TORTUOUS state government efforts to find a site for an LNG processing hub on the Kimberley coast may count for nought, at least for the next decade.
TORTUOUS state government efforts to find a site for an LNG processing hub on the Kimberley coast may count for nought, at least for the next decade.
The long-running process is close to resolution, with government, industry and indigenous groups aiming to reach in-principle agreement on a site north of Broome, at James Price Point, by the end of this month.
However, even if the negotiations come to a quick and amicable conclusion, there is no guarantee the site will be used.
The search for a Kimberley LNG hub started nearly three years ago, when the Carpenter government became worried that the region may be scarred by multiple LNG plants at different sites.
The issue was brought to a head when Japanese company Inpex released plans for an LNG plant on the remote Maret Islands.
At the same time, Woodside was evaluating options for its Browse Basin gas fields and other oil and gas companies, including Shell, were engaged in drilling programs off the Kimberley coast.
The Carpenter government, with support from environmental, tourism and indigenous groups, commenced an exhaustive review of possible sites for an LNG hub.
Following the state election, the Barnett government hastened to resolve the matter, resulting in the selection of James Price Point as the preferred location.
In the meantime, Inpex had lost patience and switched its LNG plant to Darwin.
That was an extremely expensive decision - it will have to build a 900-kilometre sub-sea pipeline from its gas field to Darwin, at a cost of $9 billion.
Despite the high cost, Woodside is also considering a long-distance pipeline for developing its very large Browse Basin gas reserves.
It has publicly stated that it is evaluating two options - building an LNG plant at the Kimberley hub, or piping the gas nearly 1,000km to an existing LNG plant at Karratha.
Wood Mackenzie senior analyst Richard Quin does not know which option will be selected but sees merit in the pipeline.
"The technology of doing long-distance pipelines is being normalised," he said.
More fundamentally, he said the pipeline option could address the long-term supply needs of the North West Shelf venture, which has a similar ownership structure to the Browse fields.
"It is a logical solution for developing that gas and maximising the value that is already invested in the Karratha gas plant," Mr Quin said.
The NW Shelf venture still has more than 25 years of gas supply available but at some point production will begin to decline. Given the long lead times and the scale of the project, the joint venture will have to make decisions to underpin its long-term supply.
"They are increasingly moving towards a point where they have to decide what they do next," he said.
Mr Quin noted that the venture is continually investing in the project. It recently commissioned the Angel platform and is spending $5 billion on its North Rankin B project, designed to boost gas extraction from fields closer to Karratha.
A third possible development off the Kimberly coast is Shell's Prelude field. However it is evaluating a floating LNG vessel that would be moored over the gas field.
