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ONSHORE
OIL&GASSupply and Service Industry Analysis
Shale gas resources and potential
Katherine
Alice Springs
Tennant Creek
Darwin
Wiso Basin
Birrindudu
Basin
Ngalia Basin
McArthur
Basin
Georgina Basin
Lawn Hill
Platform
Arthur Creek
Formation
Ordovician
(incl. Horn Valley Siltstone)
Velkerri
Formation
BEETALOO SUB-BASIN
P50: 156.5 Tcf 2
70.5 Tcf (BCG)2
Best est: 111.8 Tcf 2
19 Tcf 1
BARNEY CREEK FM
P50: 13 Tcf3
Best est: 7.4 Tcf1
PEDIRKA BASIN (Purni Formation)
Best est: 43 Tcf (includes SA)1
BONAPARTE BASIN
Best est: 6 Tcf
(includes WA)1
AMADEUS BASIN
(Ordovician system)
Mean: 11.3 Tcf4
14.9 Tcf (BCG)4
Best est: 16 Tcf1
SOUTHERN GEORGINA BASIN
Best est: 50 Tcf (includes Qld)1
A15-151.ai
200 km1000
Tcf: trillion cubic feet of shale gas.
Tcf (BCG): trillion cubic feet of
basin-centred gas (in addition to
shale gas).
P50: P50 Prospective Resource of
undiscovered gas potentially-in-
place, in which there is at least a
50% probability that the gas volume
is greater than this estimate.
Best est: The best estimate of the
quantity of the prospective gas
resource that will actually be
recovered from the accumulation.
Mean: mean, unrisked technically
recoverable prospective resource.
Sources for resource estimates+
:
1
AWT International (2013)
2
RPS (2013)
3
MBA (2012)
4
DSWPET (2011)
#
Approximate areas within which key
prospective shales are likely to be
present, although this does not imply
that the shales are necessarily
present or are gas-bearing over the
entire area indicated (Sources:
Bonaparte and Amadeus basins from
Ahmad and Scrimgeour (2006);
Velkerri Formation from Bruna (2015)
NTGS DIP012; Arthur Creek
Formation adapted from Munson
(2014).
x
Approximate boundaries of the areas
encompassing the quoted resource
estimates (from AWT International
2013).
* Approximate interpreted area within
which the McArthur Group and
equivalents may occur in the
subsurface. This does not include the
Lawn Hill Platform, which also
contains shales of this age.
+
Details of references in Munson
(2014). Petroleum geology and
potential of the onshore Northern
Territory. NTGS Report 22.
Petroleum wells
Potential extent of
McArthur Group*
Gas pipeline
Sedimentary basins
Extent of known
prospective shales#
Area of prospective
resource estimatesx
Road
Major town
ore petroleum exploration and production
Gas pipeline Onshore
petroleum permits
Oil pipeline Oil fieldGas field
Mereenie
Palm Valley
Glyde
Oil/gas field Gas discovery Production lease
0 100 200km
A15-182a
McArthur Basin
Beetaloo
Sub-basin
Bonaparte Basin
(Onshore)
Georgina Basin
Amadeus Basin
Pedirka and Eromanga
Basins
Pipeline flow capacities*
Bayu Undan 287.2 PJ/a
(petajoules per annum)
Bonaparte 38.7 PJ/a
Amadeus 45.6 PJ/a **
McArthur River 3.3 PJ/a
Palm Valley 5.8 PJ/a
Mereenie Spur 15.0 PJ/a ^
* based on freeflow at Maximum Allowable
Operating Pressure
**flows in both directions from Ban Ban Springs
^ from historical flows
2
1
4
5
6
3
TAMBORAN RESOURCES PTY LTD
SANTOS
TAMBORAN RESOURCES PTY LTD
ARMOUR ENERGY PTY LTD
CENTRAL PETROLEUM PTY LTD
TERRITORY OIL AND GAS PTY LTD
BEACH PETROLEUM
BLUE ENERGY
WISO OIL PTY LTD
CENTRAL PETROLEUM PTY LTD
SANTOS
PETROFRONTIER (AUSTRALIA) PTY LTD
PANGAEA RESOURCES
TRISTAR PETROLEUM COMPANY
IMPERIAL OIL AND GAS
FALCON OIL AND GAS AUSTRALIA LTD
ORIGIN ENERGY
SASOL
Borroloola
Ban Ban Springs
Nhulunbuy
Jabiru
Tennant Creek
Yulara
DARWIN
Alice Springs
Katherine
WESTERNAUSTRALIA
QUEENSLAND
S O U T H A U S T R A L I A
SurpriseSurprise
DingoDingo
OoraminnaOoraminna
WeaberWeaber
2
1
4
5
3
3
3
6
3
3
3
3
An industry study by the Department of Business examining potential
supply and service industry development opportunities associated with
growing onshore oil & gas sector.
Research & Analysis:	 Richard Exley
	 Manager Industry Development
	 Department of Business
	 T: +61 8 8999 5201
	 E: richard.exley@nt.gov.au
Disclaimer:
While care has been taken to ensure that information in this publication is true and correct at the time
of publication, changes in circumstances after the time of publication may impact on the accuracy of
the information.
The Northern Territory of Australia gives no warranty of assurance, and makes no representation as to
the accuracy of any information or advice contained in this publication, or that it is suitable for your
intended use. You should not rely upon information in this publication for the purpose of making any
serious, business or investment decisions without obtaining independent and/or professional advice in
relation to your particular situation.
The Northern Territory of Australia disclaims any liability or responsibility or duty of care towards any
persons for loss or damage caused by any use of reliance on the information contained in this publication.
ONSHORE OIL & GAS IN THE
NORTHERN TERRITORY
October 2015 | Onshore Oil & Gas in the Northern Territory
Onshore petroleum exploration and production
Palaeo–Mesoproterozoic
Basins (1000–2500 Ma)
Palaeo–Mesoproterozoic
Orogens (1000–2500 Ma)
Archaean
(>2500 Ma)
Neoproterozoic–
Palaeozoic (250–1000 Ma)
Gas pipeline
Mesozoic–Cenozoic
0–250 Ma
Onshore
petroleum permits
Oil pipeline Oil fieldGas field
(Kalkarindji Province)
Mereenie
Palm Valley
Glyde
Oil/gas field Gas discovery Production lease
0 100 200km
A15-182a
McArthur Basin
Beetaloo
Sub-basin
Bonaparte Basin
(Onshore)
Georgina Basin
Amadeus Basin
Pedirka and Eromanga
Basins
Pipeline flow capacities*
Bayu Undan 287.2 PJ/a
(petajoules per annum)
Bonaparte 38.7 PJ/a
Amadeus 45.6 PJ/a **
McArthur River 3.3 PJ/a
Palm Valley 5.8 PJ/a
Mereenie Spur 15.0 PJ/a ^
* based on freeflow at Maximum Allowable
Operating Pressure
**flows in both directions from Ban Ban Springs
^ from historical flows
2
1
4
5
6
3
TAMBORAN RESOURCES PTY LTD
SANTOS
TAMBORAN RESOURCES PTY LTD
ARMOUR ENERGY PTY LTD
CENTRAL PETROLEUM PTY LTD
TERRITORY OIL AND GAS PTY LTD
BEACH PETROLEUM
BLUE ENERGY
WISO OIL PTY LTD
CENTRAL PETROLEUM PTY LTD
SANTOS
PETROFRONTIER (AUSTRALIA) PTY LTD
PANGAEA RESOURCES
TRISTAR PETROLEUM COMPANY
IMPERIAL OIL AND GAS
FALCON OIL AND GAS AUSTRALIA LTD
ORIGIN ENERGY
SASOL
Borroloola
Ban Ban Springs
Nhulunbuy
Jabiru
Tennant Creek
Yulara
DARWIN
Alice Springs
Katherine
WESTERNAUSTRALIA
QUEENSLAND
S O U T H A U S T R A L I A
SurpriseSurprise
DingoDingo
OoraminnaOoraminna
WeaberWeaber
2
1
4
5
3
3
3
6
3
3
3
3
ore petroleum exploration and production
Gas pipeline Onshore
petroleum permits
Oil pipeline Oil fieldGas field
Mereenie
Palm Valley
Glyde
Oil/gas field Gas discovery Production lease
0 100 200km
A15-182a
McArthur Basin
Beetaloo
Sub-basin
Bonaparte Basin
(Onshore)
Georgina Basin
Amadeus Basin
Pedirka and Eromanga
Basins
Pipeline flow capacities*
Bayu Undan 287.2 PJ/a
(petajoules per annum)
Bonaparte 38.7 PJ/a
Amadeus 45.6 PJ/a **
McArthur River 3.3 PJ/a
Palm Valley 5.8 PJ/a
Mereenie Spur 15.0 PJ/a ^
* based on freeflow at Maximum Allowable
Operating Pressure
**flows in both directions from Ban Ban Springs
^ from historical flows
2
1
4
5
6
3
TAMBORAN RESOURCES PTY LTD
SANTOS
TAMBORAN RESOURCES PTY LTD
ARMOUR ENERGY PTY LTD
CENTRAL PETROLEUM PTY LTD
TERRITORY OIL AND GAS PTY LTD
BEACH PETROLEUM
BLUE ENERGY
WISO OIL PTY LTD
CENTRAL PETROLEUM PTY LTD
SANTOS
PETROFRONTIER (AUSTRALIA) PTY LTD
PANGAEA RESOURCES
TRISTAR PETROLEUM COMPANY
IMPERIAL OIL AND GAS
FALCON OIL AND GAS AUSTRALIA LTD
ORIGIN ENERGY
SASOL
Borroloola
Ban Ban Springs
Nhulunbuy
Jabiru
Tennant Creek
Yulara
DARWIN
Alice Springs
Katherine
WESTERNAUSTRALIA
QUEENSLAND
S O U T H A U S T R A L I A
SurpriseSurprise
DingoDingo
OoraminnaOoraminna
WeaberWeaber
2
1
4
5
3
3
3
6
3
3
3
3
Onshore Oil & Gas in the Northern Territory | October 2015
TABLE OF CONTENTS
PURPOSE	1
BACKGROUND	2
The Role of Knowledge,
Information & Data	 3
Summary Onshore Exploration –
Granted Permit Work
Commitments 2013-18	 3
Industry Structure 	 4
The Role of Infrastructure	 4
Pipelines	4
Major gas transmission pipelines
and proposed pipelines in Australia	 6
Roads	7
Australian Interstate Road Network	 7
USA – Interstate Road Network	 8
Rail	9
USA – Rail Map	 9
Australian Rail Map	 10
INDUSTRY BARRIERS & GAPS 	 11
Knowledge, Information & Data Gaps	 11
Water Resource 	 11
Fracture Stimulation Services & Supplies	 12
Fraccing Fluid – What is it?	 12
Guar Gum 	 12
Proppant
(Frac Sand and Ceramic Proppant)	 13
DEVELOPMENT CHALLENGES	 15
DEVELOPMENT OPPORTUNITIES	 16
Drilling Contractors & Services	 16
Civil Works	 16
Fracture Stimulation Services	 16
Fracture Stimulation Equipment	 17
Frac Fluids	 17
Guar Gum	 17
Water Services –
Supply and Treatment	 17
Extractive Resources Industry –
sand, gravel and rock	 18
Waste Management Services	 18
Transport & Logistics Hubs	 18
Research and Innovation	 19
Alternative Stimulation Technologies	 19
Alternative & Recycled Frac Fluids	 19
CONCLUSION	20
Where to from here	 21
APPENDIX A	22
Frac Sand Specifications	 22
END NOTES	25
October 2015 | Onshore Oil & Gas in the Northern Territory
PURPOSE
This analysis identifies current industry trends and increases
understanding of the industry as well as its infrastructure gaps. It also
identifies potential opportunities for a considered, responsible stewardship
approach to the industry’s development and growth.
