THE END of 2014 will signal the start of an unprecedented and lucrative industry for Queensland, and more broadly for the rest of Australia.
The BG-led Queensland Curtis Liquefied Natural Gas Project (QCLNG) will enter what up until now has been unchartered territory when first production from the facility starts later this year.
QCLNG will be the world’s first coal seam gas to LNG development, with Origin Energy’s APLNG and Santos’s GLNG project to follow closely behind, with production on schedule for 2015.
While up until now Queensland has been largely coal export reliant, but the coming years will see LNG take the title of being the state’s second biggest export earner.
By the end of 2016, it’s estimated that 25 million tonnes per annum of LNG will be exported from Gladstone with six LNG trains in operation.
To fulfil offtake contracts, the CSG to LNG proponents will be drilling up to 1,500 wells per year to support the trains in operation.
According to the Grattan Institute, more than $63 billion is being invested in LNG export projects in Queensland, creating almost 30,000 jobs during the construction phase and up to 17,000 ongoing jobs from 2020 when the projects are fully operational.
This investment is expected to lift the value of Australian LNG exports, currently worth $14.5 billion a year, to more than $60 billion per year in 2017.
LNG to add $12 million to Queensland coffers every year
Speaking to Oil & Gas Australia just months out from the QCLNG project coming online, Queensland Resources Council chief executive Michael Roche said the gas sector accounted for about 8 per cent of the state’s regional product, equivalent to about three years of economic growth.
With the states coal sector in the doldrums, Mr Roche acknowledged that the booming gas industry had propped up the economy in a big way.
“You take 8 per cent out of any economy and you would really be feeling the impact,” Mr Roche said.
Even throughout the years of construction and commissioning, Mr Roche said the fledging LNG sector in Queensland had already marked an important diversification.
“In terms of the reliance on coal, that has been reduced and that will occur into the future,” he said.
“Coal will continue to be very strong and will continue to be our biggest exporter but what we’ll see in the case of the gas sector is the addition of about $12 billion to the value of production for an industry that this year will probably have value of production overall of $35 billion.
“Gas bringing in another $12 billion – that’s a major diversification of the sector and that’s got to be good for the Queensland economy as a whole to not be as exposed to (only) one part of the resources sector.”
Gladstone riding the LNG wave
Mr Roche said there was clear evidence that gas sector employment in the upstream side of the gas projects had gone a long way to offset the job losses occurring in the coal industry, with people even jumping across from coal to gas in places like Moranbah at the peak of the market.
“That certainly I think is continuing because obviously there are strong skill sets that are involved that are relevant in gas especially in the geology, drilling and engineering roles,” he said.
Mr Roche estimated that there have probably been an estimated 4,000 people from the Gladstone region working on Curtis Island, but with the peak of construction having now passed, the permanent operational workforce needed is expected to drop to about 1,500.
As such, Gladstone will be the city most impacted by the winding down in the construction phase, which Mr Roche admits will be a “big change for the city.”
However, Gladstone is not vulnerable to peaks and troughs, having ridden the waves of boom times many times before when the Rio Tinto-owned Yarwun refinery ten kilometres north-west of Gladstone was built in 2002, and later when the plant underwent an expansion.
“It is a city that is used to construction peaks,” Mr Roche said.
However, Mr Roche admits this level of activity in the region is unprecedented.
“This is quite an extraordinary phase to have had three big projects side by side, of between $60 and $70 billion worth of capital expenditure. That’s big by Gladstone’s standards,” he said.
“As things wind back in Gladstone, these are the people that will quite cheerfully pursue the next big project, either in the Northern Territory or the West or PNG or hopefully somewhere else in Queensland.
“We’ve got high hopes for example for the big shale oil project in Gladstone.”
While the demobilisation of the workforce will begin progressively over the next couple of years, the LNG projects being undertaken in Queensland will require ongoing maintenance over their expected 30-year lifetime.
Energy Skills Queensland has identified the total workforce requirements for the operations and maintenance phase of the CSG to LNG industry will peak in 2024 at 14,900 workers, based on six LNG trains and 45,000 wells.
Opportunities also remain at the stalled Arrow LNG project, a partnership between Shell and PetroChina.
“It’s certain that Shell and Petrochina will want to monetise their gas resource,” Mr Roche said.
“There’s space on Curtis Island if they want to build a plant or there are six potential additional trains at the existing projects that need gas.
“There are various options so I think Arrow Energy is sitting very pretty at the moment.”
Just the beginning of the QLD LNG story
Mr Roche sees a bright and prosperous future for the LNG industry in Queensland.
“What we’re hopeful for is that this is not the end of the LNG story for Queensland,” he said.
“What’s being built at the moment is six trains but the construction has been arranged so that there is room for six more.”
However, Mr Roche warned that the key LNG players would only commit to brownfield expansions if the industry remained cost competitive.
“It was an extraordinary investment period in the resources sector to have a number of port, coal mine and gas projects all under construction at the same time competing for a scarce workforce and other resources so hopefully we can space out the investment over a longer period in the future,” he said.
Large reserves of gas gave the state plenty of scope for up to six additional trains, he said.
“We just need to make sure we have competitively priced gas and completive construction costs,” he said.
In order to ensure Australia remained cost competitive, Mr Roche said the state had to learn from the lessons of the large LNG investment period experienced in the last few years.
“The market did what the market does and when there was so much competition for scarce resources [skills], prices of everything got bid up,” he said.
“We have started to settle back down at much more competitive construction costs and that’s where we need to stay because we’re not the only place that’s got gas and the rest of the world will be bidding for those markets.”