By ERWIN CHLANDA
In terms of dollars it doesn’t get much bigger in the Northern Territory than onshore gas, creating the most excitement at the national exploration seminar closing in Alice Springs today.
Royalties for onshore resources go to the NT Government. Offshore royalties go to Canberra.
This is how Chief Minister Adam Giles put it recently: “It is estimated that the Territory has more than 200 trillion cubic feet of gas resources in six onshore basins – potentially enough gas to power Australia for more than 200 years and reserves almost 20 times the size of the Ichthys LNG Project.
“There is also more than 30 trillion cubic feet of gas offshore.”
He says the pipeline his government wants to have built, linking our fields with the national grid, “will help unlock those onshore and offshore gas assets”.
Yesterday a senior mines department official said these are industry estimates, not proven up by exploration. He was more comfortable saying that even if 10% of that becomes available, it’s a lot of gas.
Today new Mines Department CEO Ron Kelly again spoke to the Alice Springs News Online, stressing the both the advantages of having a secure supply, as well as having it on our doorstep.
However, he found it hard to put dollar figures on it.
NEWS: What will we, the man in the street, get out of it?
KELLY: The man in the street will benefit from a vibrant and sustainable oil and gas industry on a number of fronts. It’s an entirely new industry that will create jobs and opportunities. It will provide additional work for existing businesses, suppliers of goods and services, and potentially new businesses coming to town and setting up. We probably haven’t even identified them yet. On the wider front the NT Government will benefit from an oil and gas sector because it provides government revenue.
NEWS: How many jobs will be created?
KELLY: Time will tell.
NEWS: What are the royalties?
KELLY: That will be negotiated as we go forward. Having our own income will be a great place to be. We can say to Canberra we don’t need your money, with all those strings attached.
Matt Doman, a spokesman for Santos, which has been operating in Central Australia for decades, says royalties for onshore gas are 10% of the wellhead price, currently $4 per 1000 cubic feet, less production expenses. [Mr Doman has taken on notice our request for current examples of production costs, so we can calculate royalty payments to the government.]
Gas at the wellhead is the product a company such as Santos is selling. Of course, it is trying to get the best price from its buyers, Mr Doman says.
He gives an example of the effort and expense gas exploration requires, including the spin-off to the local economy: “Overall we invested around $100 million and employed over 100 people in works associated with the drilling of four wells at Mereenie [some 250 kms west of Alice Springs] last year.
“Intract Indigenous Contractors, with an entirely Aboriginal workforce, was awarded the contract to complete all civil works at Mereenie as part of that work program.”
What the consumer pays pays for gas includes transport, the use of a pipeline, for example, bottling and so on. Clearly, the closer to the wellhead a user is, the cheaper will he get the gas.
Mr Kelly says lower power bills and greater security of supply are just some of the likely benefits for Territorians. Attracting industries is another.
NEWS: Can the government set the prices of what – after all – is our gas, achieving extra benefits for the Territory?
KELLY: The market sets the prices. If the supply is close to where you are setting up your industry, then the transport costs will clearly be less. There are opportunities from cheaper energy and better energy security. I don’t have crystal ball [to know which companies may be setting up in the NT].
NEWS: Will the government say to the gas companies, we’ll let let you produce the gas, but we want you to sell it in the NT at a substantial discount?
KELLY: That’s a question for the government, not for me as the CEO of the department.
NEWS: Is it something the government could decide?
KELLY: I don’t want to speculate about what cabinet may or may not do.
IMAGES from the Santos website.
By ERWIN CHLANDA