It broadly identifies gaps in local industry capacity and capability to service or supply the
emerging unconventional oil and gas sector, particularly service and supply support of
shale gas operations in regional Northern Territory.
These gaps represent opportunities for local capacity development or investment
attraction for capability development. It could provide new business, employment and
training opportunities for communities throughout the Northern Territory.
The role of government in helping industry meet these challenges and
opportunities includes:
•	 Provision of robust information.
•	 Promotion of opportunities for new investment.
•	 Encouragement of collaboration and joint ventures.
•	 Provision of a competitive business and regulatory environment.
1October 2015 | Onshore Oil & Gas in the Northern Territory
The ‘Shale Gale’ gas revolution of North America has rapidly changed the global energy
landscape. It has the potential to significantly alter the energy landscape in Australia, if the
US success can be replicated.
There are considerable, but not insurmountable obstacles to achieving shale gas success
in the Australian context. A thriving shale gas industry could play a role in direct action
on climate change, assist the transition to a low carbon future and restore the energy
advantage that Australian manufacturing requires to be sustainable. If the Australian shale
gas revolution is a success it could see a return to historic (low) gas prices and break or
reduce the impact of the link to oil pricing via Liquefied Natural Gas (LNG) exports.
In addition to gas, fractured shales can yield (associated) ethane, LPG (butane and
propane), condensate and sometimes oil. Wells yielding ‘wet’ gas have considerably
better economics compared to ‘dry’ gas wells and may allow producers to price gas
competitively for domestic consumption.
The UCL Australia Green Paper ‘SHALE GAS IN AUSTRALIA: THE POLICY OPTIONS’
(UCL International Energy Policy Institute, Adelaide), states, in conclusion;
‘Policy should also encourage the development of a shale gas service industry to drill
the wells and hydraulically fracture the structures. Such policies could range from fiscal
breaks to the encouragement of greater cooperation among the operators and the
service industry. The development of such an industry could prove to be a major benefit
to the Australian economy as shale gas interest in Asia grows.’ i
BACKGROUND
Assessed Basin Darwin
Other Basin
Canning
Perth
Maryborough
recoverable
gas
(trillion
cubic feet)
recoverable
oil
(barrels
in billions)
Beetaloo
Cooper
Adelaide
Perth
Brisbane
Sydney
Melbourne
Cooper 9.3 1.5
Maryborough 19 -
Perth 33 0.5
Canning 235 9.7
Georgina 13 1.0
Beetaloo 44 4.7
NT
QLD
SA
NSW
VIC
WA
Georgina
Source: US Department of Energy
2 Onshore Oil & Gas in the Northern Territory | October 2015
THE ROLE OF KNOWLEDGE, INFORMATION & DATA
The US Shale Gas revolution or ‘shale gale’ has been underpinned by decades of oil
and gas field data, geophysical, geochemical, seismic, core and drilling logs and nearly
a century of exploration and production experience. This vast library of information,
data and knowledge helped the early shale explorers identify the most prospective
targets, optimising drilling programs on the ‘sweet spots’ which increased success rates
dramatically. As interpretation of the data was confirmed, success built upon success. The
technical data library available on most of the Australian shale basins, with the possible
exception of the Cooper Basin, by contrast is far more limited in comparison. Prospective
shale basins in Australia often lack seismic data and have had few, if any wells drilled.
This doesn’t diminish the potential of the basins but it does slow exploration and
development as explorers cautiously analyse what data they can draw upon, mainly from
minerals exploration, new 2D seismic and a few tentatively drilled wells.
Summary Onshore Exploration – Granted Permit Work
Commitments 2015-2020
Key NT Onshore Oil & Gas Basins - Exploration Activity
Basin G&G
2D Seismic
survey (km)
Wells Main Industry Participants
Amadeus 5 1464 4 Santos Ltd; Central Petroleum; Mosman Oil & Gas
Georgina 4 629 5 Baraka Energy; Minerals Australia and Jacaranda
Minerals Limited; Wiso Oil Pty Ltd; Tom Oates
McArthur
inc. Beetaloo/
Carpentaria
31 488 54 Origin Energy; Sweetpea Petroleum; Minerals
Australia and Jacaranda Minerals Limited; Santos
Ltd; Armour Energy; Imperial Oil & Gas; Pangaea
Resources
Pedirka/
Eromanga
inc. Simpson Desert
8 860 10 Santos Ltd; Central Petroleum; Tri-Star Energy;
Tamboran Resources
Victoria-
Birrindudu
11 - 13 Paltar Petroleum; Pangaea Resources
Ngalia 16 - 7 Tamboran Resources
Wiso - 450 3 Wiso Oil Pty Ltd
Bonaparte 1 - 1 Beach Energy
Total
(all basins)
76 3727 97 NT total land area 1,335,742 sq.km
Note: G&G = Geophysical and Geochemical studies/investigations. Data based on work commitments at award of permits
(source: NT Dept. of Mines & Energy, Permit Work Commitments – June 2015).
3October 2015 | Onshore Oil & Gas in the Northern Territory
INDUSTRY STRUCTURE
Currently, the US industry is also far more diverse than Australia’s with many small
(including family owned) explorers, producers and service companies providing an
environment for intense competition. It is these small companies that drove and benefited
from the development of shale reserves. In addition, this may have also been driven
by the fact that mineral rights are owned by landowners - not the government. The key
factors of extensive knowledge; large volumes of data and a competitive industry resulted
in intense competition driving innovation and igniting the shale gas boom. The diverse
range of suppliers has also been important in keeping costs down through specialisation,
the development of standardised solutions and production line-like processes.
THE ROLE OF INFRASTRUCTURE
In the US there is extensive infrastructure throughout the main shale basins, a legacy of
earlier conventional oil and gas developments, that now supports the rapid development
of the shale gas industry. These earlier booms left tens of thousands of kilometres of oil
and gas pipeline, road and rail networks across much of America. They linked oil and gas
producing regions with consumers, refineries and export ports.
PIPELINES
The US natural gas pipeline network is a highly integrated transmission and distribution
grid that can transport natural gas to and from most locations in continental USA (the
lower 48 States).
The US natural gas pipeline grid comprises:
•	 More than 210 natural gas pipeline systems.
•	 Over 480 000 km of interstate and intrastate transmission pipelines.
•	 More than 1 400 compressor stations that maintain pressure in network.
•	 More than 11 000 delivery points, 5 000 receipt points and 1 400 interconnection
points that facilitate the transfer of natural gas throughout the US.
•	 29 hubs or market centres that provide additional interconnections.
•	 394 underground natural gas storage facilities.
•	 55 locations where natural gas can be imported/exported via pipelines.
4 Onshore Oil & Gas in the Northern Territory | October 2015
Legend
= Interstate Pipelines
= Intrastate Pipelines
Source: Energy Information Administration, Office of Oil & Gas, Natural Gas Division, Gas Transportation Information System
The growth of the US shale gas industry benefited hugely from this legacy of oil and
gas pipelines. This infrastructure was a critical enabler in providing ready access to
markets in the early days of shale development and significantly reduced the capital
expenditure of the industry. Only now, more than ten years after the shale gas revolution
began, are capacity limits of the pipeline network beginning to constrain further growth in
the industry.
5October 2015 | Onshore Oil & Gas in the Northern Territory
By contrast Australia’s transmission pipeline infrastructure comprises approximately 29 000km
of transmission pipeline, of which some 21 000km are high-pressure gas transmission pipelines.
These high-pressure gas transmission pipelines span the significant distances between Australia’s
(conventional) gas fields and its population and industrial centres. Australia has a significant pipeline
infrastructure deficit when compared to the US with limited, poorly integrated pipeline networks
on the east and west coasts. As a result most shale basins in Australia lack access to pipeline
infrastructure, with the exception of the Cooper Basin.
The Northern Territory Government is progressing the development of a gas pipeline linking the
Amadeus Basin to Darwin pipeline, at Tennant Creek (Warrego), with the Carpentaria pipeline near
Mt Isa in Queensland, the development is known as the North East Gas Interconnector (NEGI). In
November 2015 the Northern Territory selected Jemena Northern Gas Pipeline Pty Ltd to construct
and operate the NEGI pipeline to connect Northern Territory gas with eastern markets. This is
expected to offer new opportunities for the commercialisation of gas discoveries in the Northern
Territory. Jemena also aspires to extend the pipeline, in the future, to the Wallumbilla Gas Hub,
which will further improve the market access for Northern Territory gas.
Major gas transmission pipelines and proposed pipelines in Australia
133
2
1
9
7
5
4
6
8
17
10
11
18
14
12
16
15
KALGOORLIE
KAMBALDA
ESPERANCE
ADELAIDE
MELBOURNE
HOBART
Osway Basin Bass
Basin
Gas basin Gas processing
Existing (or under construction)
uncovered natural gas pipelines
including subsea pipelines
Pipeline No.
