IT is not so much what is in the ACIL Allen’s assessment of the...

IT is not so much what is in the ACIL Allen’s assessment of the economic impacts of a potential shale gas industry on the Northern Territory but what isn’t.
The 230-page report, The Economic Impacts of a Potential Shale Gas Development in the Northern Territory, painted a lacklustre, or as the gas industry’s lobby group APPEA described “conservative” assessment, of what onshore gas development might deliver for the Territory.
On the flip side activists groups like Lock the Gate, who oppose onshore gas development and contributed to the report, said it confirmed the risk versus reward was not worth it.

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But so much has been left out you have to wonder if ACIL Allen hasn't sold the NT’s future industrialisation opportunities through manufacturing or export potential well short?
At least one junior miner quoted in today’s NT Business Review thinks so.
Verdant Minerals managing director Chris Tziolis sees his Ammaroo Phosphate Project, located on Ammaroo Station about 220km south east of Tennant Creek, as a future foundation for a fertiliser industry.
“It (the report) didn’t contemplate any downstream usage and I think it sold the Territory’s potential short especially given we will be sending gas to Queensland to sustain a fertiliser industry through the North Gas Pipeline,” he said.
“Our project could be the starting point of attracting a much larger industry. At this moment Australia imports most of its fertiliser. But we could have cheap access to phosphate and cheap gas which are important ingredients for the downstream production of fertiliser.”
Yet that, and any other downstream industries were not included. Only dry gas — so no liquids, like oil, was considered when looking at potential products. It also means any associated jobs potential is excluded.
ACIL Allen argues this is because “all economic modelling is subject to uncertainty, and should be treated with caution. ACIL Allen considers the modelling presented in this report is subject to higher than usual uncertainty. The development of a shale gas industry in the Northern Territory is at the very earliest possible stages.”
In response to NTBR questions ACIL also said: “It is not considered appropriate to model development of downstream industries on the basis of a new energy source alone, as development is based on many other factors besides the availability of an energy source.”
Verdant wasn’t alone. In identifying future economic drivers the report left out Defence and the $20 billion to be spent over a two decade period. Jemena, which is building the 622km NGP between Tennant Creek and Mt Isa in Queensland also didn’t contribute to the report despite ACIL Allen using Jemena’s decision to only build a 12 inch pipe due to a lack of customers and gas moving forward as a key piece in some of its economic modelling.
A Jemena spokesman confirmed the company did not contribute to the report.
“Under the tender contract awarded by the Northern Territory Government, Jemena could build either a 12 or 14-inch pipeline, depending on the demand for gas transportation services,” he said.
“Due to deadlines associated with ordering pipe to meet our construction schedule, a final decision on the size of the pipe needed to be made by 1 April 2016. “At that point in time there were not enough NT gas producers who were ready to commit to delivering gas to customers to be able to economically justify a larger pipeline. However the pipeline is scalable and the capacity can be relatively quickly increased as demand for transportation services increases.”

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ACIL Allen also chose not to use Origin Energy’s Amungee NW-1H well in its modelling.
“To date,” according to the report, “there has been one fracture stimulated horizontal well that has been tested in a near-production setting — Origin Energy’s Amungee NW-1H well, in the Beetaloo Sub-Basin of the McArthur Basin.
“While the well delivered a positive production test result, significant further testing is required to determine the precise scale, scope and qualities of shale gas production potential in this sub-basin alone, let alone the remainder of the Northern Territory.
“However, in order to conduct economic impact assessment modelling, it has been necessary for ACIL Allen to develop a commercial financial model of an industry in the NT.
“This model has been built using a range of assumptions, and does not represent an assessment of the commercial viability of a shale gas industry development.
“It is not possible to conduct such modelling at this point in the industry’s life cycle, as even the most basic information regarding the quantity and quality of gas in situ is unknown.”
On this part ACIL Allen says it was not instructed by the Scientific Inquiry into Hydraulic Fracturing to exclude the Amungee Well resource information from methodology. Interestingly the Well numbers it quotes in the report vary from the July Interim report by up to half.
ACIL also denies being instructed on any of its methodology or the exclusions including what benefits may exist for other industries. The report identified that for every two pads built there would be a requirement for 1.7km of road.
ACIL said: “It is not possible to determine how improved roads infrastructure would benefit other industries as this is location specific.” ACIL did come up with scenarios three development models — Breeze; Wind and Gale.
At the lowest levels royalties and taxation will be worth $29 million to the NT Budget per annum or the equivalent of a new school every year for 25 years.
At the highest level our coffers will grow by $143 million per annum which is roughly $20 million short of the total royalties collected from the resource sector.
This revenue will be spent on services for Territorians but ACIL Allen’s report and the subsequent commentary seems to have missed this point.
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■ SHALE CALM
The moratorium is lifted, and exploration and appraisal activity occurs. However, the results of testing indicate the resource is not commercial, and no further activity takes place.
■ SHALE BREEZE
The moratorium is lifted, and exploration and appraisal activity occurs. A relatively small scale development occurs, targeting production of 100 terajoules (TJ) per day into existing NGP pipeline, the net effect being an increase in the amount of NT gas flowing to the East Coast market.
■ SHALE WIND
The moratorium is lifted, and exploration and appraisal activity occurs. A moderate scale development, targeting production of 400 TJ/day into newly constructed pipeline infrastructure, to fill short-term gap in East Coast industrial and power generation, and the Territory market post-Blacktip.
■ SHALE GALE
The moratorium is lifted, and exploration and appraisal activity occurs. A relatively large scale development, targeting production of 1000 TJ/day into the Darwin LNG facility and additional East Coast supply, replacing the Bayu-Undan feed stock as it depletes in the middle of the next decade.