Gas Quality: Competition Policy and Economic Development in Western Australia K. Peter Kolf Senior Manager Office of Energy

Acknowledgments

* Mostly a commercial issue * To do with access to the DBNGP * Spill over into safety & technical areas * Customer satisfaction a major issue * Some environmental concerns The Gas Quality Debate in Western Australia

Typical Natural Gas Compositions and Properties

Gas Supply and Demand Classified by Gas Quality Requirements Industry & Power Gen. (85.5%) 46 ó WI ó 52 MJ/m 3 36 ó HHV ó 42.3 MJ/m 3 Total Sulphur Hydrogen Sulphide Commercial & Residential (5.9%) 47.3 ó WI ó 51.5 MJ/m ó HHV ó 42.3 MJ/m 3 Total Inerts ó 8 mol% LPG (5.5%) 47.3 ó WI ó 51.5 MJ/m 3 minimum of 1.45 tonne/TJ extractable Total Inerts ó 5.5 mol% (5 mol % in contract) Moderate Treatment (33.9%) (Available reserves 3,021 PJ, 6. 5% of total reserves/resources) Extensive Treatment (21.7%) (Available reserves 568 PJ, 1.2% of total reserves/resources) PRODUCING (Cat. A) NON PRODUCING RESOURCES Minimum Treatment (Available resources 535 PJ, 1.1% of total reserves/resources) Moderate Treatment (Available resources 9,866 PJ, 21.2% of total reserves/resources) Extensive Treatment (Available resources 29,038 PJ, 62.4% of total reserves/resources) Feedstock (3.1%) 46 ó WI ó 51.5 MJ/m 3 (51 MJ/m 3 in contract), 36 ó HHV ó 42.3 MJ/m 3 (41 MJ/m 3 in contract) Very low LPG CO 2 ó 3.6 mol%, Total Inerts ó 5.5 mol% (5 mol % in contract) NOTE: 1. All production and consumption figures are for 1995/ The undeveloped and available reserves are as at February Consumption figures derived from AGA and OOE. 4. Reserves exclude those committed to LNG export and for resources for which limited information is available on gas composition. USERS (Cat. B & C) Minimum Treatment (44.4%) (Available reserves 5,527 PJ, 7.6% of total reserves/resources) Chart 1

Industry & Power Gen. 85.5% Low Sulphur Low Hydrogen Sulphide Commercial & Residential 5.9% Minimum Wobbe Index LPG 5.5% High LPG Low CO 2 Low N 2 Moderate 33.9% Extensive 21.7% SUPPLY Feedstock 3.1% Low LPG Low CO 2 Low N 2 DEMAND Minimum 44.4% Gas Supply and Demand Local WA

Gas Resources (Excluding LNG contracts) Gas Production 1995/96 Local WA Moderate Treatment 27.7% Extensive Treatment 63.6% Minimum Treatment 8.7% Gas Resources & Production Moderate Treatment 33.9% Extensive Treatment 21.7% Minimum Treatment 44.4%

Inlet Gas Guality Envelopes Methane & Nitrogen only Methane & Propane only 100% Methane HHV = 35.1 MJ/m 3, CO 2 =0% Wobbe Index = 51.5 MJ/m 3 Wobbe Index = 47.3 MJ/m 3 HHV = 42.3 MJ/m 3, CO 2 =0% Inerts=5.5%, CO 2 =3.6% Inerts=5.5%, CO 2 =0% HHV = 42.3 MJ/m 3, CO 2 =3.6% HHV = 36.0 MJ/m 3, CO 2 =0% HHV = 37.3 MJ/m 3, CO 2 =0% Propane + Nitrogen gas equivalent (mol%) Wobbe Index (MJ/m 3 ) Category A New Category A GGT Fields to the right of this side of line can have 1.45 tonne/TJ of extractable LPG

Inlet Gas Guality Envelopes Methane & Nitrogen only Methane & Propane only WI = 46.0 MJ/m 3 WI = 51.5 MJ/m 3 100% Methane Inerts=7.0%, CO 2 =4.0% HHV = 42.3 MJ/m 3, CO 2 =4.0% WI = 47.3 MJ/m 3 Inerts=5.0%, CO 2 =3.6% HHV = 37.3 MJ/m 3, CO 2 =0% HHV = 41.0 MJ/m 3, CO 2 =3.6% HHV = 35.1 MJ/m 3, CO 2 =0% Propane + Nitrogen gas equivalent (mol%) Wobbe Index (MJ/m 3 )

North West Shelf Gas Fields CS 2 CS 1 Dampier North West Shelf Project Pilbara GGP DBNGP Wandoo North Rankin Goodwyn Campbell Sinbad Harriet Barrow Island East Spar Crest Skate Griffin Chinook Tubridgi Roller Saladin Cossack Wanaea Rosette Tidepole Gorgon Angel Bambra Chrysaor Dionysus Echo Perseus Wilcox Wonnich Maitland Keast Marcedon/Pyrenees West Tryal Rocks Spar Pasco Scarborough Longitude (degree) Latitude (degree) Developed Reserves Undeveloped Reserves Static Resources INDIAN OCEAN Exmouth BROWSE BASIN BONAPARTE BASIN CANNING BASIN OFFICER BASIN EUCLA BASIN PERTH BASIN CARNAVON BASIN

