Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Joint Select Committee on Northern Australia
28/04/2014
Development of northern Australia

ARIEL, Mr Fred, Chairman, Might and Power Australia

MOYA, Mr Philip, First Secretary to the Hon. Francis Awesa, Minister for Works and Implementation, Papua New Guinea

[15:56]

CHAIR: We welcome Might and Power Australia. Would you like to make a short opening statement? The committee will then ask some questions.

Mr Ariel : Thanks to the committee for the opportunity to present today. My topic is water and hydropower, but basically it is on the water front. The development of Northern Australia, in particular Central Queensland, from the gulf country down to Augathella and that region, requires permanent, reliable and secure fresh water supplies. Water is a very difficult thing to transfer, economically. If you look at one tonne of water, which is a kilolitre—a metre by a metre by a metre—it weighs a tonne. A thousand of those—a megalitre, an Olympic swimming pool—weighs 1,000 tonnes. And then if you look at a gigalitre, that weighs one million tonnes. Now, I am talking about a transfer of water of between six to eight gigalitres per day. And the traditional method of moving that by transport—by ship or whatever—is just not possible. One of those tonnes of water is worth between 60c and $1.20, depending where it is. You cannot move it.

The concept that our project stacks up is gravity—Isaac Newton discovered gravity—and that is it. It is a gravity feed system that powers itself. Our proposal is that the source of the water is the Highlands of PNG—Southern Highlands in particular—at 5,500 feet in altitude, down to the headwaters of the Murray-Darling, which are in central Queensland, roughly at Augathella, at an altitude of about 350 feet.

There are many engineering problems that need to be overcome. In particular, the low point of the pipeline has enormous pressures. It is not that it cannot be overcome; it can be with the right sort of engineering. We are of the view that a project of this magnitude will spawn its own material that this pipeline will be made out of. A local company here, Flanagans, did the initial engineering showing that the system does work; we are not pie-in-the-sky stuff here. If you run a hose from up in the Highlands down to Augathella, the water does run out the end without pumping. So we can transfer this volume of water. We want to pump it, but we will generate our own power with hydro power stations in the altitude part of New Guinea. We will bring a cable along and use that power for pump stations along Cape York to pick up the flow rate, not just rely on gravity alone. The power pays for itself.

Where to from here? The funding of this project has been borne by me to date, but what I have agreed with the government of New Guinea at the top level is that they wish to purchase a 25 per cent stake in my company, in two stages. I can do a pre-feasibility study with stage 1 and an advanced case study with the second tranche of money. Our friends can explain that a little bit further. What is important for the government as a whole, I think, is for this project to be taken a little bit more seriously when I bring it up. It has been around for a long time; I initially mapped those rivers in the mid-nineties. The New Guinea government is aware of the amount of water that is available in the Highlands—it rains every afternoon at 3.30—and the insatiable demand here in Australia for water, which can create this food bowl that everybody is talking about and also assist in environmental solutions for the Murray-Darling, which I have spoken about with Greg Hunt.

I could talk away for days here, but I understand it is mainly questions you are interested in. I will just put it over to Phil Moya, the first secretary.

Mr Moya : Thank you, Fred. Thank you for giving me the opportunity to give you an overview of what Fred has said. I would like to highlight the views of the government of Papua New Guinea. The government views the project as of high impact for the country. The National Executive Council has endorsed the project for it to be a high-impact project and a priority for the government. You may have heard about the LNG project that has been developed in Papua New Guinea. We see this project as of high impact. The most important aspect of this is that it is sustainable and renewable, and it will be of enormous social benefit both in PNG and likewise in the northern part of Australia. So the government is committed to it. This has been demonstrated by the highest level decision-making body, the National Executive Council, giving the okay for it to proceed.

Secondly, you may be thinking about the financial aspect that Fred has highlighted. The government is committed to uptaking the feasibility whenever it is required of us to partake of and invest in it. Thank you.

CHAIR: Thank you. We will now open up for questions from the panel.

Mr SNOWDON: What discussions, if any, have you had with the Australian government?

Mr Ariel : It has been over many, many years, since about 2004, with government. It started with Senator Ian Macdonald and it progressed from there to Malcolm Turnbull when he was the environment minister. He actually got a desktop review off of my figures by SMEC—Snowy Mountains Engineering Corporation. Greg Hunt on a couple of occasions, once when he was out of government and now that he is in government. I have met with Warren several times about it. So there have been discussions with those people, and a few others.

Mr SNOWDON: Great idea, if it works, but I am wondering what discussions have taken place as to where the outlets for the water might be along this pipeline, and whereabouts would they be?

