ADELAIDE, South Australia—Chevron unveiled its vision to stimulate Australia’s next major LNG wave by inviting Woodside and Shell to join forces in an unprecedented, collaborative effort to unlock stranded gas from the North West Shelf and bring it to market.

Speaking at the Association of Petroleum Production and Exploration Conference (APPEA) on a platform shared with Woodside Chief Executive Peter Coleman, Chevron Australia Managing Director Nigel Hearne said a “new chapter” culminating in train 2 at Wheatstone and Gorgon Stage two could inspire a new era for “Australia’s energy crown,” the Carnarvon Basin.

Hearne said the challenge of keeping 11 (North West Shelf) trains at full capacity for the next 30 years, delivering sufficient supplies to Australia’s domestic market and improving the competitiveness of Australian exports could be fulfilled with a “shared vision for the development of the basin.”

The fragility of Australia’s recent $200 billion LNG construction boom was revealed in balance sheet cracks as the oil price went into freefall in 2015. Operators of the three-coal seam to LNG plants on Curtis Island, in Queensland, subsequently conceded that more collaborative efforts, such as a shared pipeline into Gladstone, could have saved billions of capex dollars.

But until yesterday, supermajors Chevron and Shell, as well as Australia’s biggest independent oil and gas producer, Woodside, had never floated a share initiative for the North West Shelf, located in Western Australia.

“With a few exceptions, historically we’ve seen ‘go it alone’ and point-to-point development strategies in the basin. They have suited individual players and the record $200 billion investment spend by the industry. Going forward, there is a better way,” Hearne said.

Hearn compared the initiative to airlines sharing a common airport, but said collaboration to drive efficiencies and commercialize stranded gas fields would need the support of Australian governments to reduce duplication of infrastructure and attract the “next wave of investment.”

“Imagine a Trans Carnarvon Basin Trunkline—or TCT—as a multi-user offshore pipeline, connecting shared offshore infrastructure to create a truly ‘interconnected basin.’ This could link remote accumulations such as Scarborough, Thebe and the Exmouth fields, to existing gas facilities such as the North West Shelf, Pluto (both Woodside-operated) and Wheatstone (Chevron-led).

“Something like this would enable gas from offshore fields to flow to where it is needed, and when it is needed via an onshore interconnector across the Burrup Peninsula. Combining this with existing pipelines to shore that interconnect with the [domestic gas] Dampier Bunbury Natural Gas Pipeline, the opportunities for system optimization and value creation are mind-boggling.” 

“An interconnected basin will provide the most efficient and economic solution to develop the gas of the future and will further contribute towards Perth’s ever-growing reputation as a world-class LNG services hub.”

Hearne said while infrastructure collaboration was not common in Australia, “it’s an established practice elsewhere”.

He cited pipelines in the North Sea, transportation and transshipment systems in Canada and the shale gas “revolution” in the United States, which he said he had witnessed in the Appalachian basin in Pennsylvania, as successful examples of shared initiatives.

“While our industry has faced these types of challenges before, and can again, adapting to new and greater barriers will mean doing our business in a different way. It will mean putting aside individual interests and collaborating to create additional value across a basin-wide system to make the pie bigger, not just take a bigger slice of a smaller pie.”

Shell, a JV partner in both the Gorgon and North West Shelf projects, welcomed Chevron’s overtures, but Woodside was more cautious.

Zoe Yujnovich, Country Chair Shell Australia, said, “we have a poor record on collaboration from east to west.

“We must see greater cooperation between ventures to reduce waste and duplication and ultimately drive value to Australian customers. Because unless we can improve the attractiveness of our projects to investors, ullage in LNG trains may fast become an unmanaged reality – not a situation that will be easily recovered.”

Coleman said Australia’s tax system would have to be overhauled and development strategies coordinated for the shared vision to work.

“The current tax structures just don’t encourage it, it’s going to take some time to work through that,” said Coleman. “But it shouldn’t stop us working on it at all.”

“Woodside’s engineers are working feverishly on designing a pipe [for the undeveloped Scarborough field]. So it is going to take a little bit of a leap of faith for some others to get me to add some diameter to that pipe.”