Industry News

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

TIMOR Resources said today it hoped its long delayed south coast drill campaign will begin in the fourth quarter once it receives its Environmental Approval to drill. 

These will be the first onshore wells drilled in five decades in Timor-Leste.  

Mining and petroleum body the ANPM will issue the approval under the new onshore oil and gas regulations in the coming weeks. Dili finally enacted its long awaited onshore petroleum laws in late May.  

The law had been pending promulgation since February last year in the small, politically tumultuous nation and is crucial not just for Timor Resources but for the on- and-offshore bidding round currently underway.  

The 12-month round was due to end in October but has been extended another year given market conditions.  

It is only Timor-Leste's second block auction and offers 11 offshore and seven onshore blocks, with several onshore blocks in the undrilled frontier areas of the north.   

"Drilling plans have unfortunately been delayed due to COVID 19 and the obstacles created by the pandemic, travel restrictions and supply chain disruption," it said today. 

Energy News reported in May drill plans had been pushed back and then, the company hoped for a June spud.  

Timor Resources spent last year busy with a 500sq.km 2D seismic campaign in the lead up to this year's drilling campaign, which originally planned for five wells this year and, pending success, five in early 2021. The project is operated under a production sharing contract with the government.  

Based on the 340sq.km of seismic a best-estimate resource of 342 million barrels of prospective resources was calculated by an independent third party, which Timor suggests could indicate potential for a discovery of over 20 million barrels of oil equivalent.

Source: Energy News Bulletin

THE COMMISSION set up by the Northern Territory government to find a path through the COVID-19 cras

The Michael Gunner-led Labor government established its Territory Economic Reconstruction Commission in May, and two and half months on, the commission has provided its first report - a path forward to growing the top end's economy in the medium term. 

While the commission, which is chaired by former Dow Chemical chief Andrew Liveris, considered a variety of industries, from manufacturing to tourism, it's clear from the report that the commission is betting heavily on oil and gas exploration and development. 

Gas from the Beetaloo featured as a keystone to economic recovery and security, in the face of what is quickly becoming one of Australia's worst financial situations to date. 

Today the commission warned "no state or territory will be left unscathed" by the global recession wrought by the coronavirus pandemic. 

It also found the "highly prospective world scale onshore gas resources and proven offshore gas reserves" along with the Territory's proximity to markets in Southeast Asia, were at the heart of the region's economic recovery. 

It urged chief minister Gunner to accelerate its efforts to secure investment in the Beetaloo Sub-basin, which is thought to hold well over 178,000 petajoules of gas according to estimates from industry on a 2C basis. 

"The Beetaloo Sub-basin shows significant potential to provide gas and liquids for energy use and to underpin a petrochemical manufacturing industry in the Territory - driving significant economic benefit," the commission said in its report. 

"The Commission recommends that the Territory Government, in conjunction with the Australian Government, accelerates the preliminary design and development assessments for critical enabling infrastructure to support development of the Beetaloo Sub-basin in the event commercial feasibility is proven," the report said. 

The commission believes this gas could sure up exports to overseas customers, but also play a vital role in reinventing the territory as a manufacturing hub. 

Excess gas could then be piped to the east coast market which is expected to suffer from severe shortfalls within the next three to five years. 

Initially, according to the commission, offshore sources of gas would be used to create a petrochemical production industry, "then gas and liquids from the Beetaloo." 

This first report noted while LNG exports had surged over the last 12 months, the Territory economy had shrunk 1.5% in 2018-2019, from its peak of $26.5 billion in 2017-2018. 

"Further contraction is expected in coming months" because of the COVID-19 pandemic which has shaken international financial markets. 

The commission also provided advice and a series of recommendations focusing on agribusiness, tourism, and critical mineral mining opportunities. 

It also referenced the NT Renewable Hydrogen Roadmap. 