Moomba to Sydney system (except for Moomba to Marsden) 1
Central West and Central Ranges pipelines 2
Victorian trasmission system 3
Dawson Valley pipeline 4
Queensland Gas pipeline (Wallumbilal to Gladstone/Rockhampton) 5
Roma to Brisbane pipeline 6
South West Queensland pipeline (Ballera to Wallumbilal) 7
Carpentaria pipeline (Ballera to Mt Isa) 8
Moomba to Adelaide pipeline system 9
Amadeus Basin to Darwin pipeline 10
Goldfields Gas pipeline 11
Dampier to Bunbury Natural Gas pipeline 12
Eastern Gas pipeline (Lengford to Horsley Park) 13
Dongara tp Perth Pinjarra (Parmelia) 14
SEA Gas pipeline 15
Tasmanian Gas pipeline 16
Palm Valley to Alice Spring 17
Midwest pipeline 18
North East Gas Interconnector 19
Existing (or under construction) covered
natural gas pipelines
Proposed natural gas pipelines
Gippsland Basin
MOOMBA
ALICE SPRINGS
DARWIN
BRISBANE
SYDNEY
MARSDEN
PORT KEMBLA
MEREENIE
PERTH
Perth Basin
Carnavor Basin
Amadeus Basin
Bonaparte Basin
Blacktip
Browse Basin
Cooper-Eromanga
Basin
Bowen-Surat Basin
Adavale
Basin
Timor Sea
Ichthys
PALM VALLEY
19
6 Onshore Oil & Gas in the Northern Territory | October 2015
ROADS
The continental USA road network is even more extensive that its pipe network, at
6 506 204km (2008)ii
and of a very high standard. Australia’s road network consists of
around 823 217km (2011)iii
while much better on a per capita basis, the density of roads
is about one sixth of the US and demonstrates how sparse infrastructure in the Australian
interior is – where the majority of our shale basins are located.
Country
Total network length of
all public roads (km)
Length of public roads
per capita (m)
Road density
(m of road per square km)
Australia 900,082 26.08 117.01
USA 6,341,421 21.69 668
Source: http://en.wikipedia.org/wiki/List_of_OECD_countries_by_road_network_size
Australian Interstate Road Network
Esperance
Kalgoorlie
Port
Hedland
Halls
Creek
Wyndham
Katherine
TennatCreek
MtIsa
Charleville
Longreach
AliceSprings
CooberPedy
Cairns
Townsville
Rockhampton
Mackay
Albany Adelaide
Port Lincon
Port
Augusta
MelbourneWarrnambool
Mt Gambier
Broken
Hill Nyngan
Dubbo
Hobart
Launceston
Darwin
Broome
Brisbane
Port Macquaire
Newcastle
Tamworth
Sydney
Canberra
Lakes Entrance
Perth
Geraldton
Carnavon
WESTERN
AUSTRALIA
(WA)
NORTHERN
TERRITIRY
(NT)
SOUTH
AUSTRALIA
(SA)
TASMANIA
(TAS)
VICTORIA
(VIC)
NEW SOUTH WALES
(NSW)
QUEENSLAND
(QLD)
Source: http://www.atn.com.au/mapofaustralia.html; Map of Australian Highways
7October 2015 | Onshore Oil & Gas in the Northern Territory
USA – Interstate Road Network
C A N A D A
M E X I C O
T H E
B A H A M A S
C U B A
GulfofCalifornia
N O R T H
A T L A N T I C
O C E A N
N O R T H
P A C I F I C
O C E A N
Lake Superior
LakeMichigan
Lake Huron
Lake Erie
LakeOntario15
1590
84
84
82
90
5
5
80
5
94
35
29
94
25
80 80
44
135
80
29
76
70
15
10
8
8
17
19
27
40
20
37
45
90
90
25
20
10
10 40
40
15
5
70
35
35
35
35
10
91
90
9594 43
96
75
69
65
74
88
35
80
70
94
76
90
69
80
74
57
75
65
70
64
65
55
55
40
30
49
12
55
10
40
59
95
75
4
75
85
20
16
75
65
10
80
76
95
81
95
76
77 79
64
40
26 77
85
81
64
40
95
20
26
75
40
59
24
65
WASHINGTON D.C
HELENA
PIERRE
BISMARCK
OLYMPIA
SALEM
BOISE
SACRAMENTO
CARSON CITY SALT LAKE CITY CHEYENNE
DENVER
LINCOLN
TOPEKA
DES MOINES
JEFFERSON CITY
SPRINGFIELD INDIANAPOLIS
FRANKFORT
LANSING
CHARLESTON
RICHMOND
ANNAPOLIS DOVER
HARRISBURG
HARTFORD
ALBANY
CONCORD
MONTPELIER
BOSTON
AUGUSTA
MADISON
ST. PAUL
OKLAHOMA
CITY
AUSTIN
SANTA FE
PHOENIX
JACKSON
BATON
ROUGE
MONTGOMERY
TALLAHASSEE
COLUMBIA
RALEIGH
NASHVILLE
ATLANTA
LITTLE ROCK
COLUMBUS
TRENTON
PROVIDENCE
CANADA
R U S S I A
ALASKA
(U.S.A)
JUNEAUBristol Bay
HAWAII
HONOLULU
NORTH PACIFIC OCEAN
National Capital
State Capital
International Boundary
State Boundary
Interstate Highway Number
State and Other Highways
Interstate Highway Network
4
NUSA
ROAD MAP
Source: www.mapsofworld.com; Enlarged USA Road Map represented road network of Unites States
8 Onshore Oil & Gas in the Northern Territory | October 2015
RAIL
Similarly the US has an extensive legacy of rail infrastructure criss-crossing the continent.
This network, the longest in the world, is over 220 000 km in length.The density of the
network is one (linear) kilometre of track for every forty-three square kilometres of land mass.
USA – Rail Map
N
Dover
Boise
Salem
Austin
TopekaDenver
Pierre
Albany
Boston
Helena
Jackson
Phoenix
Atlanta
Raleigh
Lincoln
Trenton
Madison Lansing
St Paul
Concord
Augusta
Olympia
Columbia
Santa Fe
Richmond
Cheyenne
Columbus
Hartford
Bismarck
Nashville
Frankfort
Annapolis
Montgomery
CharlestonSacramento
Des Moines
Harrisburg
Providence
Montpelier
Baton Rouge
Tallahassee
Little Rock
Springfield
Carson City
Indianapolis
Oklahoma City
Jefferson City
Salt Lake City
Washington D.C.
C A N A D A
M E X I C O
N O R T H
AT L A N T I C
O C E A N
N O R T H
PA C I F I C
O C E A N
G u l f o f M e x i c o
National Capital
State & Province Capital
Rail Network
International Boundary
State & Province Boundary
0 500 Km
USA
Rail Network
Source: http://www.usamapxl.com/rail-map
In comparison Australia has a network of approximately 38 000 km, providing a density
of one kilometre of track for almost every two-hundred square kilometres of land mass.
Most of the network is located in the eastern states with transcontinental links east-west
(Sydney to Perth) and north-south (Adelaide to Darwin). There are also significant private
networks in north-west Western Australia servicing the Pilbara iron mines.
9October 2015 | Onshore Oil & Gas in the Northern Territory
Australian Rail Map
Source: http://en.wikipedia.org/wiki/Rail_transport_in_Australia
Creative Commons Licence http://creativecommons.org/licenses/by-sa/2.5/au/legalcode
What these comparisons reveal is that the nascent US shale revolution had a substantial
advantage in terms of availability and access to enabling infrastructure as it emerged
allowing it to expand rapidly and get production to market quickly, with few barriers to
restrain growth. Only after ten years of sustained growth, have constraints emerged in
the US pipeline system.
The situation across most shale basins in Australia is very different. Most are remote from
existing infrastructure, with the possible exception being the Cooper Basin on the South
Australia-Queensland border. The Cooper Basin is for this reason the leading target for
local small to mid-tier companies and the big national and international oil companies
due to its access to infrastructure. When explorers unlock the resources of the ‘Cooper’
it will likely provide valuable insight to how other basin can be developed. That would
accelerate development in subsequent basins, although differences will exist between
the shales of the various basins.
Kalgoorlie
MtIsa
Longreach
Charleville
AliceSprings
Tarcolola
Cairns
Normanton
Croydon Townsville
Rockhampton
Adelaide
MelbourneWarrnambool
Arat
Bunbury
Broken
Hill
Hobart
Bairnsdale
Shepparton
Darwin
Brisbane
Newcastle
Bomaderry/Nowra
Albury
Eucha
Swan Hill
Armidale
Moree
Dubbo
Sydney
Canberra
Perth
10 Onshore Oil & Gas in the Northern Territory | October 2015
KNOWLEDGE, INFORMATION & DATA GAPS
Significant knowledge and information gaps currently exist in the Northern Territory
regarding the geology of both conventional and unconventional (shale) basins, due to the
very limited exploration that has occurred to date. We therefore have limited access to
seismic and well data to aid in the identification of ‘sweet’ spots.
The Northern Territory Geological Survey is tackling the issue with pre-competitive data,
but it is an enormous task (the Northern Territory at 1.3m km2
is about twice the size of
Texas) with some basins never having been previously drilled for conventional oil and
gas let alone unconventional. These basins had scant seismic investigations undertaken,
with only limited data from minerals exploration drilling available.
The availability of water and particularly the sustainability of ground water sources are
poorly defined and understood. As a result limited knowledge exists of where the best
ground water resources are located in many cases.
WATER RESOURCE
The Northern Territory, for the most part, is a very dry environment with limited surface
water resources and sparse water supply infrastructure. Therefore drilling and fraccing
operations will be highly dependent on ground water supplies in most regions. A typical
horizontal multi-stage hydraulically fractured well requires ten to twenty mega litres (ML)
of water (Equivalent to 4 to 8 Olympic swimming pools). Each well may require up to 15
fraccing stages, with each frac stage requiring 0.04 to 0.4ML of water (ML = mega litre =
1 000 000 litres).
