Industry News

CENTRAL Petroleum will send gas from its Amadeus Basin gas fields in the Northern Territory to the east coast gas market through a new proposed pipeline to be developed by Australian Gas Infrastructure Group and Macquarie.

Yesterday after markets closed, Central told shareholders it had signed the agreement with AGIG which would see the company ramp up production from its three currently producing gas fields and pipe the gas to Santos' Moomba gas supply hub in South Australia through a new pipeline. 

Central will drill a series of development wells across the Mereenie, Palm Valley and Dingo gas fields, and also upgrade and debottleneck its existing infrastructure. 

The pipeline is an answer to one of the most complicated commercialisation challenges across the onshore NT region, allowing gas produced from the central NT to reach the east coast gas market which is facing gas supply shortfalls by 2024.

Currently gas produced from the onshore NT is piped more than 2200 kilometres through a pipeline that connects to Mount Isa and then doubles back on itself to Moomba. The Northern Gas Pipeline is owned and operated byJemena. 

 

This new pipeline proposed by AGIG will be "less than half" that distance, about 950km, and make piping gas to Moomba significantly cheaper, according to AGIG. It would cost more than $1 billion. 

The pipeline will have a 16-inch diameter and have the capacity to pipe 124-terajoules of gas per day with an option to expand that capacity with compression. 

"We are delighted to partner with Central Petroleum and Macquarie Mereenie by signing a memorandum of understanding for the development of this significant new pipeline," AGIG chief Ben Wilson said. 

AGIG is owned by Hong Kong-based CKI Group, which was nixed from buying fellow pipeliner APA Group by newly appointed Treasurer Josh Frydenberg in 2018 over foreign investment concerns. 

Wilson noted the pipeline development would be a major piece of infrastructure for gas markets in the NT and Eastern Australia. 

Not only is it good news for Central Petroleum in the Amadeus Basin, but an important development for all onshore regional players including Santos, Empire Energy, and Origin Energy which are all planning major gas exploration and appraisal in the nearby Beetaloo Sub-Basin, which an expansion could connect it to. 

It will allow Santos to connect its Dukas well, which it also shares with Central Petroleum, to the east coast gas market, a major win for the NT gas hopeful. 

Work on front-end engineering and design has already been conducted, as part of a process AGIG completed in 2015. A final investment decision will be made in the second half of next year. 

Construction would then begin in 2022 with first gas deliveries by 2024. This would be the same year the Australian Energy Market Operator expects major gas supply shortfalls and a stark lack of gas across the east coast.

Source: Energy News Bulletin

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THERE is great uncertainty as to how oil and gas companies will adapt to the hydrogen era given there are many synergies but a move to carbon-free gas, transport and heating will also ultimately hasten the end of the fossil fuel era.

A comprehensive report from AllianceBernstein this week notes that only certain companies will adapt, and among those globally are Australia's Woodside Petroleum and Santos.  

It sees Equior as the most progressive, but notes Shell, BP and China's Sinopec have announced hydrogen strategies also.  

However, hydrogen will have no impact on near term earnings, it says.  

Woodside has made a series of recent hydrogen investments including fuel cell charging stations in South Korea and green ammonia, which can be used as a carrier of green hydrogen as an alternative to liquefaction -- which occurs at a far cooler -260 compared with natural gas' -160 - and Santos has a carbon capture and storage project and associated hydrogen plans. 

"Oil & gas companies, gas utilities, and automotive manufacturers are some of the industries most threatened by hydrogen. Those that embrace the energy transition may survive and even thrive, while those that do not risk being confined to history," it said.  

Overall hydrogen may finally play a major role in future decarbonisation after several false starts as costs fall and the cost of green hydrogen in particular -- which is made via using renewable energy to split water into its two components -- falls to US$2 per kilo and fuel cell costs to $30 per kilowatt from $200/kW now.  

"Investment in hydrogen will likely be enormous, but so will revenues, with over $1.2 trillion in annual revenue from hydrogen by 2050. Transport will likely be the most material at $350 billion, followed by industrial energy at $260 billion and building heating and power with $180 billion in revenues," it said. 

