The LNG Port for Gladstone; LNG reduces greenhouse gases as we aim to go for more environmentally friendly wind and solar systems.

Written by Gerry Clarke

The Liquefied Natural Gas (LNG) fields from central Queensland will have have their major exports through the port here at Gladstone. With advances in technology, LNG has developed into a key transition fuel, with only half the carbon emissions of coal, as we move to a low carbon future with technologies like wind and solar.

Four gas firms are building export facilities at the southern end of Curtis Island, with three currently under construction. See these on Pocket Book Map G at B1 and C1.

The firm of AP-LNG is a joint venture from Origin, Australia's largest energy company, and ConocoPhillips from Houston USA, a firm with a proven record in the delivery of LNP projects internationally. The QC-LNG is owned by the BG Group from the United Kingdom. The G-LNG belongs to Santos with Total, Kogas and Petronas. These three projects are currently being built by Bechtel. The Arrow-LNG, a partnership between Shell Oil and PetroChina, is scheduled for a later construction. See contact phone numbers for these firms in this Pocket Book under "Liquefied Natural Gas - Plants".

Arrow

Arrow Energy is an integrated coal seam gas company, safely and sustainably delivering a world class coal seam to liquefied natural gas projects. Arrow CSG-LNG project comprises of expanded gas fields in the Surat and Bowen basins, two major CSG pipelines and a new liquefaction processing facility on Curtis Island. Arrow is a proud Queensland-based company, privately owned in a 50:50 joint venture by oil giants Shell and PetroChina. Arrow employs more than 1,100 staff across the state.

Arrow estimates there is at least 70,000 petajoules of gas contained within its portfolio of exploration tenements across Queensland and northern New South Wales, which will support both the domestic needs for energy in Queensland as well as support its CSG-LNG project. The project will play an important role in meeting worlds growing demand for cleaner burning fuels. Arrow will submit a final investment decision on its LNG project to shareholders late in 2013.

A Joule & the Amount of Energy

These are "big numbers", which need some understanding. The basic unit of energy is the joule. The joule was named after the English physicist, James Prescott Joule who lived from 1818 to 1889.

A joule is the work required to produce one watt of power for one second, or one "watt second". In a practical sense, a fluorescent light-tube as used for lighting in most offices, runs on 40 watts of power. So each second, the tube does 40 joules of work while producing it's light. In a minute it has done (40x60), 2400 joules of work, and during an hour it has done 144,000 joules of work. That's just one fluoro tube, so a joule is a pretty small basic measuring unit. This fluoro, working 8 hours a day for 240 work-days a year will use 276,480,000 joules of energy. Or 276 million joules. A small office of say fifty sq m would usually have 10 fluoros and four computers, a printer, an air conditioner, phone system, photocopier etc using the equivalent of about 72 fluoros. (Twenty 200 watt solar cells running at 50% efficiency would also run this small office.) The "Watt" unit is named after James Watt, a Scottish engineer who lived from 1736 to 1819, and Newtons are, of course, named after Sir Issac Newton. Newton was famous for 'discovering' various laws of gravity after seeing an apple fall to the ground. So fittingly, one joule in everyday life is "the energy required to lift a small apple one metre straight up." (This small apple, though, weighs exactly 102 grams.)

Back to Arrow's petajoules. The petajoule (PJ) is equal to 1015 joules. Simple ... well not quite. That little 15 next to the 10 means we need to have 15 naughts in our number.

So a petajoule is 1,000,000,000,000,000 joules of energy. This will run 3,616,898 flouro tubes for one year, or say 50,000 small offices. Or, perhaps a town with 50,000 residents for the homes and businesses for a year.

If you take this petajoule and use the energy "all at once" the resultant mad rush of energy is usually called an explosion. Using 210 PJ "all at once" is equivalent to about 50 megatons of TNT. This is the amount of energy released by the Tsar Bomba, the largest man-made nuclear explosion ever. So we are talking about a lot of power.

When Arrow says they have 70,000 Petajoules, they mean they could power the city of greater Tokyo with its 35 million people for perhaps 100 years. Of course, they intend to use a lot of this energy in Australia - not just for exports.

Australia Pacific

AP-LNG expects to have 6,000 jobs during their project construction and 1,000 jobs for the continuing operation. AP says that coal seam gas emits 50% fewer greenhouse gases than coal. CSG is used to make LNG.