It is therefore very important, for the efficient and effective growth of the shale gas
industry that ground water resources are identified, mapped to determine
their capacity to support operations. This will both ensure limited resources are
managed sustainably and development of shale gas basins are optimised without
detrimental impacts on other users. Low levels of salinity may be acceptable for some
frac fluid blends.
INDUSTRY BARRIERS
& GAPS
11October 2015 | Onshore Oil & Gas in the Northern Territory
FRACTURE STIMULATION SERVICES & SUPPLIES
Fracture stimulation is the key to unlocking the gas, natural gas liquids (propane, butane
and condensate) and oil found in deep fine-grained sedimentary rock layers. It is the
application of pressure to fracture or crack the rock that leads to the release of oil and/or
gas into the well.
Fraccing Fluid – What is it?
Fracture fluid is a proprietary fluid made up principally of water and sand, (which typically
make up 99% of the mix) of the fluid, with the addition of a range of additives that act
as lubricants, change its viscosity and suspend the sand evenly throughout the fluid.
One of the key additives is Guar gum, a thickener used to make the fluid more viscose.
Guar gum is also used as a food additive, particularly in chewing gum. The blend of the
fraccing fluid is customised to each well and rock type.
Guar Gum
A key ingredient in fraccing fluids is guar gum, derived from guar (pronounced ‘gwa’)
bean, is used to alter the viscosity of the base fluid (water) to enable it to hold the
propping agent (typically sand) in suspension.
Derived from the guar bean (also known as cluster bean - Cyamopsis tetragonoloba,
family Leguminosae) it is used as a viscosity regulator in the complex fraccing fluid mix.
A drought-resistant plant of the pea family, which is grown as a vegetable and fodder crop
and as a source of guar gum, is native to dry regions of Africa and Asia.
(Source: http://www.oxforddictionaries.com/definition/english/guar?q=guar )
The bulk of current global demand is sourced from India, the leading supplier, which
grows about 80% of current global production.
Guar powder or guar gum is a fine powder obtained by grinding guar seeds, which is
used in the food, paper and oil & gas industries.
Guar bean pricing has risen sharply over the past couple of years due to strong demand
from the oil & gas sector in the US for use as fraccing fluid additive. Although it is
anticipated that as more growers enter the market and production increases prices will
moderate to a more sustainable level. Efforts have been made to cultivate guar in Texas,
USA and New South Wales, Australia.
12 Onshore Oil & Gas in the Northern Territory | October 2015
Proppant (Frac Sand and Ceramic Proppant)
A large variety of differing materials have been used as proppant over the years
including, walnut shells, plastic pellets, silica sand, steel shot, ceramic proppants, glass
beads, resin coated proppants (sand), aluminium pellets, fused zirconia and fly ash. The
ideal proppant according to Mike O’Driscoll of Industrial Minerals Research ‘is one that
has: the specific gravity of water, the strength of iron and is cheaper than dirt!’iv
Today,
silica sand (frac sand) dominates with around 75% of the proppant market, with resin
coated sand and ceramic proppants, (such as sintered bauxite), accounting for about
10% each.
When the hydraulic fracturing of Australia’s shale basin gathers pace significant volumes
of ‘frac sand’ will be required. See Appendix A for information on the industry specification
of ‘frac sand’. This will represent a significant supply opportunity for the Northern Territory
if suitable sands can be identified to meet the demanding standards of the industry. For
instance the US state of Wisconsin is one of the largest suppliers of frac sand throughout
the US due to the quality of its sandstone formations. It is an example of a region that is
benefiting from the shale gas boom even though limited oil and gas drilling has occurred
in that state to date.
Potential sources of frac sand exist in the NT subject to confirmation of the sources
meeting the industry’s specifications. (For further information please contact the Northern Territory
Geological Survey (NTGS) on Telephone 08 8999 6443 to discuss the availability and potential of local frac
sand sources).
Alternatively, if suitable sands are not available then an option may be the manufacture
of ‘Ceramic Proppant’, commonly made from calcined/sintered bauxite, alumina or kaolin.
Ceramic Proppant currently makes up about 10% of the proppant market. Typically
more expensive than natural sand proppant, it does have superior properties that make
it attractive in deeper, higher pressure shales. Resin coated sand is another alternative
to natural sands that improves its properties and performance, although there is greater
concern around the environmental impact with its use. Given the higher cost of drilling
shale gas wells and wafer thin margins in the US due to the low gas price, the industry
is price sensitive. An indication of the size and growth potential of the proppant market,
including frac-sand, resin coated sand and ceramic products, is the expectation that the
US market will near $10 billion by 2017.v
Ceramic proppants are expected to experience
the lion’s share of future strong growth in the coming years as resin-coated proppants
are falling out of favour due to environmental concerns.
13October 2015 | Onshore Oil & Gas in the Northern Territory
The Northern Territory has an abundant supply of bauxite and one possibility may
be to develop a ceramic proppant manufacturing industry to supply the Australian
unconventional oil and gas market. The technical and commercial feasibility needs to
be investigated further to determine the potential viability of such an industry and its
competitiveness both locally and in global export markets.
Proppant technology continues to evolve and develop as new products become
available such as Schlumberger’s HiWAY™, synthetic fibre bonded slugs and Imerys
Oilfield Services’ rod shaped proppants. Both of which seek to improve production and
environmental results (reduce water/chemical use), and demonstrate the industry is
actively seeking to improve outcomes through innovation.
14 Onshore Oil & Gas in the Northern Territory | October 2015
Significant challenges exist for the industry, due to the remoteness of many of the shale
basins in the Northern Territory. These challenges include:
•	 A lack or low capacity / standard of infrastructure in the shale basins, particularly
-- road
-- communications
-- pipelines for moving product to market.
•	 Water resources
-- limited availability of ground and surface water hydrology data
-- ground water sustainability yet to be determined
-- limited supply in some areas.
•	Proppants
-- availability, suitability and economic viability of NT frac-sand resources.
-- potential of bauxite based ceramic proppant.
•	 Service Industry
-- limited in regional areas but has potential to grow
-- specialist suppliers (e.g. for fracture stimulation) dominated by big
international players, with limited local (NT) presence
-- some capability and capacity exists in Darwin and is rapidly expanding on
back of offshore and LNG projects.
Monetisation of proven commercially recoverable gas discoveries in remote basins also
presents a major challenge due to the distances and lack and infrastructure in many
regions. Explorers and project operators face a number of issues depending on the scale
of the resource and distance to existing infrastructure and potential markets. Options or
paths to monetisation include;
•	 New gas pipeline (including spur lines from the existing Amadeus-Darwin pipeline).
•	 Liquefaction of natural gas via mini, micro or Nano LNG liquefaction plants for use as
a diesel replacement in transport (on and off road heavy vehicles, locomotives and
shipping) and stationary power generation in remote communities. Either at a nearby
regional centre or infield. This can offer an early monetisation option prior to full
development via a pipeline.
•	 Compressed natural gas (CNG).
•	 Truck and/or rail transport of oil and other liquid products.
DEVELOPMENT
CHALLENGES
15October 2015 | Onshore Oil & Gas in the Northern Territory
DRILLING CONTRACTORS & SERVICES
As the number of wells drilled per annum rises, drilling contractors with horizontal
drilling capabilities and experience will be in high demand. The Northern Territory will
face competition for horizontal drilling capacity from other jurisdictions such as Western
Australia (Canning Basin), Queensland and South Australia (Cooper Basin). A sustained
increase in drilling activity will also encourage drilling contractors to consider basing a rig
in the Northern Territory, overcoming the current, ‘hit and run’ from interstate, approach
for the delivery of annual drilling campaigns.
Driven by the lower oil price excess capacity has emerged in the USA as drillers face
reduced activity and pressure to innovate and become more efficient. As a result
fewer drill rigs are now required to maintain and grow production. Excess rigs could
be redeployed to the Northern Territory with US operators encouraged to establish a
presence in the Northern Territory or joint venture with local businesses.
Increasing activity is also expected to drive demand for support services, with
opportunities emerging in the drilling supply chain in a diverse range of areas such as;
mechanical services (diesel generators, pumps and vehicles), drilling muds, camp and
catering services, pipe machining and spooling, transport and logistics.
CIVIL WORKS
Civil contractors – those delivering services covering earthworks, drainage, road and
civil structures will benefit from a range of activities during both exploration and
development. Key opportunities are expected to be drill pad preparation, access road
upgrade / construction and maintenance will present a significant opportunity for
regional contractors.
FRACTURE STIMULATION SERVICES
Australia currently only has one home-grown service company with capabilities in fracture
stimulation services – Condor Energy. The sector is currently dominated by global oil
service companies such as Halliburton and Schlumberger. Condor Energy has invested
heavily - around $40 million - in specialised pumps, blenders and other equipment that
form a fraccing set up. The company had the equipment custom made in the USA for
the rugged Australian conditions expected in local shale basins such as the Cooper and
DEVELOPMENT
OPPORTUNITIES
16 Onshore Oil & Gas in the Northern Territory | October 2015
Amadeus. The high cost of entry and specialised nature of the equipment and service
may be a barrier to the development and growth a strong and diverse range of local
(Australian) stimulation service companies. Condor Energy’s emergence is a cause for
optimism in the potential of the sector.
Techniques including ‘nitrogen lift’ used to aid recovery of well fluids will also benefit
industrial gas producers supplying bulk inert gases such as nitrogen.
FRACTURE STIMULATION EQUIPMENT
Fracture stimulation services use a range of equipment and services, including pumps,
generators and hydraulic hoses, just to name a few, all of which will require maintenance
and servicing to ensure they operate safely and efficiently. They also use specialist
equipment such as manifold trailers - integrated, self-transportable pipe connection
systems used to connect multiple high pressure pumps to wells for fraccing operations,
injecting the water-proppant fluid.
US oil and gas equipment manufacturer Weir Oil & Gas has recently established a
presence in Adelaide to manufacture manifold trailers for the shale gas sector – the only
manifold trailer manufacturer in Australia. Weir established the Adelaide workshop in
response to customer driven demand for in country manufacturing.iv
Both the manufacture and maintenance of this equipment represents a significant
opportunity for local fabrication and service companies, through either joint venture
with US based manufacturers or local capability development. US suppliers seeking
to enter the Australian market can benefit significantly by joint venturing with local
businesses, through enhanced product localisation (standards and conditions) for the
Australian market.
