Premier Barnett’s true agenda came out this weekend, when he visited the town of Broome. He wants Broome to be the supply base, like Karratha, for a large Industrial and Port complex at James Price Point, like Dampier.
This was from February, before Woodside had pulled out. Barnett was meeting with the local Chamber of Commerce who mostly support Barnett’s vision. He may also have been at indigenous ‘Yawuru’ group’s new premises, opened today.
Superbasin that overwhelms the rest
- The Sunday Times
- February 24, 2013
CHEAPER gas and lots of it. Reduced electricity prices and royalties flowing, like rivers of gold, into the coffers of the WA Government to fund myriad infrastructure projects at some point in future.
It might read like any Premier’s fantasy, but the bounty locked in deep geological formations beneath the west Kimberley is the stuff dreams are made of.
Or nightmares, depending on your outlook. If the potential of the Canning Superbasin is to be realised, environmentalists say thousands of wells will have to be sunk.
And extracting much of the gas will require hydraulic fracture stimulation the controversial drilling practice better known as “fracking”.
Fracking creates fractures in rock formations that hold unconventional gas. Opponents say toxic chemicals used in the process poison surrounding ground water.
Industry and environmental groups are fiercely divided on the impacts, but there’s no disagreement on the phenomenal interest the Canning Basin is attracting, both at home and abroad.
Some of the biggest international energy companies are watching developments very closely, while some, like Mitsubishi Corporation and ConocoPhillips, are already funding the work of local exploration companies, which are themselves takeover targets.
If the proposed gas hub is built at James Price Point, the value of Perth-based Canning Basin explorers Buru Energy and New Standard Energy will soar. Experts say James Price Point would be logical as an export hub for onshore gas producers. Why pipe the gas to the Pilbara when there’s a hub on your doorstep?
Premier Colin Barnett acknowledged as much last month when interviewed by The Sunday Times about James Price Point. His vision is for the gas from the Canning Basin to be processed and exported from the precinct, alongside that from the Woodside Petroleum-led joint-venture.
Co-locating two LNG projects at James Price Point would “dramatically improve the economics for everyone,” the Premier said.
“The shale gas resource in the Canning Basin is probably twice the size of the combined offshore reservoirs of both the Carnarvon and Browse basins. Again, while that’s into the future probably five to 10 years away that’s another strong argument why the State Government wishes to see James Price Point developed.”
His comments were echoed this week by Mines Minister Norman Moore. He said export of Canning Basin gas was likely and that James Price Point made sense.
“I think that is on the cards,” he said. “There’s a huge reserve and the state won’t need all that for domestic purposes, so it’s not out of the question that they might seek to go to export.
“And I think there’s been some talk about whether they can put their gas through the hub at James Price Point, which would make a bit of sense.”
Like the Premier, Mr Moore is deeply opposed to the prospect of Woodside and its Browse partners pursuing the cheaper option of processing gas on a floating facility, rather than doing it onshore at James Price Point.
Irrespective of who triumphs in next month’s state election, both Mr Barnett and Labor leader Mark McGowan have pledged to do all in their power to resist a floating LNG plant, which would see WA miss out on royalties and construction jobs.
“The quantity of gas that needs to be made into LNG needs an onshore facility,” Mr Moore said.
“I don’t think floating LNG can cope with the capacity of a Browse. (Adding) unconventional or onshore gas (to James Price Point) could be the cream on the cake.”
The Canning Superbasin is the biggest sedimentary basin in WA, covering an area of some 530,000sqkm, more than twice the size of Britain (243,610sqkm) and almost as big as Texas (696,241sqkm).
The US Energy Information Administration has estimated the basin holds unconventional gas resources of 229 trillion cubic feet. It could be one of the world’s greatest reserves.
Dane Griffen, onshore gas research officer for the Conservation Council of WA insists there is a bigger picture for James Price Point than simply the offshore Browse gas.
“The State Government wants that project onshore as a strategic asset to develop the Canning Basin,” he said.
“There’s anywhere between eight and 12 times more gas in the Canning Basin than there is in the Browse Basin and having an LNG processing facility in the Canning Basin would definitely suit the agenda that the State Government and the Federal Government has.
“Norman Moore said to me that the Canning Basin will make James Price Point a 100-year-project, not a 30 year project.”
Mr Griffen said the Government was sensitive when talking publicly about the Canning Basin because of fracking.
“They don’t like the f-word for starters and they are starting to really not like the s-word (shale) because people are starting to put two and two together. So they kind of try to keep a lid on it. I was surprised that Colin Barnett even opened his mouth (to The Sunday Times) about the Canning Basin.”
Glen Klatovsky, national Kimberley campaigner for the Wilderness Society, agrees the Canning Basin is the “main game”.
