Making upstream infrastructure collaboration happen

Abstract

Major upstream and midstream developments are required in Australia to sustainably address the east coast gas price challenge and enable a new wave of liquefied natural gas (LNG) projects in Western Australia (WA) and the Northern Territory. Until now, each project in the WA offshore and Queensland coal seam gas systems has had its own midstream infrastructure, which is suboptimal for costs. Major players, including Chevron and Woodside, have expressed interest in a more optimal, shared ownership model, similar to others around the world. In the US Gulf of Mexico, pipeline owners established master limited partnerships to take advantage of tax benefits and to share cost with institutional investors. In Norway, high infrastructure costs led to government-mandated shared ownership. The momentum for change in Australia is gathering and includes increasing investor pressure on capital discipline for upstream companies, strong competition for final investment decisions across global LNG projects, stakeholder expectations to minimise the environmental footprint of energy projects, a strong appetite of infrastructure and pension funds for energy infrastructure assets and pipeline companies looking to expand their portfolios to realise synergies in view of increasing regulatory scrutiny and margin restrictions. This paper describes international benchmarks, identifies blockers and proposes action steps that will enable this crucial industry development.