FRAC FLUIDS
Fracturing fluids are pumped into a well under high pressure to create conductive
fractures in the hydrocarbon bearing zones. The result is an increase in the productive
surface area of the well, which induces a hydrocarbon flow in the formation. Fracturing
fluids typically consist of (about) 96.7% water, 3% proppant (silica/quartz sand or a
ceramic) with the remaining 0.3% consisting of a series of chemical additives. These
additives typically include a gelling agent (usually guar gum), scale inhibitor, biocide,
algaecide, hydrochloric acid, corrosion inhibitor, friction reducer and detergent. These
additives are designed to give the fluid the desired predictable set of properties.
Guar Gum
If demand for guar in the US remains strong or continues to rise due to growing global
demand as other countries exploit their shale gas reserves, an opportunity to grow guar
bean could be considered. In addition to the bean being used to produce the gum that
acts as a viscosity regulator in fraccing fluid, as a legume it provides benefits in the crop
rotation cycle and a high protein hay/fodder for livestock. Further work is required to
determine the potential suitability, yield and economics of guar bean in the NT.
17October 2015 | Onshore Oil & Gas in the Northern Territory
Water Services – Supply and Treatment
Competitive businesses providing water services including transport, pumping, storage
and recycling or disposal, may benefit significantly from shale gas activity. The industry
has steadily increased its focus on reusing returned frac water to reduce overall
consumption, as well as increasing the percentage of frac fluid, thus water, that returns
to the surface for recycling for example by utilising nitrogen lift techniques. In addition to
environmental benefits such techniques can result in increased oil and/or gas flows.
A study by US Duke University has identified the potential for Frac water (flow-back fluid)
recycling via the complementary use of using saline waste frac water to neutralise acid
mine drainage. See Water & Wastewater Treatment online article - Blending fracking and
acid mine wastewaters could remove contaminants http://wwtonline.edie.net/news/blending-
fracking-and-acid-mine-wastewaters-could-remove-contaminants.
EXTRACTIVE RESOURCES INDUSTRY - SAND, GRAVEL
AND ROCK
Supplies of materials for road and drill pad construction will need to be identified in or
close to the key shale basins. This will aid the quick and economic development of the
shale resources. This should also ensure resources are adequate for the shale industry
and other users such as the general building and construction industry.
Local sources of frac sand (Proppant) will also be highly sought after. If, as discussed
previously, suitable supplies can be identified this could prove a lucrative business for the
local community, suppling frac operations both locally, and eventually across the region.
Other opportunities will include the supply of sand, gravel and fill material for construction
or upgrading of access roads and drill pad (worksite) preparation.
WASTE MANAGEMENT SERVICES
Commensurate with environmental requirements, waste management services
associated with drilling, well preparation and fracture stimulation operations will be in high
demand such as; collection, storage, removal and disposal of industrial waste including
•	 Cuttings recycling
•	 Lubricants
•	 Coolants
•	 Returned drilling fluids
•	 Other process fluids and
•	 Hard rubbish.
TRANSPORT & LOGISTICS HUBS
The Northern Territory has a modern and efficient national rail connection via the
Adelaide to Darwin railway that links the Northern Territory to all major capital cities
of Australia. Its proximity to the Amadeus, Beetaloo and Georgina Basins may be a
significant benefit to regional centres along the route. While Alice Springs has a well-
established transport hub and can expect to benefit from shale and conventional oil &
gas development in region (Amadeus Basin), opportunity exists for Katherine to benefit
significantly and to a lesser extent Tennant Creek from the movement of equipment and
supplies to and from the shale basins to support the industry, particularly for hydraulic
fracturing including frac sand.
18 Onshore Oil & Gas in the Northern Territory | October 2015
RESEARCH AND INNOVATION
Institutions and businesses in the Northern Territory have the opportunity to engage the
unconventional oil and gas industry in a number of areas of research and innovation
including but not limited to:
•	Logistics.
•	 Frac fluid – recovery and recycling.
•	 Frac fluid composition including alternatives to using water such as liquid CO2.
•	 Flare gas minimisation and / or utilisation.
•	 Proppant – natural (sand) and ceramic (manufactured).
•	 Standardisation and specialisation.
•	 Waste recovery, recycling and disposal of well and / or returned frac fluids
•	 Environmental monitoring.
Alternative Stimulation Technologies
Other alternative well stimulation technologies have also emerged, such as radial jet
drilling or ‘jetting’ which can be used as a standalone enhancement or in conjunction
with acidizing or fraccing. A recent innovation in this area is the Fishbones™ stimulation
system, which uses a proprietary open-hole liner completion incorporating small diameter
(jetting) tubes / needles. The needles are released by pressurising the liner, the fluid
flows through the needles and jets out through the nozzles, achieving lateral penetration
of up to 12 metres, with up to 300 laterals being installed per well. For further information
regarding the Fishbones™ stimulation system refer to: www.fishbones.as.
Alternative & Recycled Frac Fluids
In response to the need to conserve natural water resources the industry has begun
exploring alternatives to fresh water as the base in fraccing fluids.
Most of the world’s ‘energy generation processes require significant amounts of water,
and water requires energy (mainly electricity) for treatment (purification) and transport
(pumping) these two resources are inextricably linked. This relationship is the energy-
water nexus.’ (Thirsty Energy: Diego J. Rodriguez, Anna Delgado, Pat DeLaquil, Antonia Sohns - The
World Bank www.worldbank.org/water). The available water resources play a central role in
interdependence of energy security, (potable) water supply security and food security
(agricultural production).
Liquid Carbon Dioxide is one alternative to water and has been used on a limited basis
for decades to fracture wells in places such as Wyoming, USA where CO2 infrastructure
already exist.vii
Benefits include reduction or elimination of water requirement in the
fraccing process and potential to sequester CO2 at the end of production life when the
well is shut-in, plugged and abandoned. Its wide spread adoption would require the
development of significant infrastructure to support supply, transport and disposal of
returned fluids. General Electric Company (GE) is reportedly studying the issue as part of
a $10 billion research program, but admits it may be years before it is a viable alternative
in fraccing due to technical challenges and limited infrastructure.viii
Recycling of returned frac fluid also holds potential to reduce the demand on fresh water
resources made by the fraccing process and in cases where water is trucked to the well
site may also significantly reduce truck movements on local roads, which has broader
social and economic benefits.
19October 2015 | Onshore Oil & Gas in the Northern Territory
The nascent unconventional (shale) oil and gas industry in the Northern Territory
has significant potential for growth in the medium to long term. In the short term
early exploration will confirm the potential and scale of that opportunity and provides
government and industry time to develop knowledge and infrastructure to support the
sustainable growth of the industry and maximise the benefit to the Northern Territory.
Given much of the activity will take place in regional areas; it represents an opportunity
for these regions to participate in the economic growth the industry will bring.
Increasing knowledge based work is decoupling from services and activities in regional
areas and being undertaken in major centres. For example 40% of all mining jobs in
Queensland are based in Brisbane due to the knowledge based nature of the activity.ix
This decoupling is not limited to mining (resource sector) increasingly farmers
(agricultural businesses) which are seeking to maximise productivity and value are
decoupling knowledge based activities and sourcing skills and services from the
capital cities.
The role of Government in helping industry meet these challenges and
opportunities includes:
•	 Provision of robust information.
•	 Promotion of opportunities for new investment.
•	 Facilitation of new external investment in infrastructure to support industry growth.
•	 Supportive policy settings, including robust balanced regulatory and
approval processes.
•	 Encouragement of collaboration and joint ventures to grow capability and capacity to
service the industry.
Local business and industry needs to begin planning now for participation and engaging
with the oil companies and their major service contractors to establish and build
relationships as developments in the region begin to emerge. Businesses need to
increase their understanding of the unconventional oil and gas business, the expectations
and standards of the industry, relative to their place in supply chain in terms of Workplace
Health and Safety, Environment and Quality Management. This is in effect a continuation
of the work that the Department of Business has been carrying out for a number of years
to encourage businesses to improve their readiness for the resource sector.
CONCLUSION
20 Onshore Oil & Gas in the Northern Territory | October 2015
WHERE TO FROM HERE
The Department of Business will progressively undertake work to determine the viability
of the opportunities identified. The Department will also work with other agencies to
identify ways to overcome the obstacles and barriers identified to the responsible growth
of the unconventional oil and gas industry in the Northern Territory.
As the industry grows over the coming three to five years specific actions, as the need
arises may include:
•	 Further research of the proppant industry potential
-- frac sand
-- 	ceramic proppants derived from bauxite.
•	 Develop a strategy to grow or attract a field service industry including:
-- hydraulic stimulation services
-- manufacture of stimulation equipment (e.g. manifold trailers).
•	 Engage industry and key stakeholders.
•	 Monitor, track and communicate industry developments and trends.
21October 2015 | Onshore Oil & Gas in the Northern Territory
FRAC SAND SPECIFICATIONSX
In the USA Frac sand specifications are the responsibility of the American Petroleum
Institute (API) and the current standard is API RP 56.
These specifications are very demanding and as a result suitable deposits are limited.
The limited availability of natural reserves which are suitable for frac sand production
coupled with growing demand ensures a high price for any producers able to meet the
API RP 56 frac sand specifications.
Natural sands must be from high silica (quartz) sandstones or unconsolidated deposits.
Other essential requirements are that particles are well rounded, relatively clean of
other minerals and impurities and will facilitate the production of fine, medium and coarse
grain sands.
GEOLOGY
Frac sand must be >99% quartz or silica. Most silica sand deposits are either already
being exploited or are at least known of due to the use of this material in many other
industrial applications including glass making and filtration media.
High purity quartz sands are common in the USA. These are made up of some
deposits that are currently being exploited, some which have been abandoned and
others that are so remotely located that costs of transporting material render them
commercially unviable.
The tight specifications for frac sands – especially in relation to roundness and
sphericity – make many deposits unsuitable for frac sand production.
From the work currently being done in the production of frac sands it seems that older
quartzose sandstones have a better chance of producing a good frac sand. However, it
is possible to upgrade other deposits if carefully controlled.
APPENDIX A
22 Onshore Oil & Gas in the Northern Territory | October 2015
GRAIN SIZE
The sizes recommended by the API for frac sand are:
Mesh	mm
8/12	2.38-1.68
10/20	2.00-0.84
20/40	0.84-0.42
70/140	 210-105 micron
The 20/40 mesh size (0.42mm – 0.84mm) is the most widely used.