"The renewables sector is a fast-growing sector with considerable potential for further significant growth in the Territory. To achieve that potential requires investment in enabling infrastructure," the commission said. 

In recognising the role of a hydrogen future, the commission said the NT government needed to "urgently undertake" studies into hydrogen development from solar power sources. 

h, is betting on the potential of its vast onshore liquids-rich gas resources as the saviour to the region’s struggling economy.

Source: Energy News Bulletin

Office Hon. Dale Wakefield

The Territory Government has released the NT’s first ever Renewable Hydrogen Strategy to turn our natural competitive advantages into clean, permanent local jobs.

As the international community seeks innovative ways to reduce greenhouse gas emissions, there is a growing demand for clean, reliable and flexible energy solutions like hydrogen.

Hydrogen has many advantages as an energy store and carrier. It can be manufactured with zero emissions, is energy dense and can be stored and efficiently transported, and it can be converted to heat through combustion or to electricity in a fuel cell, without creating any greenhouse gas emissions.

The Territory is well placed to position itself at the forefront of the developing renewable hydrogen industry with large areas of land with high solar irradiance, close proximity to export markets, an established world-scale energy production and export industry and a commitment to net-zero emissions by 2050.

There is the potential for hydrogen production, export and adoption to generate significant jobs and investment in the Territory, much of which could be in regional areas and provide opportunities for Aboriginal landowners and custodians.

The strategy outlines a five point hydrogen plan for government and industry to work together:

• Local industry development – preparing industry capabilities, logistics and supply chains to facilitate the adoption of renewable hydrogen
• Resource management – investigate how to optimise the Territory’s resources and infrastructure to facilitate hydrogen industry development
• Grow and harness demand – promote the Territory as an attractive export hub and investigate domestic hydrogen applications to build demand
• Support innovation – incorporate new ways of researching, trialling and adapting emerging technologies to optimise hydrogen opportunities
• Responsive regulation – establish effective regulatory frameworks for the development of a safe and efficient hydrogen industry

The Territory’s strategy complements the Australian National Hydrogen Strategy to develop a clean, innovative, safe and competitive hydrogen industry that benefits all Australians.

The strategy can be found at https://business.nt.gov.au/hydrogen-strategy 

Quotes from Minister for Renewables, Energy and Essential Services, Dale Wakefield

“This Labor Government understands the enormous potential our renewable energy resources have to create permanent local jobs for Territorians.

“We can be a leader in the world transition to renewable hydrogen and this strategy provides the vision and the plan to make it happen.

“The strategy complements our record of delivering more renewables, taking real action on climate change, and the strongest protections for water and our environment the Territory has ever seen.

“Only Labor has the plans and record to ensure we create local jobs and secure our unique environment for generations to come.”

 

Media Contact: Paige Nguyen 0428 727 244
paige.nguyen@nt.gov.au 

 

Independent Oversight of Hydraulic Fracturing Implementation A key part of the Government’s response to the Inquiry and the Implementation Plan is building trust through transparency. The principles of engagement, transparency and accountability are guiding our approach to implementing the recommendations. Current mechanisms for independent oversight include: Independent Overseer A key mechanism of oversight is the Independent Overseer, Dr David Ritchie. The role of the Independent Overseer is to provide the Chief Minister and NT Government with independent advice on how the implementation of the recommendations from the Inquiry is progressing and being managed. Dr David Ritchie’s role as Independent Overseer was due to expire on 30 June 2020, an extension has been granted until 31 December 2021. The Onshore Shale Gas Community and Business Reference Group The Onshore Shale Gas Community and Business Reference Group (CBRG) provides direct feedback and advice to the Hydraulic Fracturing Inquiry Implementation, coordinated by the Department of the Chief Minister. The CBRG is essential to ensure stakeholders have oversight and input into the development of the implementation framework and its subsequent execution. The CBRG’s term was due to conclude in June 2020. The CBRG’s term has been extended until 31 December 2020 and continue their oversight of Stage 3 implementation. Other targeted oversight The Aboriginal Information Program Working Group has been established to guide the implementation of Recommendations 11.5 and 11.6 and includes representatives from Land Councils, Aboriginal Areas Protection Authority (AAPA) and the Australian Petroleum Production and Exploration Association (APPEA). The Aboriginal Information Program is being designed with CSIRO to ensure Aboriginal people and communities have access to consistent, factual, relevant and easy to understand and culturally appropriate information relating to the onshore petroleum industry. A Regional Reference Group will established for the Strategic Regional and Environmental Baseline Assessment (SREBA) in the Beetaloo Sub-Basin.  The Reference Group will comprise stakeholders who live, or have interests within the SREBA region to ensure there is appropriate local and regional engagement in baseline studies and SREBA outcomes. The Reference Group will provide advice on the development and implementation of the SREBA studies within the region, engagement with local stakeholders, and communication of results and outcomes to the community.

