Stephen Dykes Managing Director Gemseekers International Pty Ltd

and

Henry Dupal Operations Manager, Northern Territory APA Group

THE CONTRIBUTION OF THE AMADEUS PIPELINE TO THE NORTHERN TERRITORY AND TO THE AUSTRALIAN PIPELINE INDUSTRY

By Stephen Dykes (Gemseekers International Pty Ltd) and Henry Dupal (APA Group)

The growth in power consumption in the Northern Territory (NT) since self-government in 1978 drove the need for constant vigilance on future capacity requirements. In 1980, studies drove a decision to build a coal power station based on the fact that there were no significant energy sources apart from uranium at Ranger and a need for relatively small scale generation precluded the use of nuclear power. Stokes Hill power house was aged, was only 400 metres from Darwin Central Business District and was a heavy polluter burning bunker oil. Gas had been considered but at this time insufficient reserves had been proven at Palm Valley (50 PJ versus an economic requirement of about 250 PJ), gas reserves at Mereenie were considered unavailable as it would be used for reservoir pressure maintenance to recover the oil until about 2000 and industrial disputes and the costs of imported pipe, materials and skills drove estimates for pipeline construction to be more than the coal option. Offshore reserves at Petrel were known but development was thought to be contingent upon an LNG facility and current prices were assumed unable to meet the economic hurdle for such a decision until the mid-1990’s1. By 1983, the coal decision was well advanced, coal would be shipped from eastern States, and a plan for the Darwin electricity system to be extended to Katherine and Jabiru were under consideration. By 1984, the piers for the coal unloading arms at Channel Island had been ordered, and preparatory civil works were about to commence. In parallel there were several attempts at a gas solution. First, through the efforts of John Butters, then General Manager AGL, the Australian Gas Light Company (AGL) offered LNG tankers from Alice Springs. Andy Lucas proposed an 8 inch pipeline from Alice Springs to Channel Island to run the first two 50 MW turbines. AGL then offered to look at a 10 – 12 inch pipeline instead of the LNG tankers and through more meetings were able to demonstrate that a power station using natural gas from central Australia was environmentally and economically preferable. Ian Tuxworth, the then Minister for Mines and Energy was able to convince the Northern Territory cabinet to put a hold on the coal option in early 1984. The Northern Territory Gas Consortium of AGL, CSR, Westpac, Moonie Oil, Boral and Nabalco got together and frantically worked at the feasibility and economics of a gas option. John Butters, who passed away in 2006 will be remembered as a strong supporter of the gas

1 The Amadeus Basin to Darwin Gas Project, Dr E.K. Campbell, paper to 1985 APIA International Convention, Sydney

Page 1 option, became chairman of the consortium that designed, constructed and operated the 1628-kilometre pipeline later to be called NT Gas Pty Ltd. The results of the consortium’s studies were presented to the NT Government in August 1984 following which negotiations with the gas producers for wellhead gas, the pipeline consortium for gas transportation and a change from coal fired for gas burning generators commenced. The gas option was becoming a reality. NT Gas Pty Ltd (32% AGL, 32% CSR, 32% Moonie Oil, 2.5% Darnor (NT Government), 1.5% Centrecorp Aboriginal Investment Corporation Ltd.) was formed to manage the pipeline assets which were held in the Amadeus Gas Trust. Gas supply agreements with the Northern Territory Electricity Commission (NTEC – now Power and Water Corporation) and gas producer agreements with both the Magellan and Mereenie joint ventures were entered into culminating in the establishment of the leveraged lease facility with ANZ Bank, the nominated manager. Supply was initially to be only from Palm Valley but the Mereenie Joint venture partners, some of whom were also in the Palm Valley joint venture, struck a deal with NTEC to provide 20% of the gas at a discounted price in order to pay for the Mereenie spur and more importantly the oversizing of the pipe from Palm Valley to Mataranka from 12 inch to 14 inch to cater for future gas supply to Nabalco at Gove. In 1984 construction of the Amadeus Basin to Darwin Pipeline, now known as the Amadeus Gas Pipeline commenced. It was commissioned in December 1986 less than 3 years after the feasibility study was first accepted. The construction of the pipeline was no mean feat. It required the co-ordinated efforts of four different construction companies and was completed in 5 different spreads. This delivery approach was required to enable the pipeline to be constructed in less than two years and to avoid the wet season conditions prevalent in the tropical northern regions of the Northern Territory. The Amadeus pipeline originally shipped gas from the Palm Valley and Mereenie fields to the Power and Water Authorities’ Tennant Creek, Katherine and Channel Island power stations. Since its initial construction the pipeline has continued to ship natural gas almost entirely for power generation purposes. The Amadeus pipeline has seen many additions and remains the backbone of all gas supply in the NT. Gas related activity was spurred on, all of it reliant on the presence of the Amadeus pipeline, and the developments have been as follows: 1988 Cosmo Howley pipeline (25km) – gas fired power station at the Cosmo Howley gold mine. In 2004/05 the power station ceased electricity generation. The Cosmo Howley pipeline was abandoned in 2008; 1988 Elliott pipeline (2 km) – gas fired power station for the Elliott township; 1989 Manton pipeline (300m) – gas for a temporary power station at Manton. The power station ceased electricity generation prior to 2001 and the pipeline was abandoned; 1995 McArthur River pipeline (330 km) – gas fired power station at the McArthur River mine;

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1996 Darwin City Gate to Berrimah pipeline (19 km) - gas supplied to commercial and industrial users in the Darwin industrial estates and East Arm Wharf areas; 2002 Katherine and Tennant Creek Sleeper Plants – gas supplied for the production of railway sleepers for the Adelaide to Darwin railway construction; 1996 Mt Todd pipeline (10 km) - gas fired power station at the Mount Todd mine. In November 1997 mining operations stopped. The Mt Todd lateral is currently suspended awaiting a decision on future operations of the Mt Todd mine; 2008 An additional supply point at Ban Ban Springs was added to the pipeline in 2008, bringing gas into the Amadeus pipeline from the Blacktip Gas Field via the Bonaparte Gas Pipeline; 2009 Weddell lateral (1.3km) - gas fired power station at Weddell. This connection also became a potential supply point in 2009 with the construction of the Wickham Point lateral which allows gas receipts from the Darwin LNG Facility. This receipt point is an emergency supply point if the Blacktip field is unavailable for delivery to the Darwin Power Stations. Gas receipts come from the Bayu Undan gas fields; 2014 A gas offtake facility was built to supply gas for electricity generation primarily to power the refrigeration plant of the Noonamah Abattoir, a beef processing facility. 2016 Inpex gas plant connection that has used the Amadeus pipeline for initial fuel gas and plant commissioning and will then become another emergency supply point for increased energy security. 2018 - Northern Gas Pipeline connection to ship natural gas from gas producers in the NT to the east coast gas market.