SPHERICITY & ROUNDNESS
The standards prepared by the API in this regard simply estimate how closely the quartz
grain conforms to a spherical shape and its relative roundness.
The grain is assessed as follows:
“average radius of the corners / radius of the maximum inscribed circle”
Krumbein and Sloss devised a chart for the visual estimation of sphericity and roundness
in 1955 as shown below. API recommends sphericity and roundness of 0.6 or larger.
23October 2015 | Onshore Oil & Gas in the Northern Territory
CRUSH RESISTANCE
API requires frac sand to be subjected to between 4000psi and 600psi pressure for two
minutes in a uniaxial compression cylinder to determine its crush resistance.
The fines generated by this test are limited as shown below:
Size / Max fines by weight
6-12 mesh / 20%
16-30 mesh / 14%
20-40 mesh / 14%
30-50 mesh / 10%
40-70 mesh / 6%
SOLUBILITY
This test measures the loss in weight of a sample that has been added to a 100ml
solution made up of 12 parts Hydrochloric Acid (HCI) and 3 parts Hydrofluoric Acid
(HCI) and subsequently heated at 150 degrees Fahrenheit (approximately 65.5 degrees
centigrade) in a water bath for 30 minutes.
The object of this test is to determine the amount of non-quartz minerals present.
API specifications require that losses by weight as a result of this test are restricted to
<2% across all mesh sizes up to 40-70 mesh where the loss permitted rises to 3%.
TURBIDITY
Turbidity refers to the amount of silt of clay sized particles in the sand sample. This is
generally not an issue in frac sand production as production requires a washing process
to be introduced which effectively removes these particles.
There can also be an attrition process applied which also serves to remove unwanted
fines as well as weaker grains.
24 Onshore Oil & Gas in the Northern Territory | October 2015
i	 ‘SHALE GAS IN AUSTRALIA: THE POLICY OPTIONS, UCL AUSTRALIA Green paper 2013. CC BY Aus 3.0’
	 and linked to the original source.
ii	 Country Comparison: Roadways – CIA The World Factbook
iii	 Country Comparison: Roadways – CIA The World Factbook
iv	 Proppant Prospects for Bauxite, Mike O’Driscoll, Global Head of Research, Industrial Minerals, presentation to
	 19th Bauxite & Alumina Conference 13-15 March 2013.
v	 according to www.indmin.com article: Proppant market to be worth $10bn by 2017, by Emma Hughes,
	 published 5 September 2013
vi	 Source Energy News Bulletin (energynewsbulletin.net) 29 October 2014 article – Weir fills hole in frac market.
vii	 Skipping the Water in Fracking, by Kevin Bullis, MIT Technology Review 22 March 2013
viii	 Source Thomson Reuters article – Fracking with CO2 to replace water a distant goal, GE says, by Ernest Scheyder,
	 7 April 2014 (Reuters) www.reuters.com.
ix	 What’s driving regional Australia? Dr Marcus Spiller, National Policy Advisory Leader, SGS Economics & Planning
x	 American Petroleum Institute (API) specification for frac sand - API RP 56, source:
	http://www.cdeglobal.com/projects/category/30/frac-sand-specs
END NOTES
25October 2015 | Onshore Oil & Gas in the Northern Territory
Contact:
Department of Business
Northern Territory Government
Phone: +61 8 8999 5201 | Email: industrydev@nt.gov.au
Disclaimer:
While care has been taken to ensure that information in this publication is true and correct at the time of publication,
changes in circumstances after the time of publication may impact on the accuracy of the information.
The Northern Territory of Australia gives no warranty of assurance, and makes no representation as to the accuracy
of any information or advice contained in this publication, or that it is suitable for your intended use. You should not
rely upon information in this publication for the purpose of making any serious, business or investment decisions
without obtaining independent and/or professional advice in relation to your particular situation.
The Northern Territory of Australia disclaims any liability or responsibility or duty of care towards any persons for
loss or damage caused by any use of reliance on the information contained in this publication.
www.investnt.com.auwww.dob.nt.gov.au

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160308 NTG-Onshore-Oil-Gas SF

  • 2. Shale gas resources and potential Katherine Alice Springs Tennant Creek Darwin Wiso Basin Birrindudu Basin Ngalia Basin McArthur Basin Georgina Basin Lawn Hill Platform Arthur Creek Formation Ordovician (incl. Horn Valley Siltstone) Velkerri Formation BEETALOO SUB-BASIN P50: 156.5 Tcf 2 70.5 Tcf (BCG)2 Best est: 111.8 Tcf 2 19 Tcf 1 BARNEY CREEK FM P50: 13 Tcf3 Best est: 7.4 Tcf1 PEDIRKA BASIN (Purni Formation) Best est: 43 Tcf (includes SA)1 BONAPARTE BASIN Best est: 6 Tcf (includes WA)1 AMADEUS BASIN (Ordovician system) Mean: 11.3 Tcf4 14.9 Tcf (BCG)4 Best est: 16 Tcf1 SOUTHERN GEORGINA BASIN Best est: 50 Tcf (includes Qld)1 A15-151.ai 200 km1000 Tcf: trillion cubic feet of shale gas. Tcf (BCG): trillion cubic feet of basin-centred gas (in addition to shale gas). P50: P50 Prospective Resource of undiscovered gas potentially-in- place, in which there is at least a 50% probability that the gas volume is greater than this estimate. Best est: The best estimate of the quantity of the prospective gas resource that will actually be recovered from the accumulation. Mean: mean, unrisked technically recoverable prospective resource. Sources for resource estimates+ : 1 AWT International (2013) 2 RPS (2013) 3 MBA (2012) 4 DSWPET (2011) # Approximate areas within which key prospective shales are likely to be present, although this does not imply that the shales are necessarily present or are gas-bearing over the entire area indicated (Sources: Bonaparte and Amadeus basins from Ahmad and Scrimgeour (2006); Velkerri Formation from Bruna (2015) NTGS DIP012; Arthur Creek Formation adapted from Munson (2014). x Approximate boundaries of the areas encompassing the quoted resource estimates (from AWT International 2013). * Approximate interpreted area within which the McArthur Group and equivalents may occur in the subsurface. This does not include the Lawn Hill Platform, which also contains shales of this age. + Details of references in Munson (2014). Petroleum geology and potential of the onshore Northern Territory. NTGS Report 22. Petroleum wells Potential extent of McArthur Group* Gas pipeline Sedimentary basins Extent of known prospective shales# Area of prospective resource estimatesx Road Major town ore petroleum exploration and production Gas pipeline Onshore petroleum permits Oil pipeline Oil fieldGas field Mereenie Palm Valley Glyde Oil/gas field Gas discovery Production lease 0 100 200km A15-182a McArthur Basin Beetaloo Sub-basin Bonaparte Basin (Onshore) Georgina Basin Amadeus Basin Pedirka and Eromanga Basins Pipeline flow capacities* Bayu Undan 287.2 PJ/a (petajoules per annum) Bonaparte 38.7 PJ/a Amadeus 45.6 PJ/a ** McArthur River 3.3 PJ/a Palm Valley 5.8 PJ/a Mereenie Spur 15.0 PJ/a ^ * based on freeflow at Maximum Allowable Operating Pressure **flows in both directions from Ban Ban Springs ^ from historical flows 2 1 4 5 6 3 TAMBORAN RESOURCES PTY LTD SANTOS TAMBORAN RESOURCES PTY LTD ARMOUR ENERGY PTY LTD CENTRAL PETROLEUM PTY LTD TERRITORY OIL AND GAS PTY LTD BEACH PETROLEUM BLUE ENERGY WISO OIL PTY LTD CENTRAL PETROLEUM PTY LTD SANTOS PETROFRONTIER (AUSTRALIA) PTY LTD PANGAEA RESOURCES TRISTAR PETROLEUM COMPANY IMPERIAL OIL AND GAS FALCON OIL AND GAS AUSTRALIA LTD ORIGIN ENERGY SASOL Borroloola Ban Ban Springs Nhulunbuy Jabiru Tennant Creek Yulara DARWIN Alice Springs Katherine WESTERNAUSTRALIA QUEENSLAND S O U T H A U S T R A L I A SurpriseSurprise DingoDingo OoraminnaOoraminna WeaberWeaber 2 1 4 5 3 3 3 6 3 3 3 3
  • 3. An industry study by the Department of Business examining potential supply and service industry development opportunities associated with growing onshore oil & gas sector. Research & Analysis: Richard Exley Manager Industry Development Department of Business T: +61 8 8999 5201 E: richard.exley@nt.gov.au Disclaimer: While care has been taken to ensure that information in this publication is true and correct at the time of publication, changes in circumstances after the time of publication may impact on the accuracy of the information. The Northern Territory of Australia gives no warranty of assurance, and makes no representation as to the accuracy of any information or advice contained in this publication, or that it is suitable for your intended use. You should not rely upon information in this publication for the purpose of making any serious, business or investment decisions without obtaining independent and/or professional advice in relation to your particular situation. The Northern Territory of Australia disclaims any liability or responsibility or duty of care towards any persons for loss or damage caused by any use of reliance on the information contained in this publication. ONSHORE OIL & GAS IN THE NORTHERN TERRITORY October 2015 | Onshore Oil & Gas in the Northern Territory
