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Australian Energy Producers Journal Australian Energy Producers Journal Society
Journal of Australian Energy Producers
RESEARCH ARTICLE (Non peer reviewed)

A time for tie-ins: the possibility for infrastructure sharing and infrastructure access in Australia’s LNG sector

Clare Pope
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Squire Patton Boggs.

The APPEA Journal 55(2) 446-446 https://doi.org/10.1071/AJ14081
Published: 2015

Abstract

The development of LNG project infrastructure for exclusive use in relation to LNG projects in Australia has placed an enormous strain and demand on human and manufactured resources. It has undoubtedly contributed to project delay and cost blow outs, and these have had an effect, along with the falling price of oil and LNG, of putting in jeopardy the development of further LNG projects in Australia.

Tie-ins and joint development may be one way to de-risk and enhance the economic viability of developing future oil and gas resources through the following means:

  1. reducing project delays by using existing developed facilities without the need for extensive pre-FEED and FEED work;

  2. reducing the number of government approvals required by using existing facilities that already have relevant government approvals;

  3. reducing the unit cost of production by using underused facilities or expanding existing facilities at a marginal additional cost to cater for the additional demand and use; and,

  4. reducing exposure to workforce-related issues which have adversely affected the LNG projects in Australia, including unionised workforces, skill shortages and occupational health and safety risks.

There are some key issues, however, that need to be considered before embracing this approach, which includes:

  1. Capacity—the availability of capacity in existing infrastructure which is constructed with an individual project in mind will need to be assessed.

  2. Distance—the geographical location of projects can be prohibitive, unlike in other jurisdictions such as the UK North Sea.

  3. Loss of control—operators and the majority of participants may no longer be able to dictate development programs and project schedules.

  4. Pre-FID work—the access agreements need to be finalised and agreed pre-FID and will need to be front-ended at a time when not all issues are foreseeable.

  5. Tolling price—the price needs to be reasonable, yet reflective of the risk taken by the asset owner in allowing third party access and relinquishing some control.

The author will explore these considerations and how some of these issues can be addressed in legal matters, as well as the way other jurisdictions have sought to use infrastructure sharing arrangements and the different ways government has influenced infrastructure sharing.

Clare Pope is a partner in Squire Patton Boggs’ global energy practice. She regularly advises her clients in relation to oil and gas developments in Australia, South East Asia and Africa, including covering a wide range of issues involved in project development, acquisition, divestment, joint venture arrangements and commercial contracts. Clare has previously worked in London, Tokyo, Singapore and Kuala Lumpur, and she is admitted in England, Wales and WA. She holds a masters in law from the University of Melbourne and she completed her undergraduate degree at the University of Western Australia. Member: Association of International Petroleum Negotiators, Australian Mining and Petroleum Law Association and Australian Institute of Company Directors.


References

Hess Corporation, 2014—Hess announces LOI with the North West Shelf to liquefy Equus gas. Accessed 19 January 2015. <http://phx.corporate-ir.net/phoenix.zhtml?c=101801&p=irol-newsArticle&ID=2001697>.

Oddie, C., 2014—Authorisations and notifications – RG Tanna Coal Export Terminal Producers: The ACCC’s latest authorization for resource companies to collectively negotiate with infrastructure providers. 22 AJCCL 210-214. Sydney: LawBook Co/Thomson Reuters.

Santos Glng., 2013—GLNG and Australia Pacific LNG sign upstream. Accessed 19 January 2015. <http://www.santosglng.com/media-centre/media-releases/glng-and-australia-pacific-lng-sign-upstream.aspx>.