Dynamic transportation changes over the years The early years saw pipeline flow rates in the Amadeus pipeline averaging approximately 16 PJ/annum such that no compression was required to move the gas north from the Amadeus gas fields, some 1628 kilometres to the main power station on Channel Island. Electrical power use increased in Darwin and to accommodate the peak electricity loads in the wet season, a compressor was installed in 1995 at approximately the half way-point at Warrego. As Darwin and the NT grew the requirement for the Warrego compressor became full time. In the summers of 2007 and 2008, the Amadeus Basin gas reserves were unable to meet the peak gas demand and although the pipeline capacity existed, the gas was not able to be extracted at the rates required. As a consequence, significant amounts of diesel were used to supplement the gas for power generation. In 2009 the Darwin LNG supply point into the Amadeus pipeline was commissioned to provide an additional supply of gas and to displace the diesel. This gas was initially supplied to the Weddell Power station. Shortly after in the same year, the Blacktip supply came online via the Bonaparte gas pipeline. The initial tranches of gas from the blacktip fields were receipted prior to the completion of the Blacktip gas processing plant at Wadeye. The Amadeus pipeline was used to blend semi processed Blacktip gas with on specification

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Amadeus Basin gas to meet the NT gas specification. Once the production facility at Blacktip was completed the Warrego compressor was no longer required and has since been mothballed. Now, with the operation of the Northern Gas Pipeline coming to fruition, and the prospect of indigenous NT gas reaching the east coast gas market, there is the potential in the near future for compression of the Amadeus pipeline to be required once again.

The Amadeus Pipeline’s Peers The State-controlled Gas and Fuel Corporation of Victoria was formed in 1950 and charged with the specific goal of constructing a brown coal gasification plant at Morwell based on the German Lurgi process. This plant was successfully commissioned in 1956. The associated high pressure Lurgi gas pipeline to Melbourne, constructed by the Corporation, was the first such project in Australia.

The first pipeline in the conventional oil and gas industry in Australia was the 306 km long Moonie to Brisbane pipeline completed in 1964 that transported oil from the nation’s first commercialised oil reserves to the refinery at Bulwer Island. It was only five years later that the Roma to Brisbane Pipeline (RBP) was commissioned to be the first natural gas pipeline in Australia. The RBP trunkline is 440 Km long and is still in operation today making it the oldest operational oil or gas pipeline in Australia following the closure of the Moonie Oil pipeline in 2008.

The RBP demonstrated the importance of the pipeline industry with the ability to move large amounts of energy over long distances with little ongoing impact to the community. It was built by private enterprise, Associated Pipelines Ltd, with the Queensland government at the time providing support in the way of guaranteeing some of the loans.

Esso constructed the 28 inch Longford to Melbourne gas pipeline in 1969. This has been recently replaced.

The next major pipeline in Australia was the Moomba to Adelaide Pipeline (MAPS). This pipeline was constructed in late 1969 and allowed South Australia to end its reliance on New South Wales coal for the manufacture of town gas. The pipeline was justified by converting the Torrens Island Power Station from oil to gas. The MAPS was initially funded by the South Australian government and is 781 Km long.

In 1971 the Parmelia pipeline was constructed from Dongara to Perth. The justification for this pipeline was the gas loads required to power the Kwinana Power Station and the Alcoa alumina plants at Perth and Pinjarra.

The first Australian Pipeline to be constructed over 1000 km in length was the Moomba to Sydney Pipeline (MSP). This pipeline was designed to deliver gas from the Cooper Basin to Sydney for domestic and industrial use and enabled Sydney to reduce its reliance on town gas manufactured from coal. The MSP is a 34 inch, 1300 km pipeline from Moomba to Wilton, Sydney’s city gate station. The construction of this pipeline was funded by the

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Commonwealth government as the first commitment in the stated intention of the Whitlam Government to complete a national pipeline grid for gas transportation.

The Keon Park to Wodonga and Shepparton pipeline was then constructed in 1975 and that enabled the northern Victorian towns of Wodonga and Shepparton to be connected to gas for domestic and industrial use.

The Jackson to Moonie oil Pipeline was constructed in 1983 to a total length of 783km. This pipeline was designed to transport oil from the Jackson oil field in the Cooper-Eromanga Basin to Moonie.

The Moomba to Stony Point pipeline was then constructed in 1984 to transport hydrocarbon liquids to the export facility.

The Dampier to Bunbury Pipeline was originally constructed by the Western Australia Government owned State Energy Commission to transport natural gas to the south western areas of Western Australia including Perth. This pipeline now is the longest in Australia due the addition of laterals and looping, however at the time it was constructed as a 1540km trunk pipeline.

What the Amadeus pipeline has contributed to the Northern Territory

The decision to construct the Amadeus pipeline came about from the need to have an abundant and cheap fuel to power to the remote northern city of Darwin and the decision to build a coal-fired power station was only reversed in 1984. The success of the other long distance pipelines gave succour to the idea that the 1628 km pipeline from Mereenie and Palm Valley to Channel Island, the longest pipeline in Australia at the time of construction, would be possible. It would transverse Australia’s harsh arid zones of the inland desert areas, up through to the sub-tropical and tropical environments of the Northern Territory. The shear length of the asset, the effect of the climatic zones on men and machinery and in particular the timeframe set for delivery drove a decision to build the pipeline in five separate spreads using four separate construction companies. The key consideration was the timing of the Katherine to Channel Island spread which had to be installed in the dry season window from April to September. When the pipeline was opened in 1986, Steve Hatton, the then Chief Minister said “as an engineering feat, the pipeline was one of the nation’s largest and most successful projects of the decade!” That the gas option became reality is a testament to the vision and the efforts of many people both in government and in private enterprise. From the start of exploration and the discovery of reserves in the Amadeus Basin in the 1960’s through to their commercialisation via the Amadeus pipeline in the 1980’s and onwards to today, a spirited culture prevalent in the oil and gas industry has meant that a nucleus of skilled people has been maintained and

