Industry News

Santos today announced it had signed a Letter of Intent (LOI) to sell a 12.5% interest in Barossa to JERA.

JERA already has a 6.1% interest in Darwin LNG. Santos’ signing of the LOI with JERA advances partner alignment between the Darwin LNG and Barossa joint ventures for the development of Barossa as backfill for Darwin LNG.

Santos Managing Director and Chief Executive Officer Kevin Gallagher said signing the LOI with JERA further builds partner alignment and follows the recent agreement to sell a 25% interest in Darwin LNG to SK E&S.

“Santos continues to build alignment between the Darwin LNG and Barossa joint ventures. Following completion of the ConocoPhillips acquisition and the sell-downs to JERA and SK E&S, Santos will hold a 43.4% interest in Darwin LNG and a 50% interest in Barossa. We are continuing to advance discussions with other parties for the sale of further equity in the Barossa project in line with our previously stated target ownership level of around 40% to achieve increased partner alignment and prudent future allocation of growth capital. We are also in discussions with buyers for Barossa volumes.”

“However as we announced on 23 March, given the uncertain economic impact of COVID-19 combined with lower oil prices, we expect to defer FID on Barossa until business conditions improve. Barossa remains an important project for Santos due to its brownfield nature and low cost of supply, and we will continue to use this time to achieve alignment and seek to further strengthen the economics of the project,” Mr Gallagher said.

The sale of the 12.5% interest in Barossa to JERA is subject to the negotiation and execution of a binding sale and purchase agreement, completion by Santos of the acquisition of ConocoPhillips’ northern Australia and Timor-Leste portfolio as announced on 14 October 2019, third-party consents, regulatory approvals and a final investment decision on Barossa.

Source: Santos Media Centre

THE ongoing COVID-19 pandemic is going to cut deeply into both global and Australian development of renewables this year, while yesterday the International Energy Agency said capital investments into renewables by oil companies will be affected by the low price environment.

The pandemic will postpone or cancel financial close of some 3 gigawatts of projects in Australia according to Rystad Energy which blames the falling Australian dollar, down 20% against the greenback since January. 

This has pushed up capital expenditure up for both solar PV and wind projects, making otherwise viable projects suddenly uneconomic. 

Hardware makes up 60% of capex and is usually priced in foreign currency. Suddenly developers are finding it more difficult to meet power purchase agreements profitably while cash is increasingly scarce and, in this environment, financiers won't lend cheaply.   

So far this year only 400 megawatts has broken ground down from Rystad predictions of between 2-3GW of projects beginning this year. 

"New South Wales will be the biggest loser, as 65% of solar PV and 67% of wind projects which are expected to, but have not yet reached financial close in 2020 are located in the state," it said.

Solar companies hardest hit will be UPC, Neoen, Wollar Solar and Canadian Solar while wind companies impacted will likely be Tilt and Goldwind.   

Things were not ideal through 2019 as grid challenges finally came to the fore and "these issues slowed the number of projects and associated capacity to break ground at the end of 2019," Rystad said. 

Globally Wood Mackenzie estimates solar and storage will contract by 20% compared to its base case for 2020 while in the shorter term the impact on onshore wind will be "muted in the near term" however cascading supply chain and construction risk present further downside risk.

Overall COVID-19 will result in a 4.9GW decline in wind additions compared to the consultancy's previous outlook. 

"We highlight India as presenting additional downside risk. Further risks exist in Asia, as travel restrictions and mitigation efforts impact Japan, Australia, Vietnam and others," it said. 

There is little impact to offshore win, thanks to China's recovery and a nascent industry in the US.  

It has revised down its outlook for solar installations by 18% from pre-coronavirus levels from 129.5 GW to 106.4 GW. 

"In the absence of prolonged recession or  profound changes to financing and utility procurement, 2021 will recover to be 3% below pre-coronavirus expected levels," it said. 

Storage installations could fall 20% compared to its 2020 base case, with the risk stemming largely from project execution delays. 

Yesterday in its April Oil Outlook report the IEA said global capital expenditure by oil and gas companies in 2020 is forecast to drop by about 32% versus 2019 to $335 billion. 

"This reduction of financial resources also undermines the ability of the oil industry to develop some of the technologies needed for clean energy transitions around the world," it said.

