Article – Darwin growth spurt fuelled by LNG8 May 2014
28 April 2014
The face of Australia’s most northern city is changing.
High rents, high-vis clothing and high-rise buildings are now synonymous with living in Darwin.
It hasn’t always been the case, though.
Not so long ago, this now bustling capital city was described as a small country town, on the edge of the coastal outback.
But now, the strong demand for a cleaner source of energy in Asia is bringing great prosperity to the Northern Territory, through major liquefied natural gas (LNG) projects.
LNG processing plants have become the preferred option for companies wanting to sell their gas to customers who are located far from the actual gas field.
By cooling natural gas to below -160 degrees Celsius into a liquid from, processing significantly reduces the volume required for transport.
The American-owned ConocoPhillips was the first to begin an operation in the region, establishing the $1.5 billion Darwin LNG plant at Wickham Point in 2006.
The company built a 500 kilometre gas pipeline from the plant to the Bayu-Undan field in the Bonaparte Basin, north west of Darwin.
In a similar way, Japanese-owned INPEX is preparing to pipe gas 900 kilometres from the Browse Basin, north of Western Australia, back to a processing plant under construction at Blaydin Point, near Darwin.
The Ichthys project is a $US34 billion LNG development which began in 2012 and is due for completion in 2016.
On top of these, oil giant Shell has a $15 billion floating liquefied natural gas (FLNG) project underway, north of the Kimberley coastline, in Western Australia, of which Darwin will be the hub.
Steven Gerhardy from the Australian Petroleum Production and Exploration Association (APPEA) says once these latest projects come online, Australia could become the largest exporter of LNG in the world.
“Darwin is actually at a very exciting junction,” Mr Gerhardy said.
“It’s had one major LNG project operating here since 2006, that’s the Darwin LNG project, and that is a huge project in itself,” he said.
“Now we have the INPEX Ichthys project under construction, which will have a workforce of up to 4,000 people, and for a city the size of Darwin it’s having quite a transformational effect.
“Then there are other projects being developed or being considered for development, such as the Prelude FLNG project, which will also contribute to the growth of the Darwin economy.
“So Darwin itself is set to become a significant player in the international big league for oil and gas projects,” he said.
Mr Gerhardy says a demand for natural gas from Japan and China is driving the push for Australian LNG exports.
“The growth in Asia, which everyone knows about the growth there, is strong.
“The second part is that countries in Asia are wanting more clean energy and gas is a much cleaner-burning fuel,” he said.
“It only emits about half the greenhouse gas emissions of coal-fire electricity, for example, and it generates much less air pollution than coal-fired generation.
“So they are two important factors that are driving the demand for gas. There are projections around, for example, that the global demand for LNG could increase by 80 per cent between now and 2025 and that means there is a need for a lot more projects like Darwin LNG and the Ichthys project,” he said.
The economic growth that these developments are bringing to north Australia is unparalleled.
While activity plateaued somewhat once ConocoPhillips finished constructing its plant in 2006, there’s no doubt the INPEX project is fuelling the latest growth spurt for the region, and confidence among local business is very high.
Darwin metal fabrication company, Best Bar Reinforcements, has managed to secure a considerable contract with JKC, the builder of the massive LNG plant at Blaydin Point.
The company has expanded its workforce to 30 staff and spent hundreds of thousands of dollars on new equipment to cope with the extra production.
Manager Gavin Futcher says he made the decision to buy large assets based on the work being provided by the LNG sector.
“All of these decisions are based on the confidence everyone has in Darwin and going forward we feel like that confidence is going to continue.
The steel fabrication business has secured large contracts with the INPEX development.
“One of the projects, which is the power station, we have 2,500 tonnes worth of work,” he said.
“So you can imagine that is quite a bit of tonnes and then also on the tanks, the cryogenic tanks, we have another 2,000 tonnes of work there.
“To quantify that, that’s a big part of the normal yearly demand for Darwin in terms of reinforcement steel.