Mr Ariel : It is like an inverted tree: it starts at the top and it spreads out from there.

Mr SNOWDON: Yes, but presumably in your modelling you have discussed where the outflows might be and how much they might be along the way and for what purpose they would be used. I would like to know that information.

Mr Ariel : I would think that demand is stronger than supply. Although we are talking huge volumes of water here—365 days a year, six gigalitres to eight gigalitres per day can go a long way—if it is the dry season I would think the demand would outstrip that supply, particularly if you are looking at land that is currently for grazing purposes but that, with a permanent water supply, could be used for agricultural purposes. It would be changing value from 100 bucks an acre to $4,000 to $5,000 an acre with a permanent water supply on it. If it is sufficiently wet and the demand drops, it can run into Maranoa River and then into the Murray-Darling system. So enter the top and you can sell it in Adelaide.

CHAIR: That is the point you are making there: wherever there is a need for it, where it flows through communities or towns or areas where there is potential for agricultural development, it can be tapped off at any point.

Mr Ariel : That is right. Where there are black soil plains out through Winton, Mundingburra and those regions there—it is fertile soil, but without a permanent water supply you grow cows on it.

CHAIR: It also generates power along the way, doesn't it.

Mr Ariel : Correct.

CHAIR: This is one of the benefits in PNG. You have that 5,000 feet fall from the catchment down to where you are flowing across the channel, basically, so it provides a very significant amount of reliable hydropower for a large area, particularly the western province. It also has the capacity to be able to—by strategically placing those turbines to be able to supply power to communities along the route, they can access power as well as water.

Mr Ariel : That is right.

Ms MacTIERNAN: I come from Western Australia. We have had a bit of experience with the idea of pipelines. It really comes down to two issues, I guess; at the end of the day it comes down to the relative cost per unit of water and whether or not it would be cheaper to do this elsewhere. Certainly in Western Australia we made the calculation, after extensive analysis of the task and looking at the cost of each proposal, that desalination was indeed a cheaper option than a pipeline from the Kimberley. Have you done any analysis on the relative cost of this per unit of water compared to the alternatives that might be available? I can understand that you are starting up in the highlands and there will be a degree of gravity, but if this thing is going all the way to the Wivenhoe Dam—it's not?

Mr Ariel : This is a living document. When Brisbane was initially in its drought, that is what spurred phase 2 of this to go to Wivenhoe Dam.

Ms MacTIERNAN: That is in this document here. That has changed has it?

Mr Ariel : The cost and the pressures, I took that off and now it terminates in Augathella.

Ms MacTIERNAN: Where?

Mr Ariel : In Central Queensland, the headwaters of the Murray-Darling.

Ms MacTIERNAN: Right. One of the things that we found when we started the analysis of the Kimberley pipeline was that the power cost—although it was heading south it was not all downhill and there was going to be an enormous cost in pumping the water. What is the analysis of the topography once it makes landfall in Queensland? Is that all downhill too?

Mr Ariel : It is not so much whether you are north or south; one is not high and one is not low.

Ms MacTIERNAN: I know. That is right, but a lot of people think it is downhill because it is heading south.

Mr Ariel : It is above sea level. It is altitude as in—it is above sea level.

Ms MacTIERNAN: Yes, I realise that. So what is the topography? Will you be requiring—you are saying it is gravity fed. Is it gravity fed all the way down to Central Queensland?

Mr Ariel : Correct.

Ms MacTIERNAN: So there is no topography, no—

Mr Ariel : Very little. If you look down the western side of Cape York Peninsula, about 50 kilometres inland, just out of the marshy swampy stuff, it is pretty flat. You get through the Gulf Country there, and if you are going to build a pipeline that is where you want to put it, in those flat plains out there. There is very little altitude. The difficult part is getting it out of PNG, but we are talking only a couple of hundred kilometres in distance there. The depth of the ocean at the deepest part between the two is only 31 metres. That is an easy lay for a pipeline. The hydropower—look, this ticks all of the boxes.

Ms MacTIERNAN: But what about the unit cost compared to the alternatives?

Mr Ariel : Our preliminary estimates say that we can land one megalitre of water at Augathella for about $350 to $400 a megalitre—that is allowing for depreciation, the lot. If you look at Waterfind, the agency that brokers water in the Murray-Darling Basin, they will sell water for between $800 and $1,200 a megalitre. As part of this proposal, and I spoke to Greg Hunt about it last week, an ideal situation would be this: there is only one seller of water, and that is the PNG government; there is only one buyer, and that is Australia. You cannot put this stuff on a ship and send it somewhere else. If the Australian government decided to be the wholesale buyer of every drop of water that came out of that pipeline at a figure of around $600 or $700 a megalitre, it can sell it for up to $1,200 a megalitre and distribute that water as it sees fit.

