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Tuesday, 16 October 1984
Page: 1803


Senator KILGARIFF(10.49) —I refer to an answer to a question given by the Minister for Resources and Energy, Senator Walsh, on 11 October regarding the Northern Territory gas pipeline and a proposed aluminium smelter. In the question Senator Robertson referred to the aluminium smelter and gas pipeline projects for the Northern Territory. In the answer it appears that there was some unfortunate confusion in the mind of the Minister for Resources and Energy, Senator Walsh, between the two projects or perhaps there was some shortfall in the Minister's briefing. The two projects are separate and unrelated, with time frames perhaps seven to 10 years apart.

The first project is a gas pipeline designed to have central Australian gas used in Darwin to bring electricity costs into line with electricity charges. This means reducing costs from about 18c per kilowatt to 9c per kilowatt and eliminating a Commonwealth subsidy, currently on a level of about $60m per year. This project might come to fruition in 1987 with the co-operation of all parties concerned. The second project aims at tapping the off-shore petrol gas field, requiring about $3 billion in investment. Such development might include liquefied natural gas export, a gas to gasolene plant and electricity for an aluminium smelter. This project is not likely to come to fruition until the mid- 1990s. Therefore, Senator Walsh is wrong to say that the smelter is associated with the pipeline project. The two are quite separate.

Since Senator Walsh's briefing on the pipeline appears to be deficient, I would like to provide some further details for him. First, as to the gas supply, the Northern Territory Government and the producers believe the required gas-about 200 PJ over 20 years-is available from the Mereenie and Palm Valley fields. This belief is supported by Van Poollen and Associates, international petroleum consultants of very high repute. Van Poollen assesses the proven reserves at Palm Valley as near 33 PJ. The assessment is also agreed to by the Royal Bank of Canada, which is acting as consultant to the Northern Territory Government and which has had significant experience in the financial analysis of pipeline projects. The Royal Bank of Canada says that 200 PJ of reserves are bankable for project financing. There are some technical differences of opinion held by the Bureau of Mineral Resources as to whether the gas volumes are held in Palm Valley or Mereenie, but these differences are being sorted out by sensible technical discussion, as such things ought to be.

I am also advised that the Northern Territory Government has now negotiated a price for the option to take gas from Palm Valley. The price is one which ensures the viability of the project. The Northern Territory Government and the Westpac consortium continue to negotiate on the pipeline tariff and, while the details of this are not yet settled, no one would argue that the pipeline is uneconomic with or without Gove being included. I say 'no one' because it is important that we realise that many Commonwealth Government departments have been provided with the various economic analysis papers. Those departments include the Department of the Treasury, the Department of Resources and Energy and the Pipeline Authority.

At present the Northern Territory Government is fine-tuning power generation technology options. The basic choice seems to be open cycle gas turbines, combined cycle gas turbines, or some combination of these. What the final choice will be is still undecided, but again no one argues that the system is uneconomic. This is really an exercise in getting to the preferred option. I understand that the Northern Territory Government has consulted and liaised with all interested parties on an open book basis. I believe this is a project for Australia with 60,000 to 100,000 tonnes of steel pipe required and thousands of man years of work involved. A significant proportion of this work will be done in the Port Kembla area where a depressed outlook for work has existed for some time. I sincerely hope that this project is not jeopardised by the Minister's attitude, as expressed over the Australian Broadcasting Corporation and within Hansard.

I shall give a few further facts and figures regarding this enormous project. The project is the most attractive of the alternatives considered in considering the question of Darwin's power house. This power house is being constructed now at a cost of some hundreds of millions of dollars. In 1981 the Northern Territory looked at the various forms of energy that could be used. It concluded that hydro-power from the Ord River would be mostly tied up in Western Australia ; that there was not sufficient base load for nuclear power in Darwin; that the development of off-shore gas would be too expensive; and that there was nothing at the time to indicate that gas from central Australia would be a feasible project-I am going back now to 1981. So, coal from Queensland got the go-ahead by default.

There are a number of problems with coal, as was soon found out. These included the huge shipping costs. No relief has been offered by the State governments of New South Wales and Queensland. The Territory would have to pay the same price as overseas purchasers. The cost goes from $15 or $16 per tonne to $40 f.o.b. Also, 33 unions were involved in the industry. Of course, 33 unions had the potential to cut off supplies at a crucial time. It was at this time that further gas wells were discovered in the southern and south west part of the Northern Territory. One of those discoveries was Dingo. It was originally thought that the pipeline would cost $400m but with technical advances four to five kilometres of pipeline can be laid per day, and the cost would be $230m. So , in just a matter of some three years the technical change which has taken place has resulted in an immense saving of $170m.