Page 5 as such has proven central to the continuing success of the oil, gas and pipelining industry in the NT. As one Magellan ‘oily’ often spruiked, “You gotta speculate to accumulate…” words that capture well the boldness of the spirit that drove many to achieve great things in those times. The Amadeus pipeline enabled the consumption of indigenous gas rather than coal from the Eastern States of Australia or uranium, of course also indigenous to the NT, but whose use would have been all but impossible from a political standpoint and certainly impractical in application. The pipeline provided local employment during construction and this continues today through its operation and maintenance. It offered businesses in the NT opportunities for expansion and it continues to provide income in the services sector such as skilled welding enterprises, providers of non-destructive testing services and of course meals and accommodation in the many small towns along the Stuart Highway as the pipeline maintenance technicians travel along its length completing their work. It’s coming into existence contributed to the nucleus of what is today a thriving centre for oil and gas consumption and processing. At the time of the momentous decisions to bring the pipeline into reality, newly appointed Chief Minister Ian Tuxworth attended the 1984 Gold Coast APIA Convention and addressed the delegates as follows: “If I can take you back to 1980/81 when my government considered the possibility of piping Central Australian gas to Darwin for power generation purposes. At that time an economically viable pipeline was estimated to cost $500 million and there were insufficient recoverable gas reserves to meet Darwin’s needs. Since that time there has been appreciable increase in recoverable reserves and pipeline costs have been reduced substantially in absolute terms. The reduction in real costs is staggering. It is a credit to your industry that by adopting technological change and sound industrial relations and management practices you have been largely responsible for reversing the Territory’s 1981 decision to go coal.”2 It is said that Roger Vale, the then Member for Braitling in Alice Springs and an ex-employee of the Magellan oil and gas company was instrumental in successfully lobbying for the gas pipeline. This surely would be in part due to the efforts of Roy Hopkins and Dennis Benbow, the two senior managers in Magellan at the time and to Kevin Hiscox of Moonie Oil NL. Paul Everingham, the then Chief Minister of the NT and his deputy Marshall Perron, also Minister for Mines and Energy were central to the gas decision. Parliament was awash with questions mainly driven by the opposition to draw upon the rationale behind what seemed to be a hasty decision and one that, because it had involved direct negotiations with a single consortium, must have had a suspicious air about it. Most related to questions of price, the take or pay provisions involved and the extent of gas reserves. To give a flavour, one such

2 APGA archives

Page 6 answer by Marshall Perron, provides some historical perspective to the question of gas price. The pricing mechanism for Palm Valley gas is $1.50/GJ in March 1985, escalating at 25% of the Consumer Price Index (CPI) with provision that should the CPI exceed 10% then the gas price will escalate by any CPI increase in excess of 10%. The pricing mechanism for Mereenie gas is $0.20/GJ for contract years 1-5 and $0.35/GJ for contract years 6-21 for gas quantities up to 125% of 'take-or pay' quantities (all in March 1985 dollars), escalating at 25% of the Consumer Price Index (CPI) with provision that should the CPI exceed 10% then the gas price will escalate by any CPI increase in excess of 10%3. Dr. Ted Campbell, the then Chairman and General Manager of NTEC was grappling with the fact that Commonwealth government subsidies for electricity generation were to be substantially reduced and totally removed by 1989. Ted acknowledged the time pressures apparent on both the NT government pipeline executive unit made up of NTEC, Mines and Energy, Chief Minister’s department, Treasury and advised by Bechtel, and the Northern Territory Gas Consortium were such that “serious negotiations on risk and benefit sharing were able to commence [in August 1984] without any of the participants having to be ‘brought up to speed’. This was the greatest advantage in dealing with a particular consortium rather than in a competitive market situation”.4 He went on to lament “The one significant disadvantage of dealing with a single consortium on the project has been the lack of competition in negotiating risk/reward profiles. The result is that the Northern Territory Government has had to play much of the entrepreneurial role in putting the project together. It appears that, at this stage, Australian private enterprise is more interested in a conservative approach with low risk and a steady income, rather than a situation where risks are taken and rewards are potentially higher. This is a rather sad situation in a country like Australia where the potential for growth is so great. However, it is recognised that the time frame of negotiations may have been significantly longer if all risks had been analysed and assessed.”5 This statement more than likely relates to the fact that the Magellan joint venture partners were able to negotiate for NTEC pay for all future development wells necessary for Palm Valley to be able to produce gas at the contract rates necessary to fulfil the Gas Producers Agreement. Initially, Palm Valley would supply 80% of the NTEC gas needs and Mereenie the remaining 20%. Barry Coulter who became Minister of Mines and Energy under Chief Minister Marshall Perron fervently waved the banner for oil and gas development, for its use throughout the NT and for the NT to export energy to other Australian States and as LNG to overseas markets. Barry would encourage, cajole, act as the political aggregator and was the

3 written answers to questions in NT Parliament, March 1986

4 The Amadeus Basin to Darwin Gas Project, Dr E.K. Campbell, paper to 1985 APIA International Convention, Sydney 5 The Amadeus Basin to Darwin Gas Project, Dr E.K. Campbell, paper to 1985 APIA International Convention, Sydney