For a project of this magnitude, I and the PNG government are of the view that the ownership of it should remain relatively tight. Do we want to have sovereign funds controlling something of this magnitude and that is going to last 150 years, that we build towns and cities and industries based on the supply of this water, and then you do not have control of the supply of it? It is a minefield, but there is a solution there. The New Guinea government have taken it seriously. They are strongly of the view, and I am strongly of the view, that the Australian federal government need take this seriously and drop the word 'pipedream' every time a pipeline is mentioned. It has gravity. If it did not, I would not be sitting here. It works. To what volume, the cost benefit analysis would require—you can do it in two stages. If stage 1 does not stack up, we do not worry about stage 2.

Ms MacTIERNAN: And what would be the cost of water acquired through desalination, for example?

Mr Ariel : Through desal?

Ms MacTIERNAN: If you are looking at an alternative—you are saying that this is $400 per megalitre, so what would be the cost of one of the alternative technologies such as, obviously, desalination?

Mr Ariel : If you look at desal, that is fine if you are living on the coast. And I mean right on the coast. If you want to pump it uphill—I am talking in Central Queensland, where it is needed to develop northern Australia.

Ms MacTIERNAN: Well if you desalinated it, and pumped it—

Mr Ariel : If you do desal it, you are on the coast. You are at ground zero, level zero—a couple of metres above it. That is where the salt water is that you are desalinating. You then have to move it to where you want it. You cannot do that; it does not work. But if it is close by—

Mr SNOWDON: What you are saying is you have a gravity feed as opposed to power-fed desalination.

Ms MacTIERNAN: You would have to look at the cost of doing a desal on the coast and pumping it—although it is not really pumping because apparently it is all downhill.

CHAIR: It has a 5,000-feet head, from where it comes from.

Senator BOYCE: It has to go over the Great Dividing Range if it is going to go from the coast to Western Queensland.

CHAIR: And you are coming off 5,000-feet head, from where it is sourced in PNG.

Ms MacTIERNAN: Then it is going underground 30 metres and that it has to come up again.

CHAIR: But you still have your 5,000-feet head where it comes from, and there are pipelines. There are pumps along the way, but the pumps there are really to continue to accelerate the water. Because of the pressure with which it is coming down, you need to accelerate that water, otherwise you have to have massive pipelines to carry the pressure from that 5,000-feet head. This gives you the opportunity—and tell me if I am wrong here—for generating power along the way, part of which will run the pump that will continue to accelerate that water to allow it to move quickly so that it does not get blocked from the head pressure. Then, of course, it is generating power at the same time, which can be tapped.

Ms MacTIERNAN: It comes down to the coast and it goes down under the ocean.

CHAIR: But it is only a short amount—it does not matter. It can go down to any depth. As long as it does not come up above the 5,000 feet that it is sourced from, it will continue to flow.

Ms MacTIERNAN: Then it has to come up 30 metres.

CHAIR: The only time you would run into trouble is if you ran it across the top of Mount Bartle Frere or something like that.

Senator BOYCE: To Augathella it is all downhill.

CHAIR: There is no uphill.

Mr SNOWDON: An interesting discussion. I am interested in land use issues. One of the issues around the gas pipeline which is being proposed from Papua New Guinea is land clearances in native title areas coming down the cape, and right down to Augathella in this case. Has any thought been given to those issues and what their costs might be?

Mr Ariel : Scant. That is jumping in front of where we are at this stage. No doubt there will be issues, but I would expect that a project of this magnitude would have a fair bit of weight behind negotiating those issues.

CHAIR: My understanding is that you are using the same alignment that the gas pipeline was going to use.

Mr Ariel : Coming out of PNG?

CHAIR: Yes.

Mr Moya : In models within the resource sector in PNG—the gas, mining, oil and all that—similar systems can be established to facilitate the interests of the people who have been impacted, mainly the landowners. So that can be managed from PNG.

Mr SNOWDON: But here we have a native title system. The gas pipeline went down the eastern side of the cape. Presumably, you are going to go down—

CHAIR: No, it is the same alignment.

Mr SNOWDON: Is it?

CHAIR: The alignment they were looking at is exactly the same alignment. Most of the clearance, I think, had already been done for the gas pipeline.

Mr SNOWDON: That is certainly true.

CHAIR: So they are looking at using exactly the same alignment because it is by far the most appropriate alignment.

Mr SNOWDON: But it was to come down towards Townsville.