Source: Energy News Bulletin

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THE offshore oil and gas regulator has issued a draft recommendation on decommissioning of oil and gas rigs, which is open for public comment after former resources minister Matt Canavan issued a ‘statement of expectations’  in November that it step up oversight of decommissioning activities.

All this already comes under section 572 of the Offshore Greenhouse Gas Storage Act but the National Offshore Petroleum and Safety Authority has outlined how it plans to oversee and enforce the section in more detail. 

It will not prevent another NOGA fiasco, however. 

Canavan said he expected NOPSEMA would "ensure that titleholders are appropriately planning for, and executing decommissioning activities in a timely and responsible manner". 

It was around this period when Northern Oil and Gas Australia went into administration and it was clear the small private company had little ability to decommission the aging floating storage production and offloading vessel, The Northern Endeavour, NOPSEMA had shut down in July over safety concerns. 

NOGA has since been liquidated and Canavan replaced by Keith Pitt  but the Northern Endeavour remains moored in the Timor Sea in lighthouse mode and no closer to a long term solution. Upstream Production Solutions, which had the original contract to run the vessel on a third-party basis, is taking care of maintenance. 

The vessel is under official control of the federal government.  

NOGA bought the vessel from Woodside Petroleum in 2016 and took over its operations along with the depleted Coralina-Laminaria oil fields, saving the latter significant decommissioning costs. 

New minister for natural resources Keith Pitt called the debacle a "wake up call to the Australian oil and gas industry" but did not outline what steps he might take as minister to prevent a recurrence of a similar event.  

Taxpayers could be liable for a $200 million-plus decom bill, despite Pitt's promises otherwise, but the new draft on section 572 does not take into account title transfer, or if an operator can meet the costs of its decommissioning plan under its wider Environmental Plan. 

New titleholders must submit EPs and decommissioning plans at that point but they are generally spartan given the long life of offshore assets.  

However each five year EP review must provide increased details. 

However unlike the titles administrator - which oversaw the transfer from Woodside to NOGA - NOPSEMA does not take into account an operator's ability to meet financial demands outside of its ability to manage oil spills. 

Given the issue is now with Australia's aging offshore infrastructure it is hard to see how the expanded rules could prevent the issue recurring. 

NOPSEMA said titleholders must remove all property in their title once it is no longer used "and only accepts alternative arrangements where justification is appropriate". 

Property applies to all equipment, including subsea and wells, brought into the area but the policy "does not cover financial liabilities that may be associated with property as addressed in the Australian Government Offshore Petroleum Decommissioning Guideline". 

Should property not be removed or an environmental plan submitted on how it might meet removal obligations "NOPSEMA may escalate to enforcement action… whether in relation to failure to maintain property or failure to remove property". 

Enforcement includes  "directing a titleholder or former titleholder to comply with the OPGSS act" or it may prosecute and "have either civil or criminal penalties applied".

Source: Energy News Bulletin

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AUSTRALIA’s biggest gas producer, Woodside Petroleum, will join a consortium of Japanese companies to explore commercial hydrogen exports from Australia to Japan.

In one of the biggest studies of hydrogen exports to date, Woodside announced it had inked an agreement with JERA, Marubeni Corp and IHI Corp to explore rapidly exporting clean hydrogen to gas-hungry Japan. 

The study will appraise options to transport hydrogen from Australia as ammonia, then convert it back into hydrogen for power generation in Japan. 

According to a statement from Woodside, the scope of the research will also consider using ‘blue' hydrogen, produced using natural gas as the feedstock with carbon emissions will then be offset, as well as ‘green' hydrogen created from renewables. 

In both cases the hydrogen will be combined with nitrogen to form ammonia. The ammonia will then be shipped as a liquid. 

Woodside chief Peter Coleman said the company would "forge new energy pathways" through the research, and even went so far as to say he expected large-scale hydrogen production by 2030. 

Source: Energy News Bulletin

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THE Northern Territory government has approved the buy of a large scale battery for the Darwin-Katherine grid for A$30 million, with estimates suggesting it will pay for itself in five years.

The battery will help manage greater amounts of behind the meter solar used by households and businesses. 

The top end government said it will decrease the need for gas-fired spinning reserve which will save $6.4 million a year and 50,000 tonnes of CO2 emissions. 

It will also allow more renewable energy into the grid from private projects and the battery may be later used provide system services to the private sector.