  • 4. Onshore petroleum exploration and production Palaeo–Mesoproterozoic Basins (1000–2500 Ma) Palaeo–Mesoproterozoic Orogens (1000–2500 Ma) Archaean (>2500 Ma) Neoproterozoic– Palaeozoic (250–1000 Ma) Gas pipeline Mesozoic–Cenozoic 0–250 Ma Onshore petroleum permits Oil pipeline Oil fieldGas field (Kalkarindji Province) Mereenie Palm Valley Glyde Oil/gas field Gas discovery Production lease 0 100 200km A15-182a McArthur Basin Beetaloo Sub-basin Bonaparte Basin (Onshore) Georgina Basin Amadeus Basin Pedirka and Eromanga Basins Pipeline flow capacities* Bayu Undan 287.2 PJ/a (petajoules per annum) Bonaparte 38.7 PJ/a Amadeus 45.6 PJ/a ** McArthur River 3.3 PJ/a Palm Valley 5.8 PJ/a Mereenie Spur 15.0 PJ/a ^ * based on freeflow at Maximum Allowable Operating Pressure **flows in both directions from Ban Ban Springs ^ from historical flows 2 1 4 5 6 3 TAMBORAN RESOURCES PTY LTD SANTOS TAMBORAN RESOURCES PTY LTD ARMOUR ENERGY PTY LTD CENTRAL PETROLEUM PTY LTD TERRITORY OIL AND GAS PTY LTD BEACH PETROLEUM BLUE ENERGY WISO OIL PTY LTD CENTRAL PETROLEUM PTY LTD SANTOS PETROFRONTIER (AUSTRALIA) PTY LTD PANGAEA RESOURCES TRISTAR PETROLEUM COMPANY IMPERIAL OIL AND GAS FALCON OIL AND GAS AUSTRALIA LTD ORIGIN ENERGY SASOL Borroloola Ban Ban Springs Nhulunbuy Jabiru Tennant Creek Yulara DARWIN Alice Springs Katherine WESTERNAUSTRALIA QUEENSLAND S O U T H A U S T R A L I A SurpriseSurprise DingoDingo OoraminnaOoraminna WeaberWeaber 2 1 4 5 3 3 3 6 3 3 3 3 ore petroleum exploration and production Gas pipeline Onshore petroleum permits Oil pipeline Oil fieldGas field Mereenie Palm Valley Glyde Oil/gas field Gas discovery Production lease 0 100 200km A15-182a McArthur Basin Beetaloo Sub-basin Bonaparte Basin (Onshore) Georgina Basin Amadeus Basin Pedirka and Eromanga Basins Pipeline flow capacities* Bayu Undan 287.2 PJ/a (petajoules per annum) Bonaparte 38.7 PJ/a Amadeus 45.6 PJ/a ** McArthur River 3.3 PJ/a Palm Valley 5.8 PJ/a Mereenie Spur 15.0 PJ/a ^ * based on freeflow at Maximum Allowable Operating Pressure **flows in both directions from Ban Ban Springs ^ from historical flows 2 1 4 5 6 3 TAMBORAN RESOURCES PTY LTD SANTOS TAMBORAN RESOURCES PTY LTD ARMOUR ENERGY PTY LTD CENTRAL PETROLEUM PTY LTD TERRITORY OIL AND GAS PTY LTD BEACH PETROLEUM BLUE ENERGY WISO OIL PTY LTD CENTRAL PETROLEUM PTY LTD SANTOS PETROFRONTIER (AUSTRALIA) PTY LTD PANGAEA RESOURCES TRISTAR PETROLEUM COMPANY IMPERIAL OIL AND GAS FALCON OIL AND GAS AUSTRALIA LTD ORIGIN ENERGY SASOL Borroloola Ban Ban Springs Nhulunbuy Jabiru Tennant Creek Yulara DARWIN Alice Springs Katherine WESTERNAUSTRALIA QUEENSLAND S O U T H A U S T R A L I A SurpriseSurprise DingoDingo OoraminnaOoraminna WeaberWeaber 2 1 4 5 3 3 3 6 3 3 3 3 Onshore Oil & Gas in the Northern Territory | October 2015
  • 5. TABLE OF CONTENTS PURPOSE 1 BACKGROUND 2 The Role of Knowledge, Information & Data 3 Summary Onshore Exploration – Granted Permit Work Commitments 2013-18 3 Industry Structure 4 The Role of Infrastructure 4 Pipelines 4 Major gas transmission pipelines and proposed pipelines in Australia 6 Roads 7 Australian Interstate Road Network 7 USA – Interstate Road Network 8 Rail 9 USA – Rail Map 9 Australian Rail Map 10 INDUSTRY BARRIERS & GAPS 11 Knowledge, Information & Data Gaps 11 Water Resource 11 Fracture Stimulation Services & Supplies 12 Fraccing Fluid – What is it? 12 Guar Gum 12 Proppant (Frac Sand and Ceramic Proppant) 13 DEVELOPMENT CHALLENGES 15 DEVELOPMENT OPPORTUNITIES 16 Drilling Contractors & Services 16 Civil Works 16 Fracture Stimulation Services 16 Fracture Stimulation Equipment 17 Frac Fluids 17 Guar Gum 17 Water Services – Supply and Treatment 17 Extractive Resources Industry – sand, gravel and rock 18 Waste Management Services 18 Transport & Logistics Hubs 18 Research and Innovation 19 Alternative Stimulation Technologies 19 Alternative & Recycled Frac Fluids 19 CONCLUSION 20 Where to from here 21 APPENDIX A 22 Frac Sand Specifications 22 END NOTES 25 October 2015 | Onshore Oil & Gas in the Northern Territory
  • 6. PURPOSE This analysis identifies current industry trends and increases understanding of the industry as well as its infrastructure gaps. It also identifies potential opportunities for a considered, responsible stewardship approach to the industry’s development and growth. It broadly identifies gaps in local industry capacity and capability to service or supply the emerging unconventional oil and gas sector, particularly service and supply support of shale gas operations in regional Northern Territory. These gaps represent opportunities for local capacity development or investment attraction for capability development. It could provide new business, employment and training opportunities for communities throughout the Northern Territory. The role of government in helping industry meet these challenges and opportunities includes: • Provision of robust information. • Promotion of opportunities for new investment. • Encouragement of collaboration and joint ventures. • Provision of a competitive business and regulatory environment. 1October 2015 | Onshore Oil & Gas in the Northern Territory
  • 7. The ‘Shale Gale’ gas revolution of North America has rapidly changed the global energy landscape. It has the potential to significantly alter the energy landscape in Australia, if the US success can be replicated. There are considerable, but not insurmountable obstacles to achieving shale gas success in the Australian context. A thriving shale gas industry could play a role in direct action on climate change, assist the transition to a low carbon future and restore the energy advantage that Australian manufacturing requires to be sustainable. If the Australian shale gas revolution is a success it could see a return to historic (low) gas prices and break or reduce the impact of the link to oil pricing via Liquefied Natural Gas (LNG) exports. In addition to gas, fractured shales can yield (associated) ethane, LPG (butane and propane), condensate and sometimes oil. Wells yielding ‘wet’ gas have considerably better economics compared to ‘dry’ gas wells and may allow producers to price gas competitively for domestic consumption. The UCL Australia Green Paper ‘SHALE GAS IN AUSTRALIA: THE POLICY OPTIONS’ (UCL International Energy Policy Institute, Adelaide), states, in conclusion; ‘Policy should also encourage the development of a shale gas service industry to drill the wells and hydraulically fracture the structures. Such policies could range from fiscal breaks to the encouragement of greater cooperation among the operators and the service industry. The development of such an industry could prove to be a major benefit to the Australian economy as shale gas interest in Asia grows.’ i BACKGROUND Assessed Basin Darwin Other Basin Canning Perth Maryborough recoverable gas (trillion cubic feet) recoverable oil (barrels in billions) Beetaloo Cooper Adelaide Perth Brisbane Sydney Melbourne Cooper 9.3 1.5 Maryborough 19 - Perth 33 0.5 Canning 235 9.7 Georgina 13 1.0 Beetaloo 44 4.7 NT QLD SA NSW VIC WA Georgina Source: US Department of Energy 2 Onshore Oil & Gas in the Northern Territory | October 2015
  • 8. THE ROLE OF KNOWLEDGE, INFORMATION & DATA The US Shale Gas revolution or ‘shale gale’ has been underpinned by decades of oil and gas field data, geophysical, geochemical, seismic, core and drilling logs and nearly a century of exploration and production experience. This vast library of information, data and knowledge helped the early shale explorers identify the most prospective targets, optimising drilling programs on the ‘sweet spots’ which increased success rates dramatically. As interpretation of the data was confirmed, success built upon success. The technical data library available on most of the Australian shale basins, with the possible exception of the Cooper Basin, by contrast is far more limited in comparison. Prospective shale basins in Australia often lack seismic data and have had few, if any wells drilled. This doesn’t diminish the potential of the basins but it does slow exploration and development as explorers cautiously analyse what data they can draw upon, mainly from minerals exploration, new 2D seismic and a few tentatively drilled wells. Summary Onshore Exploration – Granted Permit Work Commitments 2015-2020 Key NT Onshore Oil & Gas Basins - Exploration Activity Basin G&G 2D Seismic survey (km) Wells Main Industry Participants Amadeus 5 1464 4 Santos Ltd; Central Petroleum; Mosman Oil & Gas Georgina 4 629 5 Baraka Energy; Minerals Australia and Jacaranda Minerals Limited; Wiso Oil Pty Ltd; Tom Oates McArthur inc. Beetaloo/ Carpentaria 31 488 54 Origin Energy; Sweetpea Petroleum; Minerals Australia and Jacaranda Minerals Limited; Santos Ltd; Armour Energy; Imperial Oil & Gas; Pangaea Resources Pedirka/ Eromanga inc. Simpson Desert 8 860 10 Santos Ltd; Central Petroleum; Tri-Star Energy; Tamboran Resources Victoria- Birrindudu 11 - 13 Paltar Petroleum; Pangaea Resources Ngalia 16 - 7 Tamboran Resources Wiso - 450 3 Wiso Oil Pty Ltd Bonaparte 1 - 1 Beach Energy Total (all basins) 76 3727 97 NT total land area 1,335,742 sq.km Note: G&G = Geophysical and Geochemical studies/investigations. Data based on work commitments at award of permits (source: NT Dept. of Mines & Energy, Permit Work Commitments – June 2015). 3October 2015 | Onshore Oil & Gas in the Northern Territory
  • 9. INDUSTRY STRUCTURE Currently, the US industry is also far more diverse than Australia’s with many small (including family owned) explorers, producers and service companies providing an environment for intense competition. It is these small companies that drove and benefited from the development of shale reserves. In addition, this may have also been driven by the fact that mineral rights are owned by landowners - not the government. The key factors of extensive knowledge; large volumes of data and a competitive industry resulted in intense competition driving innovation and igniting the shale gas boom. The diverse range of suppliers has also been important in keeping costs down through specialisation, the development of standardised solutions and production line-like processes. THE ROLE OF INFRASTRUCTURE In the US there is extensive infrastructure throughout the main shale basins, a legacy of earlier conventional oil and gas developments, that now supports the rapid development of the shale gas industry. These earlier booms left tens of thousands of kilometres of oil and gas pipeline, road and rail networks across much of America. They linked oil and gas producing regions with consumers, refineries and export ports. PIPELINES The US natural gas pipeline network is a highly integrated transmission and distribution grid that can transport natural gas to and from most locations in continental USA (the lower 48 States). The US natural gas pipeline grid comprises: • More than 210 natural gas pipeline systems. • Over 480 000 km of interstate and intrastate transmission pipelines. • More than 1 400 compressor stations that maintain pressure in network. • More than 11 000 delivery points, 5 000 receipt points and 1 400 interconnection points that facilitate the transfer of natural gas throughout the US. • 29 hubs or market centres that provide additional interconnections. • 394 underground natural gas storage facilities. • 55 locations where natural gas can be imported/exported via pipelines. 4 Onshore Oil & Gas in the Northern Territory | October 2015