CHAIR: And then they will continue it from wherever it is further south, but most of the sensitive stuff would have been through Cape York and that area. Even the issues around the underground pipe have been addressed because they have already done all the research on the impact of migration of rock lobsters and things like that, what the barriers were and where they needed to place the pipes. All of that research had been done prior to this proposal coming up. My understanding is that that is correct.

Mr Ariel : That is right.

Senator IAN MACDONALD: I note you have included in your submission the national executive council minute from PNG. I notice it is subject to a condition about discussing it with Julie Bishop. Has that all been resolved?

Mr Moya : It was discussed during Julie Bishop's recent visit to PNG. That has been discussed at a high level between the two foreign affairs ministers.

Senator IAN MACDONALD: So it has been approved?

Mr Moya : Not fully but at that level of discussions.

Senator IAN MACDONALD: I notice there is a letter of support from Minister Awesa, which is good. Thank you very much, gentlemen, for coming down to talk to our hearing today. Mr Ariel, if this pipeline did come down through the spine of Cape York and through Western Queensland, I guess some would say that that would obviate the need for any dams on the Gilbert, Flinders, Thomson and any other river. Is that as you see it?

Mr Ariel : The project is not to compete with similar water supply systems. We are not robbing Peter to pay Paul here, taking it out of the left pocket and putting it into the right. There are no environmental concerns that have happened further south. You mentioned dams. Environmentalists do not want water taken out of this catchment area and placed in another. This is a full importing of the full amount of water. It is not taking any amount of water out of the existing rivers, because you would have to start pumping again. Those rivers, in most instances, are only 100 metres, at the most, above sea level.

Senator IAN MACDONALD: I know you are aware of the fact that, on the Flinders River, the Queensland government have allocated a small amount of water, but they are reluctant to do more because they say they are not certain of the quantity in the Flinders. The Flinders, for Western Australians, is a river that more or less goes from Townsville towards the gulf. Would you be able, on your way to Augathella, to open a tap into the Flinders River and provide water into that system which could then be allocated by the Queensland government?

Mr Ariel : You can do what you like with the water. If the federal government, under this proposal, owns the lot of it, they can distribute it how they wish. This is also like a system where you turn your tap on at home and water comes out. The farmer can do that. He does not have to turn a pump on first to get the water moving. He can turn the tap on and it flows out, so it is reticulated. But you can reticulate it however you want. As I said earlier, if the demand is not there, it just flows into the system and ends up in South Australia.

Senator IAN MACDONALD: All your costings show that this is the cheapest form of water that you would get anywhere along the line of the pipe.

Mr Ariel : By far.

Ms MacTIERNAN: Can we see the document showing the relative costings? Have you got a document that shows that?

Mr Ariel : I can produce that, yes.

Ms MacTIERNAN: Can I ask that we get that?

Mr Ariel : Not here, I cannot.

Senator BOYCE: You can provide that on notice. Presumably there are numerous parties that own the land that the pipeline will come across. Can you tell me who you have got there and whether your costings include some sorts of deals with those people?

Mr Ariel : In New Guinea or Australia?

Senator BOYCE: In Australia in the main, I am talking about.

Mr Ariel : No, none of that done in Australia as yet.

Senator BOYCE: But there would be numerous—

Mr Ariel : Yes. I think in very sensitive areas you would bury the pipe. You would not know it was there. In other areas it would be half-buried. In other areas it would be on concrete stanchions above ground.

Senator BOYCE: Doesn't that have the potential to affect the cost of your water?

Mr Ariel : It is minute in the scheme of things, whether is buried into the sand bed or it is on concrete stanchions or half and half.

Senator BOYCE: Australia and Papua New Guinea have wonderfully friendly relations right now but, if in 50 years time we do not have friendly relations, what is the danger—

CHAIR: Sovereign risk.

Senator BOYCE: the sovereign risk, yes, to Australia of the water coming from another country?

Ms MacTIERNAN: Australia becoming the Ukraine—

Mr Ariel : It would be the same as where you buy your cars from, I suppose.

Senator BOYCE: I am sorry?

Mr Ariel : It would be a similar problem to where you buy your cars from, if you fall out with certain car—

Senator BOYCE: I can probably live without a car if I have to, but living without water is a bit trickier, I think.

Senator SIEWERT: And, as you just said earlier, there are a lot of towns that are going to be dependent on this water.

Mr Ariel : That is why, if you speak to the Prime Minister of PNG and the senior ministers, they treat this as the other way round: it is an umbilical cord for them. They want to stay as close as they can to Australia, more so than an Asian influx into the country.