The battery will be in operation in the second half of 2022. 

The government also has two smaller new initiatives in place to encourage households and businesses to take up solar panels, batteries and inverters with a $6000 grant. 

It has also developed a new standard feed-in tariff of 8.3 cents per KWh to be offered by Jacana Energy which will apply to all new businesses and households with behind-the-meter solar installations of up to 30 kilowatts. 

An initial allocation of $800,000 will be provided for the scheme, funding grants for about 130 batteries. 

Source: Energy News Bulletin

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ORIGIN Energy will buy a further 7.5% interest in its Beetaloo Sub-basin project, in the Northern Territory, from joint venture partner Falcon Oil and Gas.

Under the new agreement, Origin will increase its stake to 77.5% in exchange for paying a further $25 million on development of the Kyalla project in coming years. 

It comes a day after the company announced cost cuts. 

The onshore Kyalla shale project, dubbed a ‘game changer' by analysts, was put on ice last week over concerns that workers would not be able to access restrictions imposed by the Northern Territory government over COVID-19 concerns. 

The JV drilled the Kyalla 117 N2-1H ST2 well to a total depth of 3809 metres including a 1579 lateral section in February. Further appraisal work including fraccing has now been postponed and the well has been shut in. 

Elevated gas shows with relatively high liquids were observed in all three of the target reservoirs encountered while drilling. 

"Results to date from the Kyalla 117 well demonstrate good reservoir continuity, conductive natural fractures, and continuous gas shows," Origin said in a statement today. 

As operator, Origin hopes to frac the well in the first half of next year. The JV is also planning a section well, Velkerri Flank, to spud in the second half of 2021.

Citing the unprecedented circumstances, Falcon CEO Philip O'Quigley said last week the company would act quickly to protect local communities. 

Source: Energy News Bulletin

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APPEA have put together a valuable industry fact sheet for to assist with information on meeting the COVID-19 challenges and the upstream oil and gas industry protocols and framework. Get more information here:  https://www.appea.com.au/chief-executive-updates/latest-appea-covid-19-updates/

Register your business now for opportunites with Sun Cable's Middle Arm Battery Project. 11 Scopes of Works have been released now through ICN Gateway.

The Middle Arm Battery project is an early works package that will later form part of the Australia-ASEAN Power Link (AAPL) project.

Project design is scheduled to start in 3rd Qtr 2020. On-site works for establishment and land clearing in Q2 2021, with the Battery to be commissioned and online in Q2 2022.

The project is proposed to be sited east of the existing Weddell Power Station, with an installed capacity of 50MW scalable to 500MW. The project is designed to provide active power and ancillary services to the Darwin-Katherine Integrated System.

The project is scheduled for commissioning in 2022, with a 12 month construction period. This will require a notice to proceed in the dry season of 2021 for civil works, with potential for enabling works in late 2020.

Register your interest now: https://gateway.icn.org.au/project/4536/middle-arm-battery-project?st=projects&psid=1586151333

The Northern Territory Government has announced two significant steps in its plan for 50% renewables by 2030. 

The rapid uptake of solar by households and businesses is already delivering cheaper, cleaner power right across the Territory.

This increase in behind-the-meter solar and the impending connection of new large-scale solar projects to the grid means new investments and policies are required to maintain the stability of the power system.

Both initiatives will create local jobs while delivering stable, reliable and affordable power for Territory families and businesses.

A battery energy storage system (BESS) for the Darwin – Katherine System

The Northern Territory Government has approved the procurement of a large scale battery for the Darwin-Katherine grid at a project cost of $30M. The BESS is expected to pay for itself in approximately five years.

Major benefits of the BESS include:

• Increased stability and reliability of power supply. Fluctuations caused by the increasing levels of household and business behind-the-meter solar can be managed quickly and efficiently.
• Reduction in carbon emissions for the Territory and costs for Territory Generation. Reducing the need for gas-fired spinning reserve can deliver both cost savings of around $6.4M and emissions reductions of about 50,000 tonnes per annum.
• Enabling more renewable energy from large scale solar projects. The potential provision of system services from the BESS to the private sector will be considered. 

The provision of central storage technology to increase system reliability and security, and to potentially provide system services to the private sector are actions recommended by the Road Map to Renewables report commissioned by the Government. 

Procurement will take place over the coming months with the BESS expected to become operational in the second half of 2022.

