not been able to find a permanent floating wharf facility of this size. There are others, but they are not permanent, nor of this size,
and they are certainly not located in a cyclone region or in an exposed open port area. Dampier is a port that is subject to big 5-6 metre tides, so all of these factors had to be built into the design of the floating wharf structure. I am very proud of our design office team, the Dynamic Analysis that was done for two large closed PSV’s moored to a fixedheading, floating wharf had never been modeled before. We did not realize this at the time. Evidently there has never been a Dynamic Analysis study conducted for three close coupled vessels together.
Challenges of a skilled workforce and safety issues Mr. Stuart Kenny, Ausgroup, CEO & Managing Director Q: Tell us about the current trends you see at this point within Ausgroup. A: Over the last ten or twelve years there has been LNG construction through Woodside, but this has been largely overshadowed by growth in the mining sector. Many companies developed and grew around mining but AusGroup never took its eye off our traditional base of supporting LNG and oil and gas customers. A couple of years ago as the mining sector tapered off, we reassessed our direction and could see that the original skills that we had built the company on - especially fabrication, cryogenic insulation and
scaffolding access - were skills that were now really in demand especially with the continuing growth of the LNG construction market. We are now the largest provider of industrial scaffolding across Australia. What was a big catch for us was probably the largest single scaffolding contract ever awarded in Australia. This was for the INPEX project in Darwin. We are currently pursuing the painting and cryogenic insulation work for the Darwin LNG project as we have the right skills to offer the market and there is not a single competitor exactly like us. Q: One of the key concerns here in Australia is
cost-competitiveness, especially in construction. How do you help your clients to be more cost-competitive? A: This is a challenge for us as a contractor. I have learned over the years that we need to have a very strong and rigorous project control and reporting program where we monitor daily performance. This is important especially moving into these major-scale construction projects such as the project in Darwin with scaffolding and potential insulation work. We have to identify the issues that will be impacting productivity. Somebody has to pay for loss in productivity if it occurs. The direct impact on productivity is either an external
delay, which unfortunately the client may well have to pay for, or an internal delay, where I as a contractor will need to pay. If I can manage my internal costs through the daily monitoring of progress, I have a chance to identify a problem early on and take immediate action. I can notify the responsible group early enough for some intervention to be engaged and applied. I cannot reduce the cost of labor and materials, but I can have a direct impact on productivity through the work-pack system and daily monitoring. This system puts responsibility on the supervisor to control his group of people daily and is very effective.
OUR GRADUATES ARE MOMENTS AWAY FROM THEIR CAREER Located in Australia’s Oil & Gas Hub, the Department of Petroleum Engineering is the preferred centre of excellence in petroleum engineering, teaching and research in the Asia Pacific region.
curtin.edu.au
NACOG: Fuelling our future
CDU055
Charles Darwin University has established the North Australian Centre for Oil and Gas (NACOG) with support from the Northern Territory Government and the oil and gas industry. NACOG delivers world-class research, training and education for the oil and gas industry in the rapidly developing regions of North Australia and South East Asia. Built on strong relationships with industry, NACOG offers training in trades relevant to the petroleum and mining sectors, such as process plant operations, instrumentation, electrotechnology, electrical, construction, metal trades, transport and logistics, through apprenticeships, up-skilling and remote course delivery. The CDU Marlins Approved Test Centre offers internationally recognised tests, enabling the
cdu.edu.au/oilandgas
oil and gas industry to provide English language training to their employees within the context of the sector. Offering specialisations in process and chemical engineering, CDU offers internationally accredited degrees that provide the necessary academic and practical training for employment in the oil and gas industry. Our engineering graduates can travel almost anywhere in the world and have their qualifications recognised. With a focus on research into corrosion prevention and control in tropical environments, NACOG offers a range of corrosion assessment and testing services to the oil and gas industry. Another core research and consultancy focus for the Centre is multiphase flow and phase behaviour.