Senator BOYCE: Could we just record all the nodding that is going on from the Papua New Guinean officials!

Mr Ariel : You cannot say it is 100 per cent secure, but, from independence in 1975 through 40-odd years, they have not had a gunshot fired in anger. They do not have tanks in the street. They have had stable government up there, albeit—

Senator BOYCE: I am not concerned about the stability of the Papua New Guinean government per se; I am simply saying: we are wonderful friends now, but there is nothing that guarantees that in 50 years we will be wonderful friends.

Mr Moya : History speaks for itself, doesn't it. PNG and Australia have come this far. Fifty years down the road, the relationship is going to be stronger and more stable because of a lot of things that are happening within PNG, Australia and our northern neighbours. PNG will continue to see Australia as the bigger brother and foster stronger relationships with projects of this magnitude.

Senator IAN MACDONALD: As well as that, PNG will get a financial benefit out of the sale of the water, and they cannot really sell it to anyone else, can they?

Mr Moya : No.

Mr Ariel : And it will still be there when gas, gold and other minerals have been exhausted.

CHAIR: Have you dealt with the environmental concerns about cross-contamination of water from the source and what impact that is going to have on the Murray-Darling? Is there any prospect of cross-contamination from where the water is sourced?

Mr Ariel : It is on the list of things to do in the initial feasibility study. If questions like that cannot be answered in the positive, we can stop there and then; that project will not proceed any further. If the water has some pathogens in it that cannot be dealt with and will then land in Australia, obviously you cannot do it. The source of it is Mount Giluwe. That is 14,500 feet.

Mr Moya : No-man's-land.

Mr Ariel : Yes. There is no agriculture, no fertiliser, sparse population and very little fish life up there—if any. It is too high.

CHAIR: But it is infrared treatment as well, isn't it.

Mr SNOWDON: Do you pump straight out of the river or set up a dam system?

Mr Ariel : No dams. Because of the steepness of the river up there—and I have rafted all these rivers I am referring to—all you need is a big funnel, virtually. You build up head pressure as well.

CHAIR: You are talking about a five-metre intake. What is the environmental impact on the water source, on where you are taking it from? Is it going to impact much on the flow of that water source?

Mr Ariel : Our initial estimate of the percentage that we are taking of the total flow of freshwater into the Gulf of Papua is a single digit—it is less than 10 per cent of the water that is available there now. That is on a daily take of a minimum of six to eight gigalitres per day. It is an enormous quantity of water. If you look at google maps, you can see how the freshwater pushes the actual saltwater, the tidal water, out to sea—on a permanent basis. This is not seasonal water we are talking about up here; this is a guaranteed supply of almost as much water as you want into Central Queensland and the Murray-Darling Basin.

CHAIR: Thank you very much for taking the time to be here. It is certainly thinking outside the square. Sometimes it is important that we get those sorts of concepts to have a look at and evaluate. Thank you very much indeed for your time.

Senator IAN MACDONALD: You are not asking for any financial commitment from the Australian government at all?

Mr Ariel : No, but we would certainly like to get into negotiations about them being the wholesaler of that water. Might and Power would own the hardware and the operation. PNG government would supply the water. The Australian government would wholesale that water. Once you have got those things locked in, the cost of it, the funding of it, will just fall into place.

Senator IAN MACDONALD: As you said before, your original proposal was to feed Brisbane at the time of the drought 10 years ago, which was followed by some massive floods. But there will come a time again when Brisbane wants water. You are talking about irrigating—that is my loose terminology there—a lot of Queensland, so you could well be saying the Queensland government as well as the federal government when you talk about wholesaling?

Mr Ariel : Well, it goes across the state borders: New South Wales, Victoria and South Australia.

Senator IAN MACDONALD: If it goes into the Murray-Darling, it does, but if it just goes to Brisbane—

Mr Ariel : I took Brisbane off because of the distance, another 450 kilometres from Augathella in to Brisbane, and you are starting to get into the Great Dividing Range stuff then as well. It still worked, but it did slow down.

Senator BOYCE: They might want to extend it some day too, mightn't they?

Mr Ariel : No, the Brisbane council and the state government are not all that rapt in the Tugun desal plant, which has not been commissioned properly.

Senator IAN MACDONALD: Do you have a figure on the desal?

Mr Ariel : I am not going to quote it off the top of my head. I just do not have it there. But I do have that information.

CHAIR: If there are any further questions, the committee will put them on notice through the secretariat. Again, thank you very much for your time here. It has been greatly appreciated, and we do appreciate your submission.

Mr Ariel : Thank you for the opportunity.