Page 7 quintessential force behind many a production development and many a pipeline dream during his tenure of the portfolio and for times after. The construction of the pipeline in 1986 coincided with a focus by BHP Petroleum and its partners on exploration in the Timor Sea. This would see the development of Talbot, Jabiru and Cassini/Challis oil fields. The NT had already gained some prominence as a potential gas and oil field region quite a few years earlier when Petrel #1 well blew out of control on 6 August 1969 and provided a navigation beacon until Red Adair successfully extinguished the blaze on 11 January 1971. The land upon which the Conoco Philips LNG plant now stands to process gas from the Bayu Undan field in the Zone of Co-operation with East Timor was actually put aside in 1978 for an LNG plant for gas from the Petrel and Tern fields. It was an exciting time. Australia’s first floating production, storage and offloading vessel (FPSO), the Jabiru Venture was installed on the Jabiru field in 1986 and produced about 115 million barrels of oil. Its sister ship the Challis Venture was installed on the Challis oilfield soon after and produced 62 million barrels. Given that the first ever FPSO was the Shell Castillon built in Spain in 1977, only 9 years earlier, is a testament to the level of Australian know how with the leading technology of the day and perhaps goes some way to countering Dr. Ted Campbell’s quandary on the risk adversity of private enterprise. Then, talk was for an Australian natural gas grid, promoted by many including Grahame Campbell, then managing director of Williams Brothers-CMPS in a paper to the Australian Pipeline Industry Association international conference in 1985. The theme would be repeated by many in the industry in the years that followed including the late Jim McDonald, the General Manager of NT Gas Pty Ltd, inaugural General Manager of AGL’s pipeline division and Managing Director of the Australian Pipeline Trust. Such dreams would be promulgated by his successor, Mick McCormack and would become the focus of many a pipeline dreamer to come. Soon after the operations of the Amadeus pipeline were bedded down discussions were full steam ahead on gas to South Australia, gas to Mt Isa and of course gas to Nabalco at Gove. Central Australian gas reserves could be boosted when necessary with the development of Elf Aquitaine’s Petrel and Tern fields. Gas was clearly the fuel of the future and supplies were extended via the Amadeus pipeline to regional power stations and mines. Pine Creek power station was developed by Energy Developments International championed by Paul Whiteman, previously of Moonie Oil NL. A 330 kV power line system was built between Katherine and Channel Island and the Cosmo Howley power station was tied into the 132 kV grid in 1992. The McArthur River mine commenced operation in 1995 following the construction of the 330 kms long McArthur River pipeline by the Power and Water Corporation. Initially incorporating industry proven zap-loc™ friction jointing technology coupled with direct ploughing techniques, there were several important industry learnings gained from this project.

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There were at least 4 serious attempts to get gas to Gove, the first one in 1987 and the very last in 2013 with Pacific Aluminium. Gas has never got to Gove despite the fervour with which Ed Knotter of Alusuisse, a major partner in the Nabalco consortium worked in the early years to get it there. Commercial realities were a significant obstacle since Nabalco had the certainty of supply of high sulphur fuel oil (>3% sulphur) under a 40 year contract with Kuwait. Potential deals were complex under the prevailing gas sales agreements with NTEC. There were at least 6 tariffs, the Return Tariff, the Variable Energy Tariff, the Minimum Payment Tariff, the Operating Tariff, the Working Capital Tariff and the Volume Tariff and some of these tariffs would later attract diverging interpretations. Discussions about potential deals over the years included volume, transport distance and capacity tariffs and a myriad of combinations of these. Many of the ideas formulated during these years would transcend into the commercial realities that attended new gas transportation pricing mechanisms as privatisation of the majority of transmission pipelines took grip in the 90’s. Andrew Michelmore, later of Oz Minerals fame, would feature in one close attempt to get gas to Gove which was complicated by escalation metrics that were to include the future price of aluminium. The project may have had a better chance of success if serious consideration had been given to the social costs of displacing a pollutant fuel and extending the life of the plant by providing a clean fuel for the long term. This could perhaps have been achieved under the first ever carbon and sulphur pollution reduction subsidy, a concept unknown at the time but one that would become a political hot potato as we have seen some years later. It seemed that every pipeline company was wanting a crack at the Gove project. There was a myriad of route excursions, all requiring helicopters and permits into Arnhem land. I completed two along improved routes each time. Sadly, one such excursion in 2002 would claim the life of a passionate pipeliner, that of John Girle who pioneered much of the early work on pipeline route selection using GIS systems that we take for granted today. Gas to South Australia did not occur either for it was about this time, after less than promising drilling results in Palm Valley, that the eminent international reservoir engineering consultants, Ryder Scott produced a study confirming the fractured nature of the Palm Valley reservoir which significantly reduced the reserve status. As the Palm Valley reservoir depleted, Mereenie took more and more of the production shortfall and the supply proportion quickly reversed to an 80% Mereenie, 20% Palm Valley split. As we have already noted, deliverability from both fields failed to meet peak demand in 1996 and the Bonaparte Gas Pipeline was borne out of the development of the Blacktip offshore gas field by Eni. This pipeline interconnects with the Amadeus Pipeline at Ban Ban Springs and currently supplies most of the gas consumed for power generation in the NT. The successful development of the oil and gas fields in Central Australia enabled by the advent of the Amadeus pipeline provided an air of confidence that the machinery and the resources necessary to do more were willing, able and most importantly available in the NT. The development of LNG plants would follow firstly with a 500 km, 26” submarine pipeline supplying gas from the offshore Bayu-Undan field for processing into a 3.7 MTPA design

Page 9 capacity Darwin LNG facility in 2006. The NT governments confidence was such that they beat the West Australian government to have the Inpex LNG plant built in Darwin with gas and condensate from the Ichthys field transported for processing via an 890 km, 42 inch submarine pipeline. Both these plants are tied in to the Amadeus pipeline for the supply of emergency gas to the gas grid. The Northern Gas Pipeline is about to come into service and this provides a direct connection to the East coast of Australia via Mt Isa, hence to Moomba via the Carpentaria pipeline and from there via the QSN, SW Queensland and RBP pipelines to Brisbane or to Gladstone via the Wallumbilla to Gladstone pipeline. The 622 km pipeline will link Tennant Creek in the NT with Mount Isa in Queensland, unlocking the next phase of economic growth for the region and helping to build a stronger Northern Australia. It will not be Palm Valley gas that sustains this, it will be Blacktip and to a lesser extent, Mereenie gas. It was and always is the people, those characters of the time that go the extra mile in sometimes difficult situations and in inhospitable surrounds and make things happen. If it were not for their efforts and strong beliefs in the prospectivity of the region as a whole in the first place and in the Amadeus pipeline project in the second, the NT would not be the burgeoning oil and gas centre that it has become. Characters that come to my mind include Mike Lillicrap, the inaugural managing director of NT Gas Pty Ltd who saw the project through construction. The late Jim McDonald took over as it came into commissioning. Jim lead a talented team of individuals through some testing times as the operation of the pipeline and facilities were bedded down. Jim would take many learnings onto East Australian Pipeline Ltd and the Australia Pipeline Trust now the APA Group. Jim commented often that the experiences he had with the Amadeus pipeline shaped much of the vision he imparted to other pipelines but also to the corporatisation of our Industry Association as it is today and the standing with which it is viewed in Canberra as well as on the International stage. The late Joe Cole, a cool, level headed, cigar smoking Texan from Williams Brothers, came over to commission the pipeline and left a legacy all of his own. Ted Metcalfe emigrated from Canada in the 70’s following a recruitment drive by Delhi and Santos for oil and gas engineers. Almost every gas pipeline in Australia has Ted’s involvement in some way or other. Of the influences of the people on the Amadeus pipeline, Ted recalls Brian Chapman at AGL giving him advice to “trust the man in the field” during an emergency which would act out during the Tennant Creek earthquake in 1988. There were others in the Industry that provided succour and guidance – Max Kimber at the Pipeline Authority was the first to ring Ted Metcalfe after the Tennant Creek earthquake and offer support. Ian Haddow, also from the Pipeline Authority provided engineering and operational advice and was instrumental in the provision of some of the information used in the initial training of the NT Gas operations and maintenance staff. NT Gas’ main customer was NTEC, now the Power and Water Corporation with whom business was most frequent. Characters such as Owen Peake and John Tarca come to mind, as well as Dennis Bree and Russel Jennings.