Expansion and growth has enabled the port to meet challenges Roger Johnston, Pilbara Ports, Authority CEO Q: What are the challenges that you face as the new integrated Ports Authority? A: Last July Port Hedland Authority and Dampier Port Authority were integrated under the new Pilbara Ports Authority; this integration represents 11 ports in the Pilbara region. We are changing from an individual port authority responsible for one geographic location to an authority responsible for multiple ports in multiple locations on islands, in a very remote part of the world. The whole population of Pilbara is only 63,000, but is actually the largest shire in the world. Most people don’t realize its size and in fact it is larger than the UK. This
is a surprising fact. In fact, the sheer volume of mineral wealth being mined probably makes it one of the richest mineral resource centers in the world. This is a great value for us. There are certain challenges due the remoteness that makes it difficult to attract a skilled workforce. As well as the challenge of managing multiple geographic locations. The type of resource we employ is very specific, very highly sought after. The wage rates offered up there are very high. This is a direct result of the remoteness. It is obvious that in order to attract and maintain the right sort of workers and train them there has to be a good motivating
factor and the high wages is one of them. Q: Is it therefore difficult for you to find the skilled workers you need? How can you solve such an issue? A: If you give them the opportunity to be based in different locations and offer them a good career-path, housing and other sorts of support, then you can attract the right kind of person. We are the biggest shipping port in the world and people that come to work for us are excited about that. It is a great learning experience and they value the knowledge they gain by working here with us. Q: How was the idea of integrating the ports conceived?
And what are the benefits of the integration of all those ports? A: The Western Australian government announced a number of reforms to improve port governance. When ports were trying to spring up and grow in isolation you needed somebody to coordinate them. The government was interested in studying what were best options and how were they going to be sure and get the best or optimal outcome for a customer who may be halfway between two different ports. This idea was born out of the need for efficiency and dealing with the great distances and best servicing the customer and their needs.
Huge subsea assets are an advantage in the sector Kim Smith, ICON Engineering, CEO assist drilling & completions campaigns on NW Shelf (ie. The rig mods for Woodside – fields Xena, Vincent and Persephone) which are subsea and no infrastructure. This accounts for about 20% of our field development work, the other 80% is outside of Australia. In the future we plan to become involved in mainte-
nance of the FLNG facilities. Q: There’s a lot of discussion currently about Floating LNG. What is your experience and capabilities in this sector? A: Subsea. We have huge subsea assets involved in FLNG as well as subsea infrastructure design and installation. We also have experience with PLETS, PLEMS, protec-
tive structures, templates and midwater arches. Further down the track we would like to become involved in maintenance of the facilities. Q: ICON installed the first fixed platform in the Timor Sea. Are you expanding there? A: These platforms are now mature assets and we do also provide occasional platform maintenance for clients.
Image Courtesy: ICON Eng.
Q: What are the current major offshore projects that you are engaged with at ICON? A: We are currently involved in three out of the four major oil and gas projects in Western Australia, (Wheatstone, Ichthys and Prelude) and we were previously working on the Gorgon project. We are also involved in EPC services to
Detailing and installation of sea-fastenings to Schlumberger equipment on the Far Stream AHTS Vessel
AMC celebrates its tenth anniversary with new projects and job creation John O’Hare, General Manager of Marine & Defence, AMC Oil & Gas
Q: AMC is now celebrating it 10th year anniversary with more than 300 projects that have been registered. What would you consider to be some of the key factors for this success? A: Since opening its doors in 2003 AMC has grown in international recognition as the southern hemisphere’s premier integrated marine industrial facility. When the State created
the AMC Common User Facility, it was the first of its type in the world. We are very pleased with its success, it has been a significant economic contribution for the State, generating $1.75 billion in economic value, enabling 373 major projects completed locally and creating 26,700 local jobs over the last 10 years. The concept of common use as an operational model evolved from experience the State had with its original Marine Support Facility. State ownership was seen as critical when we commenced with the concept and we developed the ethos and principles
of common use. Our common use model has continued to work well. In terms of having third party independent management (AMC Management Pty Ltd), that has been one of the critical successes as well as having a first rate marine infrastructure in place. Q: What type of tenants do you have now and what type are you trying to attract in the future? A: We have over 150 companies located in the AMC’s Support Industry Precinct, which is the location for specialized marine, defense, mining, engineering and oil &
gas businesses. You have to be operating in one of those industry sectors to be located in the AMC. A good example of the type of tenants we try to attract are Matrix and FMC Technologies. You can look back to 2006 when the State decided to increase Australia’s participation in subsea and dedicated part of the AMC as a subsea precinct. Thanks to this action we now have subsea companies such as Matrix and FMC Technologies based there. We would like to see further oil and gas sector investment in Western Australia as this is beneficial for all.