VENTIA HOLDINGS will rebrand subsidiary Broadspectum after it acquired the company from Ferrovial for A$485 million, a deal that closed last week.

Ventia's acquisition of Broadspectrum - a major contractor in the oil and gas and renewables sector - was approved by the Australian Competition and Consumer Commission in April. The deal was first announced in December last year.

Broadspectrum will soon be known as Ventia, joining its parent company, which is itself a 50-50 joint venture between construction giant CIMIC and Apollo Global Management.

The company holds service contracts for BP's Kwinana refinery, Shell's QCLNG venture and with Inpex for the Ichthys LNG project in the Northern Territory.

Broadspectrum also owns Easternwell, a major drilling contractor in Australia.

The combined group was expected to generate revenue in excess of A$5 billion when it was first announced, however the COVID-19 pandemic and oil price crash may affect this.

CIMIC, the 50% owner of Ventia, also owns service business UGL - another major oil and gas contractor - which it acquired through a hostile takeover about four years ago. 

The acquisition of Broadspectrum gives CIMIC, through Ventia, an even bigger slice of the services business. 

Source: Energy News Bulletin

THE National Offshore Petroleum Titles Administrator has approved Santos’ application for a production license offshore Northern Territory for its Barossa field, despite project sanction now left open ended. 

Santos has held the title since 2012 as a retention license renewing the initial five-year term in October 2017 and was approved to transition to a production license Friday after its application March 27. 

The 841sq.km field is in the Bonaparte Basin and contains 10 blocks.  

Barossa was due for final investment decision in the June quarter and would be destined as backfill for the Darwin LNG plant as the current Bayu Undan field goes into decline. 

"Barossa remains an important project for Santos due to its brownfield nature and its low cost of supply," managing director Kevin Gallagher said March 23 when he announced the company had delayed sanction thanks to market conditions.  

It said then it would cut spending by almost 40% this year, making it then the second major ASX-listed oiler to revise guidance.  

Santos will lower its capital expenditure this year by $550 million and will cut $50 million from cash production costs.  

Though DLNG was always due to be shut in before development of Barossa that delay is now expected to be longer, hitting Australia's forecast future LNG exports.  

In October it announced it was taking a larger share of the assets it already shared with ConocoPhillips for a total of $1.4 billion, but would sell down 25%  interest in Bayu-Undan and DLNG to SK E&S for $390 million, giving the latter a larger stake.  

The sale completed in late May for a revised down price of US$1.25 billion.  

However the deal also saw an increased contingent payment of $200 million on sanction of Barossa, up from an original $75 million. 

The National Offshore Petroleum Safety and Environment Management Authority greenlit the Barossa pipeline development in early March. 

Source: Energy News Bulletin

AUSTRALIA’s leading petroleum industry body has hit back at Territory Alliance leader Terry Mills’ promise to ban fraccing in the jurisdiction if his fledgling party wins a balance of power in the upcoming election in late August. 