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Post construction, NT Gas developed and sustained a really healthy relationship with the technical regulators, Bill Tinapple and Brett Struck. Bill would move onto establishing many of the learnings from the development of the Central Australian production fields and the Amadeus pipeline project to the Petroleum division in the Western Australian Mines and Petroleum department. Brett would take learnings into the NT department of the Environment for a time but would return to the NT department of Primary Industry and Resources and remains the technical regulator for pipelines in the NT today. Gary Voss, part of the core group from NT Gas that went over to build and operate the Goldfields Gas Pipeline in 1996, went on to Actew AGL in Canberra, worked on the PNG pipeline dream and then formed IDM partners. Wendy Oldham started as an accountant for NT Gas in the late 1980’s, became General Manager of NT Gas and is now CEO of SEAGas. Craig Connor was one of the originals, a mechanical technician, now a stalwart of the APA technical team. Mike Ward was also an original, he went as part of the core team to the Goldfields pipeline, returned to the NT after some years and he works on the Amadeus pipeline today. There are many heroes, too many to mention but all have contributed to the legendary status of the Amadeus pipeline and many are industry legends in their own right.

The Amadeus Pipeline Has Contributed Immensely Towards Pipeline Industry Learnings The Pipeline Industry is unique in terms of the dissemination within it of company learnings and experience. These are shared incredibly freely through people participating in APGA committees, through the Research and Standards committee, the Pipelines Cooperative Research Centre (Pipelines CRC) and through the Pipeline Operators Group. The Amadeus pipeline has, over its life, provided a rich cache of learnings, some perhaps forgotten over time, but many are worthy of inclusion here as a testament to the pipeline and to the people that were faced with the problems and shared the learnings. The Amadeus Pipeline nearly did not come into existence, it did because the Gas Consortium never gave up. They showed incredible tenacity driven by a sincere belief that gas as a fuel was the best option for energy in the NT. Tenacity is a trait exemplified by those in the oil and gas industry and by “Pipeliners”; we understand the broadness of the risks faced, we overcome those obstacles with measured and intelligent intent, and we are not driven by blind belief, although it may sometimes appear so! Its route, extending from Alice Springs to Darwin provided a source of energy the length of the NT and power generation facilities emerged in population centres and on mine sites adjacent to it like Elliot, Tennant Creek, Katherine, Cosmo Howley, Mt Todd and Pine Creek. There was a strong desire amongst all the participants to encompass as much Australian content as possible. The project was built with X52, X60 and X65 pipe manufactured by Tubemakers from Australian steel coil made in Kembla Grange by BHP. The pipe was then

Page 11 coated by Shaws, also in Kembla Grange producing a final product with excellent quality. These manufacturers would continue to produce quality coated pipe for indigenous use and for export, with Orrcon and Socotherm entering the business and providing competition in the 1990’s and 2000’s. Sadly in recent times, the sourcing of cheaper pipe from China and Korea, some of which has proven to be of less than dependable quality, saw the end of pipe and coating manufacture in Australia with the closure of Onesteel, Orrcon and Bredero Shaw plants in 2011 and 2012. The desire for indigenous involvement extended to ancillary equipment. At the time, Richards manufactured small valves up to 6 inch in diameter here in Australia. These were used with Grove valves making up the rest. The Richards valves have performed remarkedly well, but the soft seat Grove valves have proven to be a little troublesome in terms of effective shut off capability. The construction and operation of the Amadeus pipeline involved long distances. Lots of windscreen time, much in inhospitable terrain with VHF communication via a microwave tower system the length of the pipeline proving not always to be 100% dependable and which triggered the advent of lone operator protocols, 2 hourly call-ins and the management of fatigue. The construction teams dealt with hundreds of cattle fences and put in temporary gates followed by permanent ones. There was no need for any compulsory acquisition orders for site leases or easements for the pipeline, traditional custodians travelled with survey teams led by Bruce Winterford, guiding them to safe areas away from sacred sites and aboriginal land rights act and indigenous land use agreements were completed with relative ease. Landowner relationships remain cordial today. The commercial aspects of the project were unique. Advantage was taken of financing through a leveraged lease facility organised through a consortium of Australian banks lead by ANZ. These had recently come to the attention of the Tax Office which had issued a Taxation Ruling (No. IT 2051) in July 1983. The leveraged lease structure enabled a partnership of companies to acquire plant which it then leased for a term of years to a lessee where, by reason of the "leverage" obtained from the borrowing of a substantial non- recourse loan, the members of the partnership were not effectively at risk for any more than a relatively small part of the funds used to acquire the plant. The lenders' security for the substantial amounts lent to acquire the plant was limited to the subject plant or to the rentals payable by the lessee. This made large tax deferral benefits available to the lessor partners. Unscrupulous operators could legitimately structure the income tax deductions available to the partnerships in the early years of the lease by way of depreciation, investment allowance and interest on borrowed moneys to be greater than the sum of rentals received in the early years and in aggregate these could be greater over the life of the lease than the total income, meaning no tax was paid at all. Whilst this was not so with the structure employed with the Amadeus Trust and NT Gas Pty Ltd, there was a time bar on getting the leveraged lease signed prior to 30 June 1985 before the enacted legislation effectively ruled out this course of finance. The result was that the