“That has been our assessment for probably 18 months or more,” he said.
“It doesn’t take a genius in the industry to realise the potential of the shale gas resource.
“You have got Buru and New Standard and a few other players in the Canning, but the reality is that it’s unlikely that those little exploration companies who are doing really well, particularly Buru, they are very well managed but they are not going to be the ones to exploit the Canning Basin. They will be bought out by major players.
“At the moment you have got Mitsubishi putting money behind Buru, you’ve got ConocoPhillips behind New Standard and they are throwing tens of millions of dollars at those guys to really test out the viability.
“If and when the resources are proven up they’re sitting there waiting with all the relationships ready to buy them out. And I wouldn’t discount for a second that one of the big guys would be Woodside. So there are long-time plays here.”
Buru Energy’s politically savvy executive director Eric Streitberg has been at pains to distance his company from James Price Point.
Buru, with Mitsubishi, has the biggest area in the basin with 135,000sqkm twice the size of Tasmania. The company had a stellar 2012 it was the best performer on the ASX, tripling its share price after a series of positive drill results.
Earlier this month Buru reported good results from an independent assessment of the Laurel Formation, within its acreage.
Mr Streitberg reported the formation alone could rival the North-West Shelf in size. “The Superbasin continues to delight and surprise us,” he said.
Last November, Buru and Mitsubishi struck a landmark deal with the State Government to supply gas to WA’s domestic market to meet the energy needs of industry, including Alcoa, which has made a $40 million pre-payment to Buru.
As part of a state agreement, Buru will build a 600km pipeline to the Pilbara where the gas will join the grid.
That meant all their gas “was going south” and not to James Price Point, Mr Streitberg said on Friday.
“I want to be clear and categoric about this: we have nothing to do with James Price Point. None of our business plans involve James Price Point.
“We have no intention of going anywhere near James Price Point,” he said.
But if Buru was taken over, it wouldn’t be his call, he acknowledged.
“If somebody wants to take us over and then negotiate with the Government about going to James Price Point that’s up to them. But Buru has no plans.
“We have a very clear business plan to take our gas down south.”
According to the precise wording of the 25-year state agreement, the gas can go to an LNG precinct “in the North-West region”.
“It is not specific (to the Pilbara) and that worries us,” said Save The Kimberley chairman Peter Tucker.
One Canning Basin player who supports James Price Point is global energy company ConocoPhillips, which partners New Standard.
President of ConocoPhillips’ Australian operations Todd Creeger said last year that the company might process gas from its Browse or Canning Basin fields at James Price Point.
Chinese oil and gas giant PetroChina also joined the fray this week.
In a deal with ConocoPhillips, it will take a 20 per cent interest in the Poseidon gas discovery in the Browse Basin, as well as a 29 per cent stake in the Goldwyer project in the Canning Basin.
New Standard is a 25 per cent stakeholder in the Goldwyer shale project.
Managing director Sam Willis said the expanded joint venture would give the company access to “unparalleled funding, technical expertise, development experience and offtake capacity”.
The deal valued the entire project at $US100 million ($97.7 million). PetroChina, like Mitsubishi, is also a stakeholder in the Browse gas project.
The Conservation Council’s Dane Griffen said companies such as Mitsubishi would be chasing bigger deals than the one secured with the WA Government.
“There’s no way that this state can possibly use 1 per cent of the gas that is in the Canning basin,” he said “It’s the fifth largest shale gas basin on the planet…what the hell are they going to do with the rest of the gas?
“Really (Buru) don’t have to come up with a plan to put any gas into the domestic market for quite a long time. In the meantime, if there is a gas hub built on the Kimberley coast, it’s just irresistible. No company in their right mind would ignore the fact that they can get LNG out of this country from the Canning Basin.”
Mr Griffen thinks a takeover is highly likely, with some of the bigger players such as BHP rumoured to be sniffing around.
Mr Streitberg acknowledged he’s considering a partial sale, which would help fund the $500 million pipeline. “We have been approached by a number of people ranging from major international players to midsize companies and we have been in discussion with them,” he said.
“It’s obviously a huge basin with good potential; both for gas and for oil and there are very few places in the world where those things are available.”
The Conservation Council and the Wilderness Society are concerned at the prospect of thousands of fracking wells around the west Kimberley.
“The Barnett Shale in the US, that went from 1600 wells to nearly 40,000 wells in 10 years,” Mr Griffen said. “With world energy demand going the way it is, (fracking in the Kimberley) is an imminent threat. It’s not something we can take lightly.”
Minister Moore said talk of thousands of wells was nonsense.
“We are confident that you can extract unconventional gas in an environmentally sensitive way,” he said.