Late last year the Northern Territory Government called tenders for the supply of gas to Darwin and received six bids-five for reticulated gas around Darwin and one for piped gas from Alice Springs. The bid came from the Australian Gas Light consortium comprising the Australian Gas Light Co., Boral Gas Ltd, CSR Ltd , the Moonie Oil Co. Ltd, Nabalco Pty Ltd and Westpac Banking Corporation. Westpac commissioned a report on the feasibility of the project which was carried out by Van Poollen and Associates. The report showed a saving of $145m over the coal proposal in the first 15 years of operation of a gas-powered station. The saving is in the final price and lower capital cost of the gas powered station. From the year 2003 it is expected that the cost would be 6* per kilowatt hour in real terms. I have a copy of the economic feasibility study dated 16 August 1984 entitled 'The Northern Territory Gas Supply Consortium by the Australian Gas Light Co., Boral Gas Ltd, CSR Ltd, the Moonie Oil Co. Ltd, Nabalco Pty Ltd and Westpac Banking Corporation'. I seek leave to have this document tabled in the Senate so that honourable senators or anybody in the community who wishes to see or learn more about this project can read this document. As I say, it is an open project and the only way it can be successful is by being better understood.

Leave granted.


Senator KILGARIFF —Following negotiations, a memorandum of understanding has been signed with Westpac. I refer now to an article in the Sydney Morning Herald entitled 'Magellan wins Northern Territory gas contract'. This is a very accurate article by Peter Gill in Canberra except for the third paragraph in which it is actually said that the consortium has signed a contract. The contract has not been signed because, as I have indicated, the memorandum of articles has been signed with Westpac, not an agreement. So, it is now proposed to investigate and confirm the economic and financial assumptions upon which Westpac based its assessment. As I say, no contract has been signed with the Magellan corporation. But, as I have indicated, it has signed a letter of intent , and letters of intent are required from other members of the venture to illustrate to the Federal Government the viability of the project. Of course, it is acknowledged that the case has to be prepared and the submissions then go to the Federal Government. It is then intended to approach the Federal Government to transfer the $160m subsidy paid to the coal fired project to the gas project.

The outlook for the gas pipeline's viability is even more attractive if an extension to supply Gove is included in the plan. The current proposal is for a 12-inch pipeline from Alice Springs to Darwin. If Gove comes in-it has a demand for power three times that of Darwin-a 16-inch pipeline from Alice Springs to Mataranka would be required and then two 12-inch pipelines to Gove and Darwin. I turn now to gas reserves at Palm Valley, Mereenie, Dingo and Orange Creek. Dingo and Orange Creek need further appraisal. It is doubtful that Mereenie can produce at this stage but, once into production, it has even more than Palm Valley. Palm Valley has a production history, and the revised Van Poollen appraisal has estimated that there is more than five times as much gas there as originally thought. This is where I think there has been some confusion in the project because now the reserves have been proved and developed immensely over the last four or five years. I feel, in light of the Minister's criticism that, sadly, the information that has been given to him is perhaps some four to five years or even more behind the times.

I was saying that Palm Valley had five times as much gas as originally thought. Its reserves are estimated at 260 million cubic feet, more than enough to supply Darwin for 15 or 20 years. The requirements for those periods are 170 million and 240 million cubic feet respectively. I understand that the information has come from the Bureau of Mineral Resources and that it has been basing its advice on outdated information. On the basis of that information, Senator Walsh described the scheme in the Senate and on the Australian Broadcasting Corporation as 'pie in the sky' or 'a piece of lunacy'. I think it would be now a foolish man who would make such a criticism without first inquiring into the adequacy of his sources, and I do not doubt that Senator Walsh will regret his hasty statement. I had hoped to put a number of questions to him today. I did not have the opportunity. I put them now in the hope that Senator Walsh will give some indication as to the reliability of his source of information. The questions I wished to ask him this morning were as follows:

I refer to the Minister's statements in reply to a question from Senator Robertson last Thursday. In view of the severe criticism of statements made by the Minister relating to the proposed Alice Springs to Darwin gas pipeline in the media, does the Minister concede that his remarks were ill-considered and based on unreliable information? In particular, does the Minister acknowledge that the information provided to him was wrong in that it put the view that the gas pipeline and the aluminium smelter to be built in the Northern Territory are associated when the two projects are quite separate? Does the Minister believe that he was misled by his informants?

In closing, I make the point that the north of Australia is on the verge of a breakthrough in the search for cheap energy so essential to the development of the outback and our north coast. Now there is every indication that our inland natural resources are going to be that trigger. Fuels for power generation for remote areas are extremely costly. Hopefully these small towns along the Stuart Highway, which bisects the Northern Territory, will be able to link to this pipeline. All in all, there is much room for optimism, not pessimism.