The North Sets Forth
Sydney Morning Herald
Saturday August 9, 2003
The Northern Territory is claiming its place in the sun. Brian Robins reports.
The Northern Territory's Chief Minister, Clare Martin, a former journalist, is writing a new future for the territory with ambitious sports projects adding a lighter touch to heavyweight gas and rail developments that should really put Darwin on the map.
The cricket Test series between Australia and Bangladesh may not go down in the history books as one of the all-time great events, but both the NT Government and the Australian Cricket Board walked away mighty pleased.
The ACB, which now calls itself Cricket Australia, was out of pocket to the tune of $1 million on the Darwin cricket games alone, while the upgrade of the Marrara Oval cost the NT Government $2.5 million.
But in putting Darwin on the sporting map, it was money well spent, because it comes as the NT Government this week launched a print and television advertising campaign to sell itself to the southern states.
And this is just the start, since the territory will be increasingly in the public eye in the coming months, with the Darwin-Adelaide railway to be completed in October, five months early, and freight and passenger train services to be launched from early 2004.
But tapping the territory's natural resources, especially its extensive gas reserves, will generate the big returns and give Darwin and the territory the great leap forward both economically and politically, especially now that the territory has renewed its push for statehood.
After bitter wrangling between Australia and East Timor over how to divvy up the spoils of the extensive oil and gas reserves in the Timor Sea, agreement was reached in March. This paved the way for the green light to be given mid-year for development of the Bayu-Undan gasfield the trigger for up to $10 billion in gas projects to move ahead.
Earlier, when talking to investors about how to develop the extensive Greater Sunshine reserves, the NT Government was keen for the gas to feed a series of local industrial projects, from various petrochemical plants to an aluminium smelter.
But it was too ambitious. Getting all the pieces to fall into place at once was impossible.
Instead, gas from Greater Sunrise will be exported, with the prospect that gas from smaller fields in the Bonaparte Gulf will be tapped for a series of petrochemical and industrial plants in the territory.
Now the NT Government is out there once more, wooing promoters of industrial projects.
``We're looking at the opportunities and doing the kind of work with potential customers now," Martin says.
``It's doing it progressively."
For Martin, a former ABC journalist, the first two years in office have brought more than their share of serendipity, with the railway, and now gas projects coming on stream. If timing is everything in politics, as it is in business, 2003 marks a significant turning point for the territory.
Completion of the Darwin-Adelaide railway, a $1.3 billion project with more than $800 million of private investor money, will give the territory its largest economic fillip ever. And the liquified natural gas (LNG) plant being built for Bayu Undan in Darwin by ConocoPhillips will give the town another lift, while presenting a unique series of challenges.
Darwin has half the territory's 200,000 population. But the skills base is small so small that Bechtel, which is building the LNG plant for the Bayu Undan development, can source locally only a quarter of the 1300 workers needed to build the project.
Darwin has long had a reputation of being a town full of ``runners" those running away from bad debts or bad marriages, looking to start again. These were ``the remittance men of the 1930s and 1940s" as Martin puts it.
A small number of mines in the hinterland, such as gold mining in the Pine Creek area and the Rum Jungle uranium mine gave the territory an early lift.
But it was largely defence spending from the local RAAF base and the progressive shifting of defence infrastructure into the area that gave Darwin its leg up, while also being responsible for much of its ``boom-bust" swing of recent years.
Growth this year will run close to 4 per cent, which is well up from the 0.1 per cent of the 1999-2000 year, for example. Putting growth onto a more sustained footing is one of the prime challenges facing the Martin administration, as well as boosting the population.
Hence the Chief Minister's decision to come to Sydney this week, to sell the territory as an investment and lifestyle destination, with a lunch hosted by Macquarie Bank and a cocktail party at Paspaley Pearls's King Street store in the CBD.
Guests dined on buffalo and received presents of ``Mango Moonshine" a 17 per cent proof liquor and Desert Flakes spices. But the challenges are daunting, because a recent decline in the territory's population will cost the territory its second seat in the Federal House of Representatives at the next elections, as well as cutting into Grants Commission funding. Even so, Martin, a former music student at Sydney University, would not have it any other way.
``What I want to see is much stronger and steadier growth, moving away from the boom and bust," Martin says. ``You get a population in for the boom times, and then it leaves. It is a very dislocating thing for the territory."
The population will flow out again unless the territory can snare industrial projects to build up the skills base once these big projects run their course.
The key to achieving Martin's ambitions is tapping the oil and gas reserves.
At $2.2 billion, Bayu Undan is the first step, but the real prize is Greater Sunrise, because it will cost around three times more, at $6 billion to $7 billion.