Page 12 project benefited from significant tax advantages along with an 18% investment allowance and a 5 year depreciation life for the pipeline asset. Peter Caldwell, who in later years would become Deputy Under Treasurer for the NT Treasury, was also a director, as the Darnor designate, of NT Gas Pty Ltd. Peter was heavily involved with the Treasury analysis of the coal and gas options. Following the commitment to gas and throughout the tenure of the leveraged lease, he was an ardent supporter of the gas option and was unequivocal about the overall competitive nature of the gas deal for the NT. The Amadeus pipeline was conceived as Australia embraced the age of gas as a serious fuel contender for power generation, and advances in construction techniques were being quickly adopted especially those that reduced the cost of pipelines. One such technique considered was double jointing used on previous long distance pipelines but this was discounted due to the inherent transport issues, which were difficult enough considering the terrain. Industry learnings included construction techniques around sink holes which are doline formations found between Daly Waters and Katherine where water congregates and drains away into limestone formations. Aerial surveillance was able to detect the large ones, infra- red photography did not help to delineate small ones and those were only avoided through ground truthing of the pipeline route. Black soil plains are prevalent between Newcastle Waters and Daly waters. When dry it turns as hard as rock and when wet it expands, becomes very sticky and plastic with little load bearing ability. Many a pipeliner has paid the ultimate price of a carton of beer having succumbed to the trappings of black soil after rain. The contraction and expansion according to moisture content threatens the pipeline coating. In such areas the pipeline was buried below 1.5 metre depth based on the assumption that the moisture content at this depth would not vary quite as markedly as at normal burial depths at 1 metre.6 Horizontal Directional Drilling (HDD) techniques were invented by Martin Cherrington in the USA in the 1960’s and were not available in any form at the time of the Amadeus pipeline construction. As such all the river crossings were completed using the traditional open cut method followed by exhaustive rehabilitation of the estuarine portion of the river banks. The techniques used in this rehabilitation were most successful and the learnings would be applied to the construction of future pipelines. The Amadeus pipeline traversed very pristine and rocky terrain including the McDonnell ranges to the North, East and West of Alice Springs. The pipeline sections down from Palm Valley and across the range at Tyler’s Pass were photographed prior to the commencement of construction and the rocks were replaced as close to the original positioning as possible. Except for the pipeline signs, it is exceptionally difficult to discern that a pipeline exists in these localities at all.

6 The Amadeus Basin to Darwin Gas Pipeline, M. Lillicrap, paper to 1986 APIA International Conference, Brisbane.

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It is a long pipeline and so one would assume it might cross a few faults and seemingly just to prove a point, it was in January 1998, just two years after commissioning, that mother Earth tested the pipeline with the Tennant Creek earthquake. The maximum surface wave magnitude was 6.8. Ironically, located just 50 kilometres away is the ANU operated Warramunga seismic array, which is there because it is on deep and solid bedrock giving it the ability to record the slightest earthquake activity all over Australia and into Asia and considered unlikely to be earthquake prone itself! The earthquake is effectively described in a paper given to the Australian Pipeline Industry Association conference in October 19887 and to the International Conference on Pipeline Reliability in Calgary, Canada in 1992. Earthquake design, or perhaps more appropriately the crossing of fault lines, was not adequately addressed or addressed at all in earlier revisions of the Australian pipeline standards CB 28, AS 1697 and AS 2885 - 1987. Some of the industry learnings from the event included pipe steel loading and the ductile performance of pipe and the adequate treatment of the crossing of “known” fault lines in the risk assessment process introduced with later revisions of AS 2885. Kingsley Davis and Chris Polhill of Tubemakers shared a great deal of their metallurgical knowledge in the understanding of the physical performance of the steel in the research conducted in the aftermath of the earthquake. Design considerations in the future would include strain based limit designs, the use of steel with high elongation and lower yield to tensile ratios yet with appropriate fracture toughness and to take advantage of the inherent strength of pipelines in torsion. Trench design and the use of friable backfill would be such as to allow for pipeline movement but to restrain that movement to prevent buckling failure in the event of rapid acceleration during fault movement. Pipeline earthquake engineering has finally become a standard phrase in Australian pipeline design circles as it is now adequately covered in Appendix M of the latest revision of AS2885 Part 1. The earthquake pipeline repair was an operation that lasted 72 hours and John Oxtoby brought huge amounts of pipeline experience to the table. The repair option utilised hot work principles for the final tie-in welds. As site engineer, I had gained experience for this through completing hot works in the field gathering systems in Roma. Absolute trust between the engineer and the welders, the late Laurie Atkins and the late Tony Blew was a key ingredient and the association between the Amadeus pipeline and these two highly competent and experienced welders would continue for many years8. The earthquake emergency provided a real life test of the emergency equipment purchased for the pipeline. Red Adair together with Asger “Boots” Hansen and Ed “Coots” Mathews became famous for fighting well fires all over the World. For NT Gas, “Boots” and “Coots” referred to two ancient 6 wheel drive army trucks which were rigged out with emergency response kit. This exercise proved that while they were perfect on the job, they were slow

7 Pipeline Earthquake Survival, Tennant Creek, Australia , 1988, S Dykes, paper to the 1988 APIA International Conference, Southport. 8 An earthshaking success: The Repair of the Amadeus to Darwin Pipeline, The Australian Pipeliner Magazine, March 2016

