LNG Production and Supply

The plan is to build an LNG production facility on Barrow Island, located 70 km off the northwest coast and occupying only 1.3 percent of its 235 km2 land area. Initially from 18 wells, gas will be extracted from the Gorgon and Jansz fields and delivered via sub-sea gathering systems and pipelines to Barrow Island for treatment and liquefaction (see map). The gas plant will consist of three trains, each capable of producing five million tonnes of LNG per annum. LNG and condensate will be loaded onto LNG carriers and oil tankers for delivery to customers overseas. In a later phase, natural gas for domestic use will be exported via a 70 km sub-sea pipeline to the mainland.

The GJV has entered into agreements with Mermaid Marine (Dampier) and the Australian Marine Complex for supply base logistics support. The GJV has let approximately $10 billion in contracts by 17 September 2009

Economics and Market

The Greater Gorgon area now contains approximately 25% of Australia’s known gas reserves which is equivalent to some 6.7 billion barrels of oil. Economic benefits in Australia will be an increase in national Gross Domestic Product of A$64 billion. About A$33 billion will be spent on locally purchased goods and services.

Demand for large volumes of LNG is fueled by rapid population growth aindustrialization in the Asia-Pacific region with natural gas consumption expected to double over the next 15 years. The Gorgon joint venture partners are aggressively pursuing innovative market opportunities in key countries such as China, Japan, Korea and Singapore. About $300 billion worth of gas supply contracts have already been negotiated.

Construction

Construction is now underway with capital costs reported to be A$43 billion. Gas production will begin in 2014 and continue until 2074.

Environmental Protection

The environmental assessment process was completed in August 2009 when the State and Federal governments approved the revised and expanded project scope. Detailed and rigorous assessment processes took six years to complete and environmental approvals reflect the commitment to safeguarding the delicate environment of Barrow Island. These conditions are being built into the project to ensure operations are conducted in an environmentally responsible way on this Class A Nature Reserve.

A second part of the Gorgon Project involves subterranean sequestration of some five million tonnes of carbon dioxide (CO2) per year. CO2 comprises about 15% of the raw gas stream which will be stripped out and then injected into aquifers at a depth of more than 2 km beneath Barrow Island. This development will constitute a world first and is controversial due to unresolved geotechnical issues with the storage of CO2.

Environmental Significance of Barrow Island

Barrow Island was set aside as a nature reserve in 1910 in recognition of its outstanding flora and fauna values. It is currently reserved as a Class ‘A’ Nature Reserve for the purpose of ‘Conservation of Flora and Fauna’, which represents the highest level of protection afforded under State legislation. In 2004, the majority of the waters around the island were included in the Barrow Island Marine Park and Barrow Island Marine Management Area (note that the Barrow Island port area was excluded). The island nature reserve is vested in the Conservation Commission and the marine reserves in the Marine Parks and Reserves Authority. Both are managed by the Department of Environment and Conservation (DEC).

The biodiversity values of Barrow Island are unique and significant on an international scale. It is Western Australia’s second largest island at approximately 23,600 hectares, and one of the largest land masses in the world without any established introduced vertebrates. Of the known taxa, there are at least 24 terrestrial species that occur nowhere else.

Thousands of years of isolation have resulted in the genetic differentiation of species, with taxa now endemic to Barrow Island, such as the Barrow Island Euro, White-winged Fairy Wren, Barrow Island Skink, and a subterranean blind snake. Most reptile and invertebrate species on Barrow Island appear to be genetically distinct from mainland populations of the same species. Barrow Island is considered significant for subterranean fauna at the regional, State and national scales. Barrow Island is also a significant nesting site for marine turtles, with four species known to nest on island beaches and a regionally important nesting area for green turtles and flatback turtles. Over 3000 individual flatback turtles have now been recorded nesting on the eastern beaches of Barrow Island.

Environmental Approval

In late 2007, the GJV obtained State and Commonwealth Government environmental approvals for a two train 10 Mtpa LNG development. In August 2009, the joint venturers received State and Commonwealth environmental approval for the addition of a third LNG train that will increase LNG capacity to 15 Mtpa. Links to the environmental approval statements are below:

The level of assessment for the 2007 foundation project was an Environmental Review and Management Plan/Environmental Impact Statement. The environmental approvals have imposed stringent environmental conditions on the GJV, including the requirement to comply with over 20 environmental management plans.

In addition to the requirements of the environmental approvals, the GJV has committed to conservation initiatives and undertakings worth approximately $150 million, including:

• the Northwest Shelf Flatback Turtle Conservation Program, valued at $62.5 million over the life of the project (expected to be 60 years) to increase protection of the turtles in areas away from Barrow Island;
  

   

• the Northwest Shelf Flatback Turtle Intervention Program, capped at $5 million, to improve recruitment to the turtle population in the event that monitoring demonstrates an impact upon the turtles; the Threatened Species Translocation and Reintroduction Program, valued at $10 million over 12 years, for selected species from Barrow Island to other suitable locations around the State; monitoring and auditing of marine activities during the project’s dredging and marine construction phase, up to $2.5 million; a financial guarantee, capped at $10 million, to cover Government costs for the eradication of viable non-indigenous species introduced to Barrow Island; and $60 million for Net Conservation Benefits (under the Gorgon State Agreement).

The GJV is also required to fund the Department of Environment and Conservation to maintain a permanent management presence on Barrow Island to manage the impacts, if any, on the island’s marine conservation over the life of the project.

Domestic Gas

The project will be a welcome additional supplier of domestic gas (dogmas) to Western Australia. The Gorgon State Agreement requires the GJV to reserve 2,000 petajoules of gas for the local market and to establish (unless commercially unviable) a project on Barrow Island capable of delivering at least 300 terajoules per day of gas to the local market.

The delivery of domestic gas is expected to commence by 31 December 2015 or at the same time LNG is first produced from the third LNG train, whichever is the earlier.

The domgas processing plant will be integrated within the LNG processing facilities on Barrow Island and a pipeline will transport gas to the Dampier to Bunbury Natural Gas Pipeline (DBNGP).