The AP-LNG processing facility on Curtis Island will have a small footprint for a resources project - 244 ha in total with less than 200 ha needing to be cleared for construction.

Coal Seam Gas and Landowners

Coal Seam Gas (CSG) is natural gas found in coal deposits. The coal and gas are formed from plant matter under pressure over many millions of years. Coal seam gas is used in the same way as any other form of natural gas for cooking and heating as well as in industrial processes and electricity generation.

CSG collects in underground coal seams by bonding to the surface of coal particles. The coal seams are generally filled with water and it is the pressure of the water that keeps the gas as a thin film on the surface of the coal (the technical term for this is 'adsorption'). The coal seams generally contain more brackish (salty) groundwater than aquifers that are usually used for agriculture.

The Queensland Government understands the concerns farmers have about coal seam gas and its extraction. The minister for the environment, Mr Andrew Powell said to Parliament in June 2012: "The government's view is that landholders should not only have their rights protected but end up better off through their co-existence with the industry."

The level of gas that can be produced from a coal bed depends on the thickness of the coal, gas content, permeability and the depth of the coal seam. In high quality CSG deposits, the cleats or fractures in the coal bed are permeable enough to allow gas and water to flow freely through them.

Coal seams that can produce CSG economically are usually 200 to 1,000 metres below the surface.

In Australia, CSG is plentiful.

Coal Seam Gas History in Australia

CSG has been known about ever since the coal mining industry began in Australia in the early 1900's.

With advances in technology, it has developed into a key transition fuel, helping to lower our carbon emissions as we move to a low carbon future. CSG now makes up a significant proportion of Australia's natural gas supply, with the Australia Pacific LNG Project providing the largest CSG resources in Australia.

Exploration for CSG in Queensland began in 1976 in the Bowen Basin, but the CSG industry did not really start to grow until the early 1990's. Commercial production began in Queensland in 1996, so the CSG industry is fairly well developed in Australia.

Australia Pacific LNG's joint venture partner, Origin, has been working in regional Queensland for over 30 years and in the field of CSG for more than 15 years. Australia Pacific LNG already supplies CSG to power stations to produce electricity. It also supplies CSG to major industrial customers, homes and businesses throughout Queensland.

Although there are some exports from Western Australia, these Curtis Island terminals will form the basis of the major liquefied natural gas export industry within Australia. The process of turning CSG into LNG is relatively easy to understand. First, the gas is cooled to the point that the gas becomes liquid (about minus 161oC). The liquid is then loaded onto an LNG tanker and shipped offshore where it is delivered to a LNG re-gasification terminal. At the terminal, the liquid is heated and turned back into gas.

Over the past 50 years LNG carriers have traveled more than 200 million kilometres without a significant accident. LNG is transported via double-hulled tankers that are specially designed and insulated to prevent leakage or rupture in an accident. These vessels contain primary and secondary cargo containment systems that prevent leaks and the ships feature sophisticated equipment to enhance safe navigation.

In 2008, as part of the approvals to develop the LNG industry precinct on Curtis Island, the Queensland government established a 4500 ha area for conservation, known as the Environmental Management Precinct (EMP). The EMP recognises, protects and maintains areas of ecological significance on Curtis Island and will provide recreation areas for the community. Industry proponents, including Australia Pacific LNG will provide ongoing funding, development and management for the EMP.

Note that Gladstone Harbour & Curtis Island are not within the Great Barrier Reef Marine Park, but are within the Great Barrier Reef World Heritage Area. Mining and petroleum activities are prohibited in the Great Barrier Reef Marine Park, but are allowed in the Heritage area.

Gladstone Harbour, established in 1925, is a sheltered and secure deep water port. It is currently the largest multi-commodity port in Queensland and is classified as a heavy industry hub. The selection of Curtis Island, within the Gladstone Harbour as the site for the LNG industry's shipping activity was a long and detailed process. One of the advantages of this precinct was that a new port did not need to be developed for the industry.

Transportation of the majority of the Australia Pacific LNG workforce and construction materials from Gladstone to Curtis Island will be by ferry and barge. During the peak construction period, the AP-LNG Project will require approximately 140 one-way ferry journeys and 70 barge transits per month.

Normal operations of the LNG facility will involve two ferry trips at shift start and shift end to transport personnel. Additional movement of personnel and supplies to and from the site will take place as required, including by smaller water taxis.

The LNG Industry's Use of Gladstone Harbour

Once the LNG industry is fully developed, it is estimated that 400 LNG ships will visit the Gladstone Harbour annually. This equates to slightly more than one LNG ship per day. Turnaround time for vessels will be approximately 24 hours, with a product loading duration of about 14 hours.

The Gladstone Ports Corporation strategic plan envisages an increase in total planned port capacity to 300 million tonnes per year within the next 50 years. This is nearly four times the throughput of the year 2008. The increased traffic linked to the LNG projects is expected to be about 7 percent of the predicted increase in shipping.

There are many other harbours located around the world that effectively manage LNG traffic for neighbouring LNG terminals. These harbours are also much busier than Gladstone Harbour. Many of these harbours, such as Japan's Tokyo Harbour, are similarly located close to populated areas.

QGC (A GC Group Business) with its QC-LNG On completion, the QC-LNG plant will comprise of the following: - Two LNG production units, known as trains, each able to produce more than four million tonnes of LNG a year - Two storage tanks, each able to hold about 140,000 m3 of LNG - A marine facility for passenger and equipment transportation between the mainland and Curtis Island - Marine loading facilities for LNG cargoes. The QC-LNG plant will receive natural gas from production wells in southern Queensland via a 540km pipeline.

G-LNG Santos

This groundbreaking US$18.5 billion Project is a joint venture between Santos and three of the world's largest LNG companies, PETRONAS, Total and KOGAS.

Santos

David Knox, the head of Santos says that Santos has high quality resources, specialising in gas, with 2500 employees headquartered in Adelaide. Santos is so innovative that they completely redesigned the interior structure of the head office to make the building truly employee friendly. Its atrium spaces are amazing.

Total

Total is headquartered in France and worldwide has 96,000 employees and 15,000 service stations. Total has the world's biggest solar panel installation in Dubai.

Kogas

KOGAS, an abbreviation for Korea Gas Corporation, was incorporated by the Korean government in 1983. Since its founding, it has grown to become the world's largest LNG importer. As the nation's sole LNG provider, the Corporation is fully committed to providing clean, safe and convenient energy to the people of Korea. In keeping with this mission, KOGAS currently operates three LNG terminals and a nationwide pipeline network spanning over 3,022km in order to ensure stable supply for the nation.

Petronas

PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources.

The group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.

Petronas is a cash-cow for the government, with some 45% of the government's budget dependent on Petronas' dividends.

Many Australian visitors to Malaysia would know this oil company's headquarters building, The Petronas Towers. Also known as the Petronas Twin Towers (Malay: Menara Petronas, or Menara Berkembar Petronas) these are twin skyscrapers with 88 floors in Kuala Lumpur. They were the tallest buildings in the world from 1998 to 2004 until surpassed by Taipei 101.

Dr Ken King

In June 2012, Dr Ken King, the then head of the Gladstone Economic Industry Board, was interviewed by Jacquie MacKay on Radio 612 ABC.

Dr King said that the major projects in Gladstone under construction were worth around $40 to $50 billion, with another possible $30 billion of projects in the pipeline.

Dr King said that Central Queensland University Q has estimated 1500 - 2000 new jobs in these industries by 2018, with the flow-on effect meaning Gladstone, by 2018, will increase in population by 10,000. Currently there are 54,000 in the Gladstone area, with 15 major housing developments in Gladstone currently under construction. Dr King said there is not a shortage of land, but there are some challenges in regards to affordable housing.

There are effectively 4 projects under construction at the moment including the almost completed CRA Yarwun Alumina refinery. Ten others are on line, including rail yards associated with Wiggins island coal terminal, Arrow LNG plant, Northern oil refineries, a new power station running on gas, coal terminals to the north on Curtis Island, Qld Pacific Nickel Ltd building a refinery, Clive Palmer's projects, and potentially a steel refiner. Queensland Energy Resources with oil from shale rock present a coming $2-3 billion investment.

Dr King was pleased with the social responsibility shown by Gladstone's big industries like Rio Tinto Alcan and the LNG firms. Three of the LNG firms have already donated some $13.5 million to the Gladstone Foundation, and Arrow might contribute some $50 million into this infrastructure fund. Overall, about $1.7 billion has been spent on Gladstone infrastructure with industry providing about $170 m of this. Dr King added that industrial planning started for Gladstone some 30 years ago.

The Aluminium Community Involvement

Rio Tinto Alcan take their community involvement seriously. Read about their Rio Tinto Alcan Fund under 'Aluminium - Manufacturers/Wholesalers' in this Pocket Book. The Queensland Alumina Ltd is also well known for its establishment of the Yaralla Sports Club and ongoing involvement today.

Over their Gladstone history they have contributed some $500m to social infrastructure. See their advertisement under Clubs - Sports in this Pocket Book.

JTM Carriers and the Locals Gain Business

Jeffrey McClintock, the owner of JTM Carriers at Calliope, said he was operating 66 trucks taking road base and other materials to Curtis island during the height earlier in 2012 of building the roads infrastructure. His trucks have carried over 1.1 million tons since April 2011. While JTM was the lead firm, althogether three firms with some 120 trucks operated pretty much non-stop. Modern work camps are being established for each construction period for each gas facility.

Bechtel

Bechtel are building three of the LNG plants.

Bechtel's headquarters are in San Francisco, USA. Around the world they have 53,000 employees, and are "the world's No. 1 choice for engineering, construction, and project management". Their diverse portfolio encompasses energy, transportation, communications, mining, oil & gas, and government services. They have completed over 23,000 projects worldwide. At the peak of construction for the three Curtis Island LNG plants, the Bechtel workforce will be 8,800 strong. These projects are also delivering a range of training and upskilling programs for the workforce. Bechtel will intake 400 adult apprentices through the National Apprenticeships Program (NAP) to work on the three LNG projects.

Part of the construction process for the three LNG plants is the construction and delivery of 260 modules from around the world. The modules are pre-fabricated steel structures that are built as a single component and transported to Curtis Island. The modules will arrive in Gladstone between August 2012 and mid-2014. When they arrive, they will be put into their permanent position to make up the key components of the LNG plant.

Bechtel says, "The delivery of the Curtis Island LNG projects will help position both Gladstone and Queensland, as one of Australia's leading industrial centres."

These three LNG plants on Curtis Island will see LNG shipped around the world. AP-LNG will have a capacity of 4.5 million tonnes per annum. GL-NG will have a capacity of 7 million tonnes per annum. QC-LNG will have a capacity of 8.5 million tonnes per annum. Total capacity is some 20 million tonnes per year. (Arrow will be in addition to this.)

Financing and depreciation

Most of these projects are financed by overseas banks and overseas companies. This is a reflection of the Australian Government's taxation policies. Some of these projects could be Australian owned and financed if the Government adopted the depreciation motion which I moved and had passed by the Beerwah-Glasshouse LNP branch in 2011.

My motion is: "That this branch moves that firms may, for taxation purposes, depreciate buildings and machinery over whatever number of years the individual firm itself feels appropriate." The seconder was Eric Westman who had worked for 30 years as an audit tax inspector at the Australian Taxation Office.

My supporting statement is:

The Australian Government embarrasses Australia every time it requests China or India to invest into a business project in Australia. Here is the government requesting a developing country provide capital to a developed country. The question should be 'Why doesn't Australia, a developed country, have its own surpluses of capital for investment, especially if developing countries can have such surpluses?' The answer is in the tax system. China and India seem to not operate a tax system designed to force firms into unnecessarily high levels of debt and it appears that China, India and to a large degree the USA, generally allow investment in plant and technology to come from ordinary operating expenses of firms, thereby effectively allowing investment to be from pre-taxed income.

In Australia, investment is from after taxed income which means a firm must save two dollars for every one dollar invested.

But then the government allows the new equipment to be written off over a number of years, compatible with the lifespan of the machinery; perhaps over 10 years for machinery or 40 years for a building, thus allowing what seems to be the right benefit to the firm. However, if the firm buys the machinery from cash reserves, the firm has had to pay effectively 50% (the marginal person income tax of 48% plus medicare levies, flood levies and other levies, not just the 30% company tax rate) thus meaning only half the money is available for investment. If the firm borrows the money from a bank, they usually take a loan long enough so that it coincides with the number of years of depreciation, with all interest being tax deducible and the annual principal payment effectively being also a deduction which is called the depreciation. This system persuades business again and again to go into debt for expansion instead of expanding with the profits of the firm.

Some politicians over the years have tried simple approaches to overcome this. Sir Joe Bjelke Petersen suggested a 20% flat (income) tax. This would not really solve the investment problem and was not taken up mainly because of political considerations.

A solution is to simply say to firms that they may, for taxation purposes, depreciate buildings and machinery over whatever number of years the firm itself feels appropriate. In many cases this would be one year, thus using only cash earnings. (True accounting would still depreciate for replacement purposes over the correct lifespan of the machinery.) Very quickly firms will save for investment and invest from profits, only using bank loans for real business reasons, rather than tax minimising reasons, as the investments would come from pre-tax dollars anyway.

Surprisingly, there would be no cost to the tax revenue as long term depreciation gets deducted eventually from tax revenue now; this system as proposed in the motion merely speeds up the period, but does not increase the number of dollars claimed in depreciation. There would even be a gain to tax revenue as firms would be paying much less bank interest, which is a business expense and therefore a tax deduction, thereby possibly making higher profits.

Australia would not then beg China, India or Brazil for capital, nor need overseas loans, and Australia would see a dramatic lessening of overseas takeovers of Australian firms. (Even Fosters last year.) Passed, without dissent.

Mal Brough recommended that the motion be forwarded to the LNP finance policy committee. At the July 2012 Queensland LNP State Convention, Joe Hockey said to me that he could see merit in the concept and said that Canada now does something very similar to our motion with their depreciation.

Efficient Cars for the Future

Gordon Murray Design of the UK has just unveiled its 25 kw fully electric car with a 208 km range. This is why LNG is a 'transitory' energy. Murray's T.27 car has a top speed of 105 km/hr, weighs 680 kg, inculding batteries, is 2.5m long and 1.3m wide.

Charging Electric Car Batteries in One Minute

Korean professor Jaephil Cho has developed a new one-minute charging system for electric cars. This makes "the filling of the electric car" just as quick, maybe even quicker, than the "filling of a petrol car." That's why our front cover depicts the LPG gas for cars as a transitory fuel, with petrol to LPG to electric.

The time spent charging car batteries has been the major impediment to their general use. Prof Cho, with his four researchers at the Ulsan National Institute of Science and Technology published, their research on the 8th August 2012. The Chinese would say 8.8.12 is 'auspicious'. This might take 5 years to filter through to the small number of existing electric cars, but in 15 to 20 years this quick-charge will mean that buying and using electric cars could really be a viable option to petrol.

Lithium-ion batteries are charged by moving charged particles. Moving them faster creates resistance. It heats up the battery and causes efficiency losses.

Shoving massive amounts of energy in also leads to a kind of metallic build up called plating. Too much plating means your battery can only be used for a couple of charges before it wears out.

Enter Professor Jaephil Cho...

His team has worked out an ingenious way to reduce the resistance inside the battery. What they've done is taken the lithium and soaked it in a solution containing graphite. The graphite then turns into web of 'superconductors' that all start charging at once.

The battery, among the most humble of inventions, might just be the most important technological battleground of the next two decades. The International Tin Research Institute has been discussing a new tin-based 'anode' with the potential to increase lithium ion battery-capacity three-fold. Car makers will look to these two developments for faster charging and increased electricity retention within the capacity of batteries.

Nissen has a production LEAF car. Holden, in Australia, is about to release an electric car. The American company, Tesla, named after the famous Nobel prize winning Croatian who brought us AC current, is developing a car with a 500 kilometre range. The English have had electric delivery trucks and 'milk float' trucks for decades. Lower powered cars and bikes can survive on solar power when driven for an hour a day and sitting picking up sun for the other ten hours, but charging for the longer haul is essential.

Conclusion

Coal Seam Gas processed into Liquefied Natural Gas will form a large part of the World's energy for several decades.

As AP-LNG explains, all of this gas is a transitory energy reducing CO2 and other emissions to half where it replaces other energy sources like coal, while awaiting more sustainable energies in the future. Total, the world's biggest energy group, already is developing the world's biggest solar cell array in Dubai in the Middle East. BP also produces solar cells. In many instances solar electricity is already more economical than other energies. In 'several decades' perhaps AP-LNG will be right in saying this gas is just 'transitory'.

On this my thinking is also with AP & Total and Professor Cho. But then, I already use an electric bicycle! (Yeah, well, as well as a diesel car).

Gerry Clarke, Pocket Books