Page 14 to get there, very cumbersome and should really have been left in retirement. Upon review, a more nimble, flexible and mobile emergency response capability using modern trucks, 4WD trailers and quick grab cages of sized pipeline materials and repair equipment flowed out of this. As if the effects of the Tennant Creek earthquake were not bad enough, a flood event along the Mereenie spur occurred in November 1988 causing an approximately 2 km long stretch of the 10 inch pipe to float out of the trench. The operating pressure was reduced, and with Graham Doye supervising, a new trench was dug and the pipeline was carefully laid in the new trench whilst still flowing. Learnings from site observations of the effects of the flood waters showed that the soil crown left to compensate for subsidence along the trench line actually trapped water crossing the right of way and re-directed this along the trench line. The water caused scouring and the more that the scouring occurred, the more it allowed the water to be directed along the trench line eventually causing tunnel erosion. Poor compaction of the soil in the trench during construction meant the material could be removed easily and the pipe eventually floated out of the trench. Another such scouring event near Bachelor would support the theory. As a result, the industry adopted the removal of the crown and better compaction of the trench spoil during backfill as a means of dealing with subsidence effects. It also triggered a better appreciation for the extent of negative buoyancy required in flood plains. Sadly, some lessons are harder to learn than others and just to illustrate, mistakes made with poor compaction and right of way rehabilitation on the Duke Energy Eastern Gas Pipeline resulted in extensive tunnel erosion in the friable lateritic soil types prevalent around Bombala which, together with excessive coating defects discovered in the post construction DCVG survey, resulted in extensive and expensive warranty works in the early days of its operation. Leaking barrel unions on main line valve body bleed risers were discovered soon after commissioning. Inspection of spare valve risers showed that, despite the fact these unions had been eccentrically drilled in manufacture, this had not contributed to the leaks, it was simply that they had not been tightened at the factory. These were carefully excavated by Mark McCluskey and tightened in situ, recoated with two-part epoxy and buried in a leak free status. Construction inspection procedures now incorporate checks on the buried valve risers and most specifications require these risers to be made of one single length of pipe without barrel unions which are known to be prone to leaks. The commissioning process involves the introduction of gas across valves which, at some point in the process, will have reasonably high differential pressures (DP) across them. In desert country where sand can get blown into the smallest of crevices including pipes, the high DPs and the existence of sand can, after the shortest period of time, render the best of valves less than leak tight. The use of soft seats for high DP valves required a hot tap and stopple of a 4 inch valve at Tyler’s Pass and after the erosion of the Barrow Creek main line valve and pipework when blowing down the pipeline to effect repairs after the earthquake, double stacking of blow-down valves at all the MLV sites was completed. Learnings included the use of plug valves for high DP service, the use of sacrificial valves for commissioning service and the rapid opening of blow down valves to lessen, as much as possible, the vortex

Page 15 impingement of gas on the pipe wall as the valve partly opens to avoid erosion. It should be noted however, the existence of sand in a pipeline will render even plug valves useless in the event erosion occurs. NT Gas tested the performance of several different ball valves provided by willing vendors under sonic blow down conditions in 1989. This doubled as a training drill for the operators to open a valve as quickly as possible under actual blowdown conditions. The Richards ball valves performed well as did a valve supplied by one other manufacturer, the design of which caused the ball to lift off the seat some distance prior to rotation. Some of the others were rendered less than leak tight very quickly. During the commissioning process, Peter Roles, the pipeline commissioning engineer remarked that the pressure profile of the pipeline aligned well with the theoretical design except for 19 KPa which he attributed to the natural pumping force caused by the rotation of the Earth. Only Peter could have deduced such an exacting notion. This is perhaps why, for such long distance pipelines, where transient analysis models now provide for very accurate predictions of gas flow, there is still a need to “tune” the model. The Tennant Creek earthquake would not only teach us the erosion effects of sand left in the pipeline from construction, but it would enforce a learning to ensure strict attention to the cleanliness of pipelines post hydrotest. As teams focussed on the repair of the pipeline at Tennant Creek, another team made sure gas was still able to reach the Channel Island power station. As pressures depleted and gas velocities picked up in the pipeline, so did the amount of dust, sand and debris. Operators changed out filters at Darwin city gate as fast as they physically could and a charter jet plane loaded with filters was scrambled from Sydney. Kilograms of dust and debris were shovelled out of the filters. A lot of credit is due to the NT Gas crew, led by Ronnie Harrison, as the lights in Darwin never once flickered. It was close though! It was clear that the cleaning process applied pre and post hydrotesting on the Amadeus was not good enough. Following the removal of a further 300 kg plus of sand and debris out of the Amadeus pipeline during pigging exercises in 1989, the learnings that resulted included the use of end caps for pipe transportation, internal swabbing of pipe prior to welding and the use of end caps on pipe strings post welding and prior to tie-in. On a recent project completed in the desert in 2016, internal air blasting of each pipe just before stabbing was very effective as proven by the post hydrotest pig cleaning runs which resulted in 75% less cleaning runs than normal. There were more learnings. The confidence with which the NT Gas team dealt with the early adversities of earthquake and flood demonstrated the importance of training for new recruits. Prior to commissioning, the NT Gas technicians went through a 3 week course covering all aspects of gas, gas pipelines and operations and maintenance practices. This was further enhanced with the construction of the emergency response training yard at Helling scraper station, an initiative which would be repeated on the next major gas pipeline built from Wallumbilla to Gladstone.

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NT Gas would introduce the first remote access terminal, referred to as the RAT, for out of hours monitoring of the 24 hour control room. This enabled on duty controllers to log into the SCADA system and to monitor alarms from home. Gas for industrial and retail use in Darwin was championed by Jim Snow of AGL. Reticulation finally reached the Free Trade Zone in the mid 1990’s but it has never really expanded much beyond that. This probably stands to reason for, when you consider that the electricity is generated using gas, it’s price must be based on the gas price and once conversion efficiencies are taken into account, there is not a great deal of margin left with which to compete with electricity in the retail market. The NT suffers from one of the largest frequencies of lightning incidents in the World and is one of the more interesting and unpredictable integrity threats. Direct hits on above ground facilities have devastating impacts on electronic equipment but indirect hits also cause induced currents which can cause equal levels of damage. In the early days of operation damage to electronics at the facilities was costing about $80,000 per year. A small company in Tasmania provided solutions reducing this cost substantially. Large induced currents can travel along the steel pipeline and because it is insulated from earth by the coating, these currents may reach the nearest above ground asset or more often a coating defect underground looking for earth. Where the strike is close to or direct, the current is so much greater than the dielectric strength of the coating and it finds earth very quickly. The arc created at this point has resulted in metal loss of the pipe steel, sometimes even resulting in a through wall defect. In one instance close to Palm Valley, a 2mm diameter hole was found in the pipeline. The gas escaping had blown the desert sand above it out of the way creating a 2m deep by 2m round conical hole. On inspection of the hole, it appeared there was a point of entry onto and an exit mark off the pipeline caused by the passage of the lightning current and it left a small blob of molten metal beside the through wall defect. The length of the Amadeus pipeline makes it susceptible to the influence of solar flares which can induce currents in the pipeline. This interferes with the cathodic protection system and can, at worst, increase cathodic protection voltages above the di-electric strength of the coating thereby damaging it. The solution was to separate the pipeline into many shorter electrical segments, in effect shorter pipelines, to reduce the telluric impact on the cathodic protection system. Learnings from this have been incorporated into modern pipeline design and it is now common to have this separation. Early on in the design process, there had been concerns that yellowjacket coating might be susceptible to termite damage. Following direct current voltage gradient surveys, a multitude of defects in the coating were identified and upon excavation were found to be due to splitting of the yellowjacket coating. Evidence has been found of termite damage however nothing significant and more defects were attributed to construction damage due to failed rollers scoring the coating during lower and lay operations and some appear to be a split with no mechanical instigator at all. Whilst not prevalent, it is thought that this may be