Perth is a regional resources hub Lisa M. Scaffidi, Lord Mayor City of Perth Q: Perth has gone from being a regional capital to a regional resource hub with an international presence, how do you now position the city? A: The City of Perth aims to position itself internationally as a city on the move and for its dynamic and talented people. It also hope to showcase its centres of excellence as well as it numerous business opportunities. It is clear that the resources sector is what drives our economy and we will continue to promote Perth internationally as a global energy and minerals hub. We are home to the largest concentration of IOC’s in Australia. The
city prides itself as being a regional base for companies servicing and supplying the oil and gas sector across the Indian Ocean and Pacific region. Q: What advantages are there for companies to implement their headquarters here in Perth? A: With more and more major resources companies establishing their headquarters in our City, the stronger our message has become in saying to the world that Perth is a centre for resources. Perth is what we like to refer to as “in the zone”. Our City is situated in the same GMT8 time zone as 60 per cent of the world’s population allowing
us to share the same business hours as key international markets throughout Asia. Additionally, Perth is an easy sell when attracting a skilled workforce, given it is internationally recognised for its high quality of life. Perth’s geographical position on the Indian Ocean Rim also gives us a distinct advantage over other Australian capital cities and we are strongly capitalizing on it as a gateway to Asia. Chevron and Woodside who already have a presence in Perth are both building brand new headquarters as part of the new major urban development projects now taking place here. BHP Billiton has also announced
that they are relocating their Asia-Pacific headquarters from Melbourne to Perth. The physical presence of these companies and energy clusters is reflecting the ‘resources hub’ that is forming in our city. We are very excited about this status as a global energy hub and we will continue to support the sector and be grateful for the recognition it brings Perth.
High hopes for oil as the next growth engine
“Where next for the local petroleum sector?” is one of the biggest questions in Australia today for government, business and workers
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SEAAOC Conference Darwin (NT) August 2015
this view changed dramatically last August with a major oil discovery by the Apache-operated Phoenix South-1 exploration well. Apache has estimated a recoverable oil resource of 300 million barrels. While this is small by international standards, Phoenix South-1 is highly significant because it was the first test of Lower Triassic sediments in the Roebuck Basin and uncovered an entirely new oil play. If a follow-up wildcat, Roc-1, is successful this year, the Roebuck Basin would be confirmed as a major new oil province and perhaps the biggest offshore oil field in Australian waters since the Bass Strait discoveries of the 1960s and 1970s. There are also high hopes that drilling in 2016 in the Great Australian Bight could discover a new offshore oil field of truly global significance. BP, Statoil and Chevron are targeting multi-billion barrel accumulations in the Bight, which is a setting with many similarities to the massive delta systems of Niger and Canada’s Mackenzie River. Unconventional oil and gas is another potential source of major growth. Australia has vast onshore basins with organicrich shales, including the Cooper Basin in central Australia and the old-rock Macarthur Basin in the Northern Territory. Local companies and their international partners are investing hundreds of millions of dollars to test the unconventional potential, although commercial development at a large scale is still uncertain and could take a decade to be realised. While more Australian LNG projects look unlikely in the current climate, it would be unwise to discount further growth of the LNG industry. Australia’s proximity to Asia means it will always have competitive advantages over emerging LNG centers in North America and East Africa. And government and industry are already had at work to close the cost gap with other nations through innovation and productivity improvements. If floating LNG proves to be the way of the future for the global industry, Australia is already at the forefront and could use these new skills as a springboard to even greater heights in the Neptune Bhagwan Dryden DSV arrives in Dampier, Australia world’s petroleum industry.
he LNG investment boom has shaped the Australian economy in recent years and, along with surging exports of iron ore and coal, underwritten jobs growth and prosperity. But as the investment phase draws to close and commodity prices collapse, there is growing anxiety about how to maintain national growth. A much-anticipated next wave of greenfield LNG projects can no longer be a savior. Up to six LNG projects were once contemplated in the second wave of the boom, but high construction costs and the rout in oil prices have placed these on the backburner. According to analysts, Woodside-operated Browse LNG is the only greenfield project with real prospects of going ahead in the near term, following its switch from onshore processing to a floating LNG concept. A final investment decision was recently postponed to mid-2016, which means first cargoes might not ship until the next decade. While there are some prospects of brownfield developments at Pluto LNG and Darwin LNG, Australia’s energy sector will need to look beyond LNG for the next phase of its development as a major petroleum nation. Fortunately, there are promising signs that oil could provide the next big chapter - a surprising twist in a country that has traditionally been very gas-prone and today imports more than half of its oil needs. The positive news is headlined by a recent discovery in the under-explored Roebuck Basin, which sits between the prolific Carnarvon and Browse Basins off the northwest coast. For decades it was thought to have missed out on the rich petroleum endowment of its neighbors, but