Source: Energy News Bulletin

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AUSTRALIAN onshore oil and gas explorer Armour Energy has paid down a note facility and shored up its bank account through a divestment and funds from a farm-in agreement with Santos.

Armour Energy chief Brad Lingo told shareholders the company would pay A$5.3 million in early principal amortization payments and expected the ASX-listed business to receive $10 million through asset transactions by the end of this month.

"The company is delivering on the equity raise target and will shortly receive the $10 million in asset transactions," Lingo said. 

It will receive $4 million through the sale of its interest in production license PL1084. Armour had a 10% stake in the CSG license known as the "Murrungamba Block" and announced it was selling it to Australia Pacific LNG earlier this year. 

A further $6 million is expected to be received this month from Santos - which is farming-in to six permits in the South Nicholson Basin. 

Under the agreement Santos will make a one-off cash payment of A$6 million and then carry the junior partner for around $65 million worth of exploration costs. 

With a significant amount of cash to hit the bank accounts in the short-term, Armour said it could justify paying debt further. By paying down the further $5.3 million in payments, Armour had now paid back nearly $10 million in debt over the last six months. 

This leaves the company with about $45 million in outstanding secured amortising notes. 

It also closed its entitlement offer, which it launched last month, raising a total of $2.19 million from existing shareholders. 

The remaining funds from the capital raise, and the transactions, will be used to fund work programs over the remainder of the year. 

Source: Energy News Bulletin

EMPIRE Energy has contracted Schlumberger to drill its awaited Carpentaria-1 well in the EP187 Beetaloo Sub-basin with civil works to begin this month.

Schlumberger's Land Rig 183 will drill, case and suspend the 2900 metre deep well which will  test the Velkerri and Kyalla shales. 

Empire said the well's design allows for future reentry, fraccing, and flow testing which it expects after the coming wet season. 

This will be the precursor to a planned multi-staged fracture stimulated and tested horizontal section which may be drilled from the same well bore. 

The rig was "determined to be the most commercially efficient to operate and mobilise with a strong track record of recent performance dril similar wells onshore Australia and an experienced crew," it said. 

Managing director Alex Underwood called the contract a "key milestone". 

"Empire will be the only the second company to drill a well in the Northern Territory's onshore Beetaloo Sub-basin the lifting of the moratorium in 2018, after Origin Energy which drilled Kyalla-117. 

"We intend to be a long term contributor to the Northern Territory economy and to that end I am pleased that we have contracted with local businesses for key elements of the program including the upcoming civil construction works."

Initial work should begin August 17 with water bore drilling, well pad site preparation and upgrading of the access to the well pad. All civil works will be performed by Top End businesses. 

Source: Energy News Bulletin

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The Strategic Regional and Environmental Baseline Assessment (SREBA)

The final Framework for Strategic Regional and Environmental Baseline Assessment (SREBA) has now been released and is publicly available 

The SREBA Framework describes the objectives and contents of a SREBA, including governance and implementation arrangements.

The Framework presents the technical guidance notes for each of the six domains identified in the Hydraulic Fracturing Inquiry (HFI) report.

These domains are

• Water quality and quantity studies
• Aquatic ecosystems studies
• Terrestrial ecoystems studies
• Greenhouse gas emissions studies
• Environmental health studies
• Social, cultural and economic studies, including a Strategic Regional Assessment

Feedback on the draft SREBA Framework was received from 30 organisations or individuals, with comments incorporated into the final Framework. This is described in the consultation report available on the website.

The Northern Territory Government has determined that a SREBA is required for the Beetaloo sub-Basin, before production approvals for onshore gas activities can be considered. Scopes of work for each domain of this SREBA are currently being drafted, coordinated by DENR and with input from independent subject matter experts.

These scopes will be submitted to the Minister for Environment and Natural Resources for approval as they are finalised.

AUSTRALIAN onshore oil and gas producer and explorer Armour Energy has made several appointments to its management team as it embarks on a new era of expansion.

