The Canning Basin in Australia’s isolated Kimberley may be one of the largest unconventional natural gas finds outside the United States.
The Canning Basin represents a key test of Australia’s ability to build the long-term infrastructure needed to develop a future low-emission economy.
The Canning Basin’s already set to get a pipeline extension to the regional hub of Broome. The ramifications are immense.
In the Canning Basin, Australian junior oil and gas explorer Buru Energy has found highly prospective oil and gas fields. Buru’s now moving ahead to develop these fields.
Buru needs a route to market, but Western Australian (WA) law presents a complicating factor.
Western Australia law mandates that 15% of any new gas developed in the state must be consumed within the state.
This is a populist measure aimed at keeping Western Australia gas prices artificially low through distorting markets. The goal is to attract industry — reflecting misguided views that energy prices alone (leaving out labor costs, distance from markets, etc.etc.) determine investment.
To meet this ‘set-aside’ requirement, Buru has agreed to build a $500 million, 600-kilometer pipeline to pump Canning Basinto Port Hedland. (see “Buru on a roll with pipeline deal,” The Australian, Nov. 8, 2012). The gas will then be delivered to state users via WA’s existing pipeline delivery network.
And this is where it gets interesting:
Woodside Petroleum wants to build a highly-controversial Liquid Natural Gas plant just north of Broome and Japan’s Inpex wants to develop the Ichthys Field nearby.
These are also potentially large sources of new supply. Like Buru, Woodside and Inpex want to sell the bulk of their Canning and Browse gas to China, Japan and South Korea.
What emerges is an ideal opportunity to take Buru’s pipeline project between the Canning Basin and Port Hedland, and use that as the first bit of a larger pipeline infrastructure stretching from Port Hedland to Darwin.
All of this could create the critical mass for a pipeline system that could subsequently stretch across the Timor Sea, Indonesia, the South China Sea and/or Mekong States enroute to Northeast Asia.
The result will be a much more flexible, future-proof pipeline infrastructure.
Over time other, more futuristic fuels also could be pumped through the pipeline. These include biofuels, hydrogen and natural gas.
And if such a regional pipeline were built, it could be bundled with high capacity power lines and fiber optic cables, creating a triple benefit — not just for Australia, but the region.
All of this is outlined in Grenatec’s reports “Pan-Asian Gas Pipeline” and its larger study “Pan-Asian Energy Infrastructure.”
It’s not often populist lawmakers interfering with the laws of economics createa positive sum outcome. But in WA, that could be the case.