Mills is a former Chief Minister and was pro-fraccing when in power but has since swung in a 180 to attack the practice, suggesting it is not supported by a majority of Territorians and that the government has already over $94 million subsidising the gas industry with no return. 

He has said "Access Economics have identified nearly $100 million of NT taxpayer money already spent on this with no return".  

Mills published a public letter in late June which said "there is no social license for fraccing". 

 "No more production permits will be issued, existing exploration licences will not be renewed and current operations will be subject to tough community and environmental safeguards," Mills wrote.  

The Australian Petroleum Production and Exploration Association sent its own four-page letter to Mills Tuesday outlining the benefits of the gas industry, its centrality to Top End power supply and contesting many of the allegations he has made.  

"Even if the government did spend $94 million subsididing the industry, some of it would have happened on his watch," APPEA Northern Territory director Keld Knudsen told Energy News today.  

"Back of the envelope calculations we've done actually suggest industry has spent $500 million already onshore," he said.  

APPEA maintains the report the former chief minister refers to is not from Access Economics but rather one commissioned by anti fraccing group Lock the Gate and prepared by think tank The Australia Institute.  

The letter says that the Access Economics report it has read said "a report by that consultancy in relation to NT gas found that contrary to your assertions, a successful onshore gas development could provide a boost to the NT economy of over $17 billion over 20 years, and an additional 4,000 jobs under their "success" scenario".  

That is far from "no return" were wells in the frontier Beetaloo Sub-basin successful.  

"It's $94 million over ten years on anything related to gas. There was some research around diesel-to-gas. It's clearly not a subsidy," Knudsen said today.  

Currently Santos and Origin Energy are the largest players in the Beetaloo, however Empire Energy also holds a vast swathe of leaseage across the region.  

Until now, the Michael Gunner Labor government has been very supportive of the oil and gas industry, moving to slash red and green tape in an effort to boost exploration and keep the domestic economy afloat.  

In May the Territory government announced a new Economic Reconstruction Commission, headed up by leading business figures, to slash red tape, create jobs and attract investment from the oil and gas sector. 

Source: Energy News Bulletin

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AUSTRALIAN oil and gas explorer Empire Energy has selected the location for its first well in the frontier Beetaloo sub-basin, in the Northern Territory.

ASX-listed Empire Energy has selected a drilling contractor, picked its well site for Capentaria-1, ordered necessary equipment, and finalised the well design. 

The announcement today saw the company's shareprice jump more than 4% to 25.5 cents per share. 

It plans to spud the well in exploration permit EP187 in the third quarter, despite challenges posed by COVID-19 restrictions and a volatile market. 

Carpentaria-1 will be drilled to a depth of 2900 metres and target the Velkerri Shale and Kyalla Shale formations. While the Velkerri has already proven to hold dry gas elsewhere, the Kyalla which is the secondary target could hold liquids. 

The well aims to identify and prove up the thickness of the shales. 

Currently Empire believes its well will hit up to 600m of Velkerri shale and a 100m interval of the Kyalla shale. 

Once drilled, it will be fracced and tested. Data from the well will be used to design an appraisal program slated for next year, with a view for short-term production. 

It is expected the drilling, completion and evaluation of the well will take around 45 days. 

Over the last two or so years, Empire have pivoted away from US onshore exploration, to focus solely on Australian domestic opportunities. 

The company believes the Beetaloo basin will play a "key role in opening up Australian supply of domestic energy." 

"We are really excited to replicate the US shale boom here in Australia," managing director Alex Underwood told Energy News. 

Recently, independent oil and gas research firm Netherland, Sewell & Associates estimated Empire's entire portfolio, which spans 14 million acres, now holds a combined 13.46 trillion cubic feet of gas on a 2U best estimate basis. 

Within EP187 Netherland, Sewell & Associates, estimate a 2U prospective resource of 2.4 Tcf

Source: Energy News Bulletin

Read more here