In May, the ASX-listed company brought Brad Lingo in as its chief executive, following an acquisition of fellow Australian explorer Oilex's Cooper Basin assets. 

The acquisition saw Armour acquire Oilex subsidiary CoEra which holds a 79.33% direct interest in two permits, PEL 112 and PEL 444, with an option to take the remaining 20.66% from a trio of North American companies. 

It also acquired the rights to 27 retention leases covering 2445 square kilometres in the Northern Fairway from Senex Energy. 

CEO Brad Lingo's plan is to progress Armour's exploration assets in Queensland and the Northern Territory, while also increasing reserves and resources at its operational Kincora gas project in Queensland.

To help him accomplish this, a new executive leadership team has been appointed to lead the company. 

Former Santos executive, Michael Laurent, who managed the gas giant's Cooper Basin appraisal and field optimisation activities joins Armour as chief operating officer. 

Laurent's key focus will be on an upcoming work program involving fraccing of newly acquired and old wells in Armour's portfolio. 

Erin Clark a well-known consultant in the Queensland and chair of the Advisory Board Centre has been brought on as interim chief financial officer. 

The third appointment announced today is that of Neil McDonald, who has been with Armour for several years in the role of corporate affairs. McDonald will now take on a new position as general manager of commercial operations. 

McDonald's remit will be to engage domestic and international investors and develop business strategies for  development of Armour's acreage. This includes creating new commercial agreements with other oil and gas companies and developing relationships with stakeholders, while ensuring the company remains within its regulatory compliance requirements. 

The three appointments come just days after Armour announced it would work with Santos to accelerate exploration and development of six permits in the Northern Territory and Queensland. 

Source: Energy News Bulletin

MACQUARIE’s global head of green investment Mark Dooley has highlighted the special role oil and gas majors will play in driving development and investment in emerging technologies such as hydrogen and CCS, while the renewables market will continue to surge to new heights in the coming decade.

Speaking at the Clean Energy Council's summit this afternoon, Dooley noted the sheer amount of capital required for the energy transition to be successful, with the world needing to install 1.6 times its existing generation capacity by 2050. 

This amounts to US$300 billion of investment per year, every year, for 30 years. 

While the numbers are mind boggling, he noted Australia's investment capacity will meet the challenge, pointing to the country's superannuation fund capital expected to reach A$10.5 trillion by 2040. 

He also highlighted the significant rise in investment globally - US$20.6 billion of new capital invested in sustainability themed funds in 2019 and US$109 billion of capital raised by infrastructure funds, compared to US$67 billion in 2015. 

"While there's been a phenomenal amount of investment, this is just the beginning," Dooley said. 

He noted governmental subsidy interventions in maturing renewable technologies was rapidly falling away and that attention needed to shift to emerging technologies such as hydrogen and CCS.

"The big players in oil and gas have a special role to play, as they have legacy expertise in relevant technologies and the industrial capabilities," he said. 

Dooley highlighted the oil and gas industry has the ability to exploit undersea caverns for CCS and noted hydrogen would be relevant to gas company's legacy assets.  

"We are seeing CCS and hydrogen changing gears, both were talked about a lot last decade but not much happened, that's changing now."

Source: Energy News Bulletin

AUSTRALIAN oil and gas giant Santos will accelerate its efforts to explore and develop six permits in the Northern Territory and Queensland, amending a farm-in agreement with its smaller joint venture partner Armour Energy, now helmed by Brad Lingo.

On Monday, Armour Energy told its shareholders that Santos, which is farming into the permits for a 70% stake, would pay the company a one-off cash payment of A$6 million, and carry the junior for nearly $65 million of exploration costs. 

The farm-in was originally signed in December last year, but the update to the contract today aims to speed up exploration and development. 

All six of the permits are located in the South Nicholson Basin, four of which are located in northern Queensland, and two in the eastern region of the Northern Territory. 

Combined, the permits hold a gross 10.7 million acres. Armour's independent experts have assessed 22.1 trillion cubic feet of best prospect gas resources in the middle of the Proterozoic aged Lawn Hill and Riversleigh Shale formations within one permit alone.

Only one permit, ATP1087, has been granted. The other five permits are still considered application areas and are yet to be awarded to the joint venture. 

Originally Santos made a $15 million payment to Armour for its 70% interest in the ATP1087 permit and was to pay a further $15 million for a 70% stake in all five other permits, once they were approved.  

Instead Santos has the $6 million one-off payment on top of the $15 million. 

While Armour will be the titleholder of the permits, Santos will take operatorship and responsibility for work programs and native title negotiations. 

Armour is expected to pay around $750,000 per annum in exploration and development costs per year, once the venture begins work. 

Armour chief executive Brad Lingo said he was pleased with the progress of the farm-in agreement which "significantly de-risk and advanced" the progress of work programs. 

Source: Energy News Bulletin

ONE of the major contractors which worked on the massive Ichthys LNG project in Northern Australia, has lost its appeal in the Supreme Court worth around A$2.5 billion.

Legal fights have consumed contractors, subcontractors and Ichthys operator Inpex, for years. The case before the court this month was just the latest in ongoing cases between the main contractor and its subcontractors. 

JKC had hoped to overturn an earlier decision over subcontractor obligations relating to a combined cycle power plant which provided electricity to the Ichthys LNG processing facility. 

It hoped to claw back $2.5 billion in costs and damages, however, has now officially had its case dismissed, after the Court found each of its grounds for appeal failed. 

Japan's Inpex engaged JKC Australia LNG in 2012 to engineer, procure and construct and commission the Ichthys onshore LNG production facility. The project was worth in the region of US$47 billion. 

JKC in turn subcontracted CH2M, UGL Infrastructure, General Electric for work on a combined cycle power plant to provide electricity to the processing facility. 

The contract was terminated in 2017, after the subcontractors pulled its workers offsite after a stoush broke out over significant time delays and cost overruns reaching billions of dollars. 

JKC then engaged replacement subcontractors to complete the power plant. It then took its former subcontractors to court over the termination claiming costs of replacing subcontractors. 

At the same time, the former consortium of subcontractors claimed costs for the work they had already completed. 

The contractual disputes between UGL, CH2M, GE, and JKC have taken around three and a half years to come to close.

At the heart of this particular case, was the interpretation of a commercial contract, and parent company liabilities. 

The subcontractors, through a consortium or joint venture agreement, were obliged to conduct their work which was guaranteed by what are known as parent company guarantees. 

JKC argued that the Parent Company Guarantees should be treated as 'pay now, argue later' instruments, similar to bank guarantees.

The subcontractors argued that any obligation under the Parent Company Guarantees depended on establishing actual liability under the subcontract.

The Court of Appeal dismissed all three of JKC's reasons for appeal.

Source: Energy News Bulletin

CENTRAL Petroleum has announced a 16% upgrade to its 2P reserves across its three producing fields in the Northern Territory to a total of 162.2 petajoule-equivalent, with plans to develop new low cost supply via a series of lateral wells. 

Netherland Sewell & Associates have independently verified the upgrade. 

Central said today the rise was driven by the performance of its Palm Valley-13 well, online since May last year.  

It confirmed today a 2C contingent gas resource of 105PJ which it believes could be unlocked by a proposed Stairway appraisal program at its Mereenie field and further infill wells at Palm Valley. It shares Mereenie with fertiliser maker Incitec Pivot.   

The company is planning to implement a new strategy to appraise its production from the Stairway Sandstone at its Mereenie field. Subject to joint venture approval  it will use lateral drilling from existing wells at locations that had prior observed gas shows while drilling through the stairway. 

It says the appraisal work will target a new material gas resource which could "significantly" increase the gas produced from the Mereenie field with minimal investment in existing production facilities  

At Palm Valley its PV-13 horizontal well in the Pacoota Sandstone "continues to show excellent performance, with more than 2.6PJ recovered over 13 months". The well recently only came off a  7 terajoule day plateau limited only by wellhead facilities. 

The company is now seeking to capitalise on the PV13 success via drilling future laterals from existing wells to access poorly connected parts of the reservoir.  

Source: Energy News Bulletin