Page 17 partly due to the ultra violet damage caused by exposure to the sun prior to burial weakening the strength of the coating in the radial direction and allowing splitting to occur. The failure of heat shrink Canusa Sleeves on the field joint coatings has also been of interest. This is not confined to the black soil plains where expansion and contraction of the soil with changes in the moisture content has been seen to affect the sleeves. At the time of discovery, various theories emerged including poor application procedures with the heat shrink sleeve application process and/or a lack of adhesive quality in the product. It is also known that the formula for the material in both Canusa sleeves and the raw HDPE yellowjacket powder was changed at some point in the late 1980’s or early 1990’s. It is inconclusive as to the main cause of the failures, the result however is that in some areas the heat shrink sleeves have dis-bonded from the pipeline allowing moisture ingress under the coating. The sleeves have then provided an insulating barrier to prevent the cathodic protection from working resulting in “shielding”. This issue lead to the requirement for heat shrink sleeve coating application qualification procedures being instigated for the very first time on the McArthur River pipeline project in 1994 and their adoption in the Australian Standard soon after. Compared with the over ditch application of tape wrapping on a number of its peers, the yellowjacket on the Amadeus pipeline has generally performed well and where the pipeline may have been prone to stress corrosion cracking downstream from a compressor for instance, there has been no indication of its emergence to date. DCVG results also indicated a large number of defects in the underground pipework at the scraper stations and main line valves which were coated with coal tar enamel. These have been excavated and re-coated and whilst corrosion was evident, it was with minimal pipe wall loss. Whilst the coal tar enamel had deteriorated and required replacement, the nature of the coating is such that it has largely prevented moisture ingress and where it has failed, it has not caused shielding and the cathodic protection has been able to protect the pipe. The Amadeus pipeline was designed to move gas north to Darwin. It was supported by a back bone of microwave towers stretching from Mereenie and Palm Valley all the way to Darwin. Managed by Telstra, it supported a VHF radio system and the VHF data communications highway to the facilities. The scraper stations are spaced approximately every 150km and were originally fitted with non-return valves to keep the inventory north should an uncontrolled gas escape occur. These were in addition to the remote actuated valves placed at each of the sites and at main line valve stations suggesting the designer’s reluctance to rely solely on remotely actuated valves whose very action is dependent upon the reliability of the data communication infrastructure. In 2009 when the Bonaparte gas pipeline was connected into the Amadeus pipeline there was then a need to transport gas in both directions. A program to disable the non-return valves at each scraper station was undertaken immediately prior to the Bonaparte pipeline connection and shortly after this a program to make the pipeline piggable in both directions was completed. Modern pipeline design remains dependent upon reliable communication infrastructure and as we know this has advanced beyond

Page 18 belief. Where once we had HF radios and the flying doctor transmission service into the telephone network as a back up to the VHF radio system, we now have 4G, soon to be 5G mobile phones, vehicle tracking and satellite phones as back up! There remains one legacy of the design which has been on the radar for many years. Most of the pipeline section from Darwin city gate to Channel Island is 12 inch but it reduces to 8 inch, heavy wall pipe for the short distance it is supported beneath the Channel Island bridge and reverts to 12 inch again to the Channel Island meter station. This renders this approximately 12 km section unpiggable and therefore intelligent pigs are not part of the armoury of integrity tools that are available to the other sections of the pipeline. The bridge is the only access point to the island. The power station is dual fuel, gas and diesel. If the bridge is lost, personnel can fly in by helicopter but both gas and diesel supply depend entirely upon the integrity of the bridge. The pipeline’s designers, John Balint and Alec Dietsch have described the decision to use the 8 inch heavy wall pipe as one based on a need to provide impact resistance, akin to nil rupture considerations today, based upon the threat of a ship losing control and damaging the bridge and the pipeline with it. It remains unclear as to why 12 inch heavy wall pipe was not used. Looking back and understanding the time pressures to get the pipeline operational, I suspect that if 12 inch heavy wall pipe with adequate fracture toughness had been available at short notice, it would have been used. In any case, intelligent pigging was in its infancy at the time and, unlike today, was not considered in the regulatory licensing process as a primary integrity tool. Learnings from this include the requirement to make all pipeline sections intelligently piggable. In addition, there has had to be the formulation of alternative integrity tools for this section of pipeline based on visual inspection frequencies founded on a sample size that satisfy statistical requirements for high levels of confidence. It does not however remove absolute doubt because, as is well known, there is one form of corrosion, namely pit corrosion which operates according to its own rules, but the consequence of which is unlikely to be a rupture in any case. As Ted Campbell noted, the heady days of negotiation required co-operation and speedy decisions. The Amadeus pipeline was perhaps one of the very first Public Private Partnerships and a very successful one at that. Construction came in under the definitive estimate, the cost of operations and maintenance during the lease period met the expectations of most in government and the conclusion of the lease period has seen the transition of the pipeline into APA hands with no loss in the continuity of the gas transportation service delivered over its 32 years of existence. The Amadeus pipeline has been and remains as important to the NT as the Moomba to Sydney pipeline is to New South Wales and the Roma to Brisbane pipeline is to Queensland. It is certain that the Amadeus pipeline will become important to the Eastern States of Australia in the very near future. It is those that had the vision, those that had the privilege of working to build it and those that rose to the challenges of maintaining it that need to be celebrated today. Sometimes through adversity and mostly through its mere existence, it has provided many learnings which have seamlessly entered into the annals of pipeline industry best practice not only here in Australia but also overseas through APGA’s Research

Page 19 and Standards Committee’s connections with the European Pipeline Research Group and the Pipeline Research Council International in the USA. It has a real character, one all of its own, borne of the environment through which it weaves, and out of the efforts of all those who have touched its life in one way or another. It has surely been one of the greatest catalysts for development in the Northern Territory and it should be honoured as one of the true icons of the Australian Pipeline Industry in this, the 50th year of the Australian Pipeline and Gas Association.

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