“Now we only have a real small percentage of the whole project, so one of our competitors got a lot more, but for us our focus has been to get a little bit of that work to help us make further investment in the business but focus more on the local customers,” he said.
But as business booms in Darwin, the character and feel of the urban environment is shifting.
There are more trucks on the roads, more high-visibility uniformed people walking the streets and the demand on housing has risen dramatically over the last two years.
According to RP Data in March this year, the average house price in Darwin was $547,000 compared to Perth’s $515,000.
To support its employees moving to the Top End, INPEX is building a 3,500 worker village in the rural area at Howard Springs.
It’s hoped this accommodation, which is due for completion in mid-2014, will ease some of the pressure on local housing.
The demand on housing in Darwin has increased significantly over the last couple of years.
Frank Schembri from United Realty NT says the real estate market began to strengthen just before the final investment decision announcement by INPEX in 2011.
“A lot of investors have started to buy in the market and at one point we were experiencing less than one per cent vacancy rates.
“That’s changed a little bit since then but we’re still below the three per-cent vacancy rate mark, so it has been quite good for the property market,” he said.
“While they’ve got their workers’ village out there, there are a lot of families that are coming up so wives and children aren’t going to be living in a workers’ camp.
“Darwin is always going to change and it’s going to grow,” he said. “Progress is just something we can’t stop.”
A resident of Darwin since the 1960s, Rob Wesley-Smith, has seen the country town grow to become a major hub for several industries, but most noticeably gas.
“Certainly once ConocoPhillips started to develop their LNG plant on Wickham Point, 2,000 or more blokes came in to build that and a lot of executives, so there was a big demand for executive housing and the single-men’s accommodation,” he said.
“So there was a lot of pressure then on accommodation and hotels.
“I think that led to a burst of building, including hotels.
“I’m not sure how many years from there it has been, to the current plans, to building an LNG plant and that whole cycle is being repeated again,” he said.
Darwin is booming with the growth of LNG exports.
Now living in the rural area, Mr Wesley-Smith says he’s content keeping away from the busy streets of the city.
“It’s sort of bizarre. Darwin has completely changed its character from a country town where you knew everybody,” he said.
“I used to catch the plane to Darwin and I used to know half the people in the airport, but these days I’m lucky to know anyone.
“Somebody who lives not very far away from me said ‘when you settle down in Howard Springs you’ll be ignoring the city altogether’. Well it took me probably 20 years before it got to that stage. I almost feel nervous going into the big smoke these days,” he said.
So while some people are choosing to avoid the city as development levels soar, back at the steel fabrication work shed in Winnellie, Gavin Futcher says he’s enjoying the new pace of Darwin.
He says the INPEX Ichthys project is having flow-on effects for most sectors.
“With all these guys coming to Darwin, there’s a little bit of a buzz around the place. If you go out on a Monday night, where you want to go for a quiet beer with a mate and you see there’s a lot of people around,” he said. “All these people are spending money. They are buying beers, they are buying pizza, they have to go and cut their hair somewhere and they have to live somewhere. This is all fantastic for Darwin,” he said.
“I won’t say it’s all good because there are other pressures, like living cost pressures that we do have, but I think our little economy here is in a very good position.”
The high cost of living doesn’t bode well for local students, but for those seeking a career in the oil and gas sector, there are strong opportunities.
Industry and government are contributing to training the next generation of workers.
At Charles Darwin University, the North Australian Centre for Oil and Gas has recently been built, to target specific needs of local developments.
Steven Gerhardy from APPEA says developing skilled labour requirements is an important issue for the sector.
“It provides a much greater scope for our kids here to enter into the industry by being able to study locally. These are highly skilled, highly paid jobs and this is an industry that is global in nature,” he said.
“They can move around Australia or move internationally. It’s quite an exciting spin-off benefit, from the development of the oil and gas industry here, is having new places and new training opportunities being established, like this centre at Charles Darwin University,” he said.
Courtesy of ABC Rural