  • 10. Legend = Interstate Pipelines = Intrastate Pipelines Source: Energy Information Administration, Office of Oil & Gas, Natural Gas Division, Gas Transportation Information System The growth of the US shale gas industry benefited hugely from this legacy of oil and gas pipelines. This infrastructure was a critical enabler in providing ready access to markets in the early days of shale development and significantly reduced the capital expenditure of the industry. Only now, more than ten years after the shale gas revolution began, are capacity limits of the pipeline network beginning to constrain further growth in the industry. 5October 2015 | Onshore Oil & Gas in the Northern Territory
  • 11. By contrast Australia’s transmission pipeline infrastructure comprises approximately 29 000km of transmission pipeline, of which some 21 000km are high-pressure gas transmission pipelines. These high-pressure gas transmission pipelines span the significant distances between Australia’s (conventional) gas fields and its population and industrial centres. Australia has a significant pipeline infrastructure deficit when compared to the US with limited, poorly integrated pipeline networks on the east and west coasts. As a result most shale basins in Australia lack access to pipeline infrastructure, with the exception of the Cooper Basin. The Northern Territory Government is progressing the development of a gas pipeline linking the Amadeus Basin to Darwin pipeline, at Tennant Creek (Warrego), with the Carpentaria pipeline near Mt Isa in Queensland, the development is known as the North East Gas Interconnector (NEGI). In November 2015 the Northern Territory selected Jemena Northern Gas Pipeline Pty Ltd to construct and operate the NEGI pipeline to connect Northern Territory gas with eastern markets. This is expected to offer new opportunities for the commercialisation of gas discoveries in the Northern Territory. Jemena also aspires to extend the pipeline, in the future, to the Wallumbilla Gas Hub, which will further improve the market access for Northern Territory gas. Major gas transmission pipelines and proposed pipelines in Australia 133 2 1 9 7 5 4 6 8 17 10 11 18 14 12 16 15 KALGOORLIE KAMBALDA ESPERANCE ADELAIDE MELBOURNE HOBART Osway Basin Bass Basin Gas basin Gas processing Existing (or under construction) uncovered natural gas pipelines including subsea pipelines Pipeline No. Moomba to Sydney system (except for Moomba to Marsden) 1 Central West and Central Ranges pipelines 2 Victorian trasmission system 3 Dawson Valley pipeline 4 Queensland Gas pipeline (Wallumbilal to Gladstone/Rockhampton) 5 Roma to Brisbane pipeline 6 South West Queensland pipeline (Ballera to Wallumbilal) 7 Carpentaria pipeline (Ballera to Mt Isa) 8 Moomba to Adelaide pipeline system 9 Amadeus Basin to Darwin pipeline 10 Goldfields Gas pipeline 11 Dampier to Bunbury Natural Gas pipeline 12 Eastern Gas pipeline (Lengford to Horsley Park) 13 Dongara tp Perth Pinjarra (Parmelia) 14 SEA Gas pipeline 15 Tasmanian Gas pipeline 16 Palm Valley to Alice Spring 17 Midwest pipeline 18 North East Gas Interconnector 19 Existing (or under construction) covered natural gas pipelines Proposed natural gas pipelines Gippsland Basin MOOMBA ALICE SPRINGS DARWIN BRISBANE SYDNEY MARSDEN PORT KEMBLA MEREENIE PERTH Perth Basin Carnavor Basin Amadeus Basin Bonaparte Basin Blacktip Browse Basin Cooper-Eromanga Basin Bowen-Surat Basin Adavale Basin Timor Sea Ichthys PALM VALLEY 19 6 Onshore Oil & Gas in the Northern Territory | October 2015
  • 12. ROADS The continental USA road network is even more extensive that its pipe network, at 6 506 204km (2008)ii and of a very high standard. Australia’s road network consists of around 823 217km (2011)iii while much better on a per capita basis, the density of roads is about one sixth of the US and demonstrates how sparse infrastructure in the Australian interior is – where the majority of our shale basins are located. Country Total network length of all public roads (km) Length of public roads per capita (m) Road density (m of road per square km) Australia 900,082 26.08 117.01 USA 6,341,421 21.69 668 Source: http://en.wikipedia.org/wiki/List_of_OECD_countries_by_road_network_size Australian Interstate Road Network Esperance Kalgoorlie Port Hedland Halls Creek Wyndham Katherine TennatCreek MtIsa Charleville Longreach AliceSprings CooberPedy Cairns Townsville Rockhampton Mackay Albany Adelaide Port Lincon Port Augusta MelbourneWarrnambool Mt Gambier Broken Hill Nyngan Dubbo Hobart Launceston Darwin Broome Brisbane Port Macquaire Newcastle Tamworth Sydney Canberra Lakes Entrance Perth Geraldton Carnavon WESTERN AUSTRALIA (WA) NORTHERN TERRITIRY (NT) SOUTH AUSTRALIA (SA) TASMANIA (TAS) VICTORIA (VIC) NEW SOUTH WALES (NSW) QUEENSLAND (QLD) Source: http://www.atn.com.au/mapofaustralia.html; Map of Australian Highways 7October 2015 | Onshore Oil & Gas in the Northern Territory
  • 13. USA – Interstate Road Network C A N A D A M E X I C O T H E B A H A M A S C U B A GulfofCalifornia N O R T H A T L A N T I C O C E A N N O R T H P A C I F I C O C E A N Lake Superior LakeMichigan Lake Huron Lake Erie LakeOntario15 1590 84 84 82 90 5 5 80 5 94 35 29 94 25 80 80 44 135 80 29 76 70 15 10 8 8 17 19 27 40 20 37 45 90 90 25 20 10 10 40 40 15 5 70 35 35 35 35 10 91 90 9594 43 96 75 69 65 74 88 35 80 70 94 76 90 69 80 74 57 75 65 70 64 65 55 55 40 30 49 12 55 10 40 59 95 75 4 75 85 20 16 75 65 10 80 76 95 81 95 76 77 79 64 40 26 77 85 81 64 40 95 20 26 75 40 59 24 65 WASHINGTON D.C HELENA PIERRE BISMARCK OLYMPIA SALEM BOISE SACRAMENTO CARSON CITY SALT LAKE CITY CHEYENNE DENVER LINCOLN TOPEKA DES MOINES JEFFERSON CITY SPRINGFIELD INDIANAPOLIS FRANKFORT LANSING CHARLESTON RICHMOND ANNAPOLIS DOVER HARRISBURG HARTFORD ALBANY CONCORD MONTPELIER BOSTON AUGUSTA MADISON ST. PAUL OKLAHOMA CITY AUSTIN SANTA FE PHOENIX JACKSON BATON ROUGE MONTGOMERY TALLAHASSEE COLUMBIA RALEIGH NASHVILLE ATLANTA LITTLE ROCK COLUMBUS TRENTON PROVIDENCE CANADA R U S S I A ALASKA (U.S.A) JUNEAUBristol Bay HAWAII HONOLULU NORTH PACIFIC OCEAN National Capital State Capital International Boundary State Boundary Interstate Highway Number State and Other Highways Interstate Highway Network 4 NUSA ROAD MAP Source: www.mapsofworld.com; Enlarged USA Road Map represented road network of Unites States 8 Onshore Oil & Gas in the Northern Territory | October 2015
  • 14. RAIL Similarly the US has an extensive legacy of rail infrastructure criss-crossing the continent. This network, the longest in the world, is over 220 000 km in length.The density of the network is one (linear) kilometre of track for every forty-three square kilometres of land mass. USA – Rail Map N Dover Boise Salem Austin TopekaDenver Pierre Albany Boston Helena Jackson Phoenix Atlanta Raleigh Lincoln Trenton Madison Lansing St Paul Concord Augusta Olympia Columbia Santa Fe Richmond Cheyenne Columbus Hartford Bismarck Nashville Frankfort Annapolis Montgomery CharlestonSacramento Des Moines Harrisburg Providence Montpelier Baton Rouge Tallahassee Little Rock Springfield Carson City Indianapolis Oklahoma City Jefferson City Salt Lake City Washington D.C. C A N A D A M E X I C O N O R T H AT L A N T I C O C E A N N O R T H PA C I F I C O C E A N G u l f o f M e x i c o National Capital State & Province Capital Rail Network International Boundary State & Province Boundary 0 500 Km USA Rail Network Source: http://www.usamapxl.com/rail-map In comparison Australia has a network of approximately 38 000 km, providing a density of one kilometre of track for almost every two-hundred square kilometres of land mass. Most of the network is located in the eastern states with transcontinental links east-west (Sydney to Perth) and north-south (Adelaide to Darwin). There are also significant private networks in north-west Western Australia servicing the Pilbara iron mines. 9October 2015 | Onshore Oil & Gas in the Northern Territory
  • 15. Australian Rail Map Source: http://en.wikipedia.org/wiki/Rail_transport_in_Australia Creative Commons Licence http://creativecommons.org/licenses/by-sa/2.5/au/legalcode What these comparisons reveal is that the nascent US shale revolution had a substantial advantage in terms of availability and access to enabling infrastructure as it emerged allowing it to expand rapidly and get production to market quickly, with few barriers to restrain growth. Only after ten years of sustained growth, have constraints emerged in the US pipeline system. The situation across most shale basins in Australia is very different. Most are remote from existing infrastructure, with the possible exception being the Cooper Basin on the South Australia-Queensland border. