PMA’s Taylor returns from natural gas advisory visit to Australia

Australia’s Northern Territory (NT) is trying to decide how best to harness a newly-discovered onshore natural gas play to drive economic growth, and for five days at the start of July, PMA President & CEO David N. Taylor joined Pennsylvania state officials on a visit to the NT to offer help and advice.

“The Beetaloo Basin play is believed to be as large as the Marcellus, and of similar composition” Taylor said. “But there are numerous obstacles to overcome to get the gas and gas by-products to the domestic market where they are needed most.”

Taylor and others, including Denise Brinley, Executive Director of the Governor’s Office of Energy, met with NT cabinet officials, members of Territorial parliament, and business members of the Energy Club of the Northern Territory at the capital port city of Darwin, which sits on the northern tip of the territory near the equator. Taylor was invited as a member of the steering committee of Forge the Future, the initiative begun in 2018 by Pennsylvania businesses to capitalize on the enormous potential of the state’s world-class energy assets. He has also been one of the state’s leading advocates over the years for high paying manufacturing jobs created by maximizing Pennsylvania’s energy production.

“The NT is an area twice the size of Texas, with the population about the same as Cumberland County’s – 250,000 people. One of the goals we discussed was to use the onshore energy opportunity to help grow the Territory’s population by offering permanent jobs in manufacturing. Instead of having itinerant workers fly in for a few weeks and then depart, the Territory could earn permanent residents with new manufacturing facilities, housing, and infrastructure. Instead of one Alice Springs [a town of 25,000 in the south of the NT], you could grow three or four of them.”

Taylor said that the Territorians want to lead a change away from the export-only approach that, while making Australia a global leader in the export of liquified natural gas (LNG), has shortchanged domestic consumers, including manufacturers who are suffering very high prices and lack of supply. There is an LNG terminal at Darwin that ships out gas extracted from beneath the Timor Sea. In June, ConocoPhillips announced that it expects the Darwin LNG plant to close for one to two years between 2021 and 2023, when gas from the Bayu-Undan field in the Timor Sea is exhausted.

Natural gas royalties from offshore production are paid to the national government in Canberra, while royalties from onshore production would benefit the Territorial government, which has experienced longstanding revenue difficulties.
Developers are looking to both the Beetaloo and the McArthur Basins in the NT, which are estimated to hold 200 trillion cubic feet of shale gas resources. The Marcellus contains about 84 trillion cubic feet of undiscovered, technically recoverable natural gas and 3.4 billion barrels of undiscovered, technically recoverable natural gas liquids, according to estimates from the U.S. Geological Survey.

One of the obstacles to development stems from the sheer size and remoteness of the place, Taylor said. “The vastness of the Australian interior is almost beyond comprehension, and the climate there is very daunting. The Australian continent is the size of the lower 48 American states but where we have the Great Lakes, the Mississippi River valley, and the Great Plains, they have desert. As a result, Australia’s population centers are all around the coastline, like jewels on a necklace.” There are 25 million Australians, roughly equal to the population of Pennsylvania and Ohio.

Another problem, one that Pennsylvania shares, is a lack of energy infrastructure for domestic delivery. While a new pipeline from the NT to neighboring Queensland has been completed, the resources delivered there would almost certainly be sent for export as LNG. What is truly needed is transcontinental infrastructure that could deliver NT energy to the population centers in South Australia, Victoria, and New South Wales.

“I told them that if we can build a pipeline from Montana to Louisiana, they could build theirs too,” Taylor said. “The Territorians still honor the completion of the Overland Telegraph in 1872, and that’s the spirit the Australians will need to build new transcontinental pipelines.”

One benefit Pennsylvanians take for granted is not available for Australians: because mineral rights belong to the Crown, Australian landowners receive no lease payments or royalties. In Pennsylvania, the royalties and leases have paid out many hundreds of millions of dollars to landowners since the development of the Marcellus began in earnest ten years ago.

A three-year moratorium placed on drilling in the NT by the coalition Labor/Independent government is over. Just this week, Reuters reported that Santos Ltd of Australia has won the first approval from the Territorial government to resume shale drilling in the McArthur Basin.

“One of the key constituencies for NT energy development will be the ranchers and cattlemen, who are known over there as ‘pastoralists.’ In the absence of lease payments and royalties, the pastoralists might look on energy development and pipeline activity as a disruption to their livelihood,” Taylor explained, “so getting buy-in from those folks – and keeping them on board -will be critical.”

The NT has another big problem – one entirely of its own making. Three years ago, the previous NT government leased the Darwin Port to the Chinese for 99 years, and many are still asking why.

“It was a seriously dumb idea by a government that really hadn't thought through the consequences,” Neil James, Executive Director of the Australia Defence Association, told the Australian Broadcasting Corporation in March. “And even if it had, was prepared to ignore the long-term costs, both financial and strategic, they were inflicting on the rest of the country.”

Earlier this month, reported that the number of U.S. Marines deployed to Darwin reached its full complement of 2,500 to counter China’s “rising dominance in the Pacific.”

“At every opportunity, I thanked the Australians for hosting our U.S. Marines at Darwin,” Taylor said, noting that USMC V-22 Ospreys (made in part at Boeing Philadelphia) were on site at Darwin Airport. “A strong and prosperous Australia is important for the entire Western alliance, and that is why I was pleased to be part of the Pennsylvania delegation to Darwin. We had an excellent exchange with the Territorians, who only half-jokingly said they want to join as the fourth member of the [Pennsylvania/Ohio/West Virginia] Tri-State Shale Coalition. I am hopeful that Pennsylvania’s partnership with the NT will continue and I look forward to assisting the Governor’s Energy Executive with her important work.”

The “Top End” (as the NT refers to itself) is Australia’s jumping-off point for commerce with the growing Asian economies in Singapore, Malaysia, Taiwan, and elsewhere in the region. Following the discovery of the significant natural gas opportunities with Beetaloo and McArthur, the NT now has a clear path to achieving lasting growth and drawing nearer to full statehood.

“Just as we are seeing with the Shell facility in Beaver County, an energy-enabled economy can drive prosperity across the board,” Taylor noted. “The energy from natural gas and the value added through petrochemical manufacturing create wealth and economic dynamism that can transform our economy. Our continuing efforts with Forge the Future are focused on making that happen here, and, in the same way, I hope our friends in Australia can achieve that brighter future too.”