Household and Business Battery Scheme (HBBS)

These batteries significantly reduce costs for households and businesses by reducing the amount of power that has to be purchased from the grid.

They also build grid stability and reduce power system costs by replacing demand for gas fired generation during evening peaks with solar energy generated during the day.  

Lower system costs mean lower power prices.

Batteries can also be designed to build resilience for families and businesses by maintaining power supply during unavoidable outages that can occur during cyclones and extreme weather events.

Two new initiatives will be implemented to encourage the uptake of behind-the-meter batteries.

Firstly, a $6000 grant will be available to households and businesses for the purchase and installation of solar PV systems with eligible batteries and inverters, or for those who already have solar, for batteries and inverters.

The minimum size for eligible batteries is 7kWh.

Secondly, a new standard Feed in Tariff (FiT) of 8.3 cents per kWh will be offered by Jacana Energy and will apply to all new businesses and households with behind-the-meter solar installations of up to 30kW in size.

All businesses and households who currently receive the premium one-for-one FiT will continue to do so.

They will only surrender the premium FiT if they upgrade the capacity of their system, move premises or take advantage of the battery subsidy.

Households and businesses who have already submitted an application to Power Water for the installation of solar will also be eligible for the premium FiT.

The scheme will be funded by savings from the introduction of a reduced FiT.

An initial allocation of $800,000 will be provided for the scheme, funding grants for about 130 batteries. 

Applications for the $6000 grants under the scheme will open Tuesday April 14.

Batteries and inverters will no longer be eligible for grants under the new Home Improvement Scheme or the Business Improvement Grant.

Reforms to the FiT to encourage the take-up of batteries by households and businesses was a recommendation of the Road Map to Renewables report commissioned by the Government.

Further details on the BESS and the HBBS can be found at www.business.nt.gov.au   

Quotes from the Chief Minister, Michael Gunner

“We’ve backed renewables and so have Territorians - they know renewables means lower prices.

“Our new $6000 solar and battery grants will see even more Territorians choose the sun and lower power prices - and create more jobs.

“Doing whatever it takes to save lives from coronavirus means throwing the kitchen sink at saving jobs and preparing the Territory for the rebound.

“I’m backing Territorians, solar and lower prices to get it done - we have a bright future if we all stick together.”

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

“The BESS and the new $6000 grants for home and business batteries are two huge steps forward in our plan for 50% renewables by 2030.

“We want Territorians to have access to the latest and best technology as we build a stronger and more resilient power system for Territory households and businesses.

“These initiatives will help lower power bills while maintaining secure and reliable power for Territorians.”

Media Contacts:

Gerard Richardson (Chief Minister) 0438 693 898
Paige Nguyen (Minister Wakefield) 0428 727 244

SANTOS has no plans to defer any spend on its carbon capture and storage development in the Cooper Basin, despite cutting $550 million in capex this year, chairman Keith Spence said during the company’s virtual annual general meeting today. 

It has entered front-end engineering and design for the project after spending $20 million drilling a couple of wells last year.  

There are no firm figures on how much the project, designed to eventually inject 1.7 million tonnes of CO2 underground per year, might cost but chairman Keith Spence estimated today in the hundreds of millions.  

It recently signed a non-binding memorandum of understanding with BP for CO2 cooperation, on the sidelines of a CO2CRC meeting in Canberra.  

BP in early March signed a non-binding agreement electing to possibly spend A$20 million at Santos' CCS project contingent on a positive final investment decision.  

Santos joined the CO2CRC at the beginning of last month, behind Woodside Petroleum, Chevron, BP, Shell and BHP, and was then hoping to sanction its CCS project before the end of the year.  

It would see an initial 300,000 tonnes of CO2 sent back into the reservoirs natural gas was originally pulled from, which will ramp up to 1.7 million tonnes per annum at full capacity.  

Santos estimates it can do this for A$30/t and later bring costs down further.  

Spence said the CO2, stripped from the natural gas at its Moomba plant, and transported to the nearby fields makes it an initially low cost project.  

‘We'll drive it down to $20 per tonne," Spence said. For it to be viable there needs to be a price on carbon and for scale up government support the way the renewables industry has received subsidies.  

CCS has, of course, received a lot of government support in previous decades though those projects never proved viable.  

Source: Energy News Bulletin

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