North West Shelf Gas Fields CS 2 CS 1 North West Shelf Project Dampier Pilbara GGP DBNGP Rosette Wanaea Cossack Saladin Roller Tubridgi Chinook Griffin Skate Crest East Spar Barrow Island Harriet Sinbad Campbell Goodwyn North Rankin Wandoo Wonnich Gorgon Perseus Chrysaor Bambra Angel Echo Tidepole Wilcox Scarborough Keast Marcedon/Pyrenees Spar Pasco West Tryal Rocks Maitland Longitude (degree) Latitude (degree) INDIAN OCEAN Exmouth BROWSE BASIN BONAPARTE BASIN CANNING BASIN OFFICER BASIN EUCLA BASIN PERTH BASIN CARNAVON BASIN Gas Quality After Minimum Treatment CO 2 > 3.6 mol % N 2 > 5.0 mol % Inerts > 5.0 mol % LPG < 1.45 tonne/TJ WI <= 47.3 MJ/cu m

Inlet Gas Guality (Raw Gas) Wobbe Index (MJ/cu m) Propane + Nitrogen gas equivalent (mol%) NOTE: 1. Raw gas is assumed. No minimum treatment. 2. Dots represent all existing Developed, Undeveloped, Static reserves/resources. Cat A New Cat A GGT

Inlet Gas Guality (After Minimum Treatment) Propane + Nitrogen gas equivalent (mol%) Wobbe Index (MJ/cu m) NOTE: 1. Dots represent all existing Developed, Undeveloped, Static reserves/resources. Cat A New Cat A GGT

Inlet Gas Guality (After Moderate Treatment, into Cat A) Propane + Nitrogen gas equivalent (mol%) Wobbe Index (MJ/cu m) NOTE: 1. Dots represent all existing Developed, Undeveloped, Static reserves/resources. 3. Fields outside CAT A require high cost processing. Cat A New Cat A GGT

Natural Gas in WA Minimum Treatment Moderate Treatment Extensive Treatment Browse & Bonaparte Basins Current DBNGP Spec. Widening DBNGP Spec. High cost CO 2 or N 2 removal Committed for local contracts & export Reasonable probability future contracts Low probability future contracts - 10,000 20,000 30,000 40,000 50,000 Reserves/ Resources 1997 Total Demand Gas Quality (excluding Browse & Bonaparte Basin) PJ Total: 51 EJ Total: 40 EJ Total: 43 EJ

Natural Gas in WA NWS Gas (after moderate or minimum treatment) Other fields Extensive Treatment Browse & Bonaparte Basin Current DBNGP Spec. Widening DBNGP Spec. High cost CO 2 or N 2 removal Committed for local contracts Poss. NWSG contract ext. Additional DBNGP GGP Pilbara Committed for export LNG Contract Extension LNG Train 4 LNG Train 5 LNG Train 6 (Gorgon) LNG Train 7 (Gorgon) - 10,000 20,000 30,000 40,000 50,000 Reserves/ Resources 1997 Gas Quality (excluding Browse & Bonaparte Basin) Total Demand PJ (Current DBNGP Spec) Total: 40 EJ Total: 51 EJ Total: 43 EJ

* Prerequisite for physical interconnection * Gas appliances designed for Australian market should be suitable on any major gas distribution system in Australia * Avoid need for parallel pipeline system with different gas quality if possible Australian Standard on Gas Quality

SELECTED COMPONENTS GAS QUALITY SPECIFICATIONS - STATES AND TERRITORIES OF AUSTRALIA AND NEW ZEALAND.

Industrial vs Commercial/Residedtial Gas Guality Requirements Propane + Nitrogen gas equivalent (mol%) Wobbe Index (MJ/m 3 ) Industrial Specification Commercial/ Residential Specification WI = 51.5 WI = 46 WI = 51 WI = 47.3

Changes In Gas Quality Over Time Time Wobbe Index WI = 51.5 WI = 46 In line gas quality

Changes In Gas Quality Over Time Time Wobbe Index WI = 51.5 WI = 46 In line gas quality

* Should Gas Quality provide for Specialised Users (feedstock, natural gas vehicles)? * Should contracts be allowed to limit gas quality specifications? * Is there a need for a Total Inerts Specification? * Should “In Line” Comingling be allowed? * Should transmission charges vary with gas quality? * Who has ownership of gas components? Other Issues

* Increase Total Inerts by 0.5 mol% * Introduce an “Emergency” Gas Quality Specification * Introduce a “New Contracts” Specification * Allow transmission price to vary with gas quality * Allow a “risk premium” to be charged where “in line” comingling takes place Changes to Gas Quality Regulations in Western Australia

* Gas Quality is the Gas Industry equivalent to the railway gauge problem * 50 cents/GJ penalty if we get it wrong * Ultimate contractual problems * Gas quality appliance requirements that differ across Australia * Hindering of access to gas pipelines * Unnecessary flaring/reinjection of associated gas * Possible duplication of pipelines with different quality specifications * Lost production $7.5 billion (PV $3.8 billion) Conclusions