Shell, one of the main partners in Greater Sunrise, wants to establish a floating LNG plant offshore, so it can process the gas and export it to foreign buyers without piping it ashore. At around $6.2 billion, this is far cheaper than $7.3 billion to bring it onshore for processing.
But ConocoPhillips's decision to build an onshore LNG plant, which will refrigerate the gas for export, has tipped the scales for the Greater Sunrise gas to also come onshore.
As one joint venture partner put it, bringing Bayu Undan onshore ``has shifted the needle to somewhere between possible and probable" for Greater Sunrise gas also to come ashore.
Just where on that scale depends on a multitude of factors, including the marketing muscle of ConocoPhillips, Woodside and Shell, as they scramble to find markets in the increasingly competitive global gas market.
Similarly, the $1 billion development cost ``gap" between tapping Sunrise via a floating LNG plant for $6.2 billion and bringing it onshore at a cost of $7.3 billion has been narrowed, although by how much is still unclear, as the project's partners continue to run the numbers.
But no matter how Greater Sunrise is developed, all output will be exported into an increasingly difficult global market for gas.
More and more, the promoters of the gas projects in northern Australia are up against the big time in world energy markets, and pricing pressures remain intense.
Next month , for example, the US and Russia are to hold an energy summit in St Petersburg, while late last month a high-level US Energy Department delegation visited Murmansk, on the Barents Sea, as the US studies importing crude oil from Russia via Murmansk.
At the same time, the long-mooted plans to link Russia's extensive oil and gas reserves in Siberia with China and Korea are picking up speed, due to the push by China to substitute much of its coal use with gas, with Japan looking at providing key financing since it, too, will be a ready recipient.
Increasingly, Australia's gas marketers are bumping into sales teams from Russia's Sakhalin gas project in the north Pacific, with strong demand for its gas from Japanese buyers over the past few months the largest destination for Australia's gas exports.
Against this global backdrop, the true sleeper for the Northern Territory is the Blacktip gas field in the Bonaparte Gulf. It is expected to be developed by Woodside to supply Alcan's Gove alumina refinery, which is planning a $1.5 billion capacity expansion.
Blacktip may be smaller than the other gas projects on the drawing boards but because it will sell into the domestic gas market in the territory, it could open the way for a go-ahead on petrochemical and other industrial projects around Darwin.
The territory's Clare Martin concedes that with the arguments about how to best develop the Greater Sunrise field, its shape changed several times so that the groups looking at petrochemical plants and the like 18 months ago drifted away. Now, with Blacktip to supply local gas demand, the process of selling Darwin as a location for industrial plants is again under way in earnest.
``We're going back and re-talking with those potential customers," Martin says. ``We're not writing anyone out."
The other great lure is linking the Timor Sea gas reserves with the national gas market, as gas fields in the Cooper Basin in central Australia and the Bass Strait in offshore Victoria start to run out.
``With the gas resource in the Timor Sea, we've got to look at the Timor Sea being a competitive source of gas for the national market," Martin says.
``As we see the current [gas] contracts being renewed, prices are going up, and competition is going to see those prices will not escalate.
``South Australia [is] very enthusiastic about the long-term future of getting another source of gas into the Australian market," she says.
``But one of the things I've been arguing, and will be taking to COAG [the Council of Australian Governments' meeting ] at the end of this month, [is that] we do need a national framework for where gas fits in.
``Because of the infrastructure costs associated with gas, until we work out what part gas will play in the growing energy needs of Australia you can't make sensible decisions about whether a mechanism like Invest Australia should be putting significant dollars into a pipeline between Darwin and Moomba," she says.
With these challenges Martin swears off any interest in Federal policies, arguing she more than has her hands full building the future for the territory.
``I think the most challenging job for any leader in Australia is the territory.
``It's the youngest place.
``We've got incredible infrastructure demands.
``We've got the opportunities of being the gateway to Asia. We feel very strongly part of that region, which the rest of Australia doesn't have.
``But it's a young place, with a lot of energy.
``Why would I be attracted anywhere else?"
THE GATHERING BOOM
* Bayu-Undan: ConocoPhillips-led consortium gas field development
- $2.7bn project to strip out liquids (condensate and liquefied petroleum gas), starts 2004
- $2.24bn export LNG project, starts 2006
* Blacktip: $1bn Woodside gas field development (incl $400m pipeline). Go-ahead decision by end of year
* Gove: $1.5bn Alcan alumina refinery expansion. Go-ahead decision by end of year
* Greater Sunrise: $6-7bn Shell, Woodside, ConocoPhillips gas field development that would export LNG from 2009
* Petrel/Tern: Santos gas developments. Timing unspecified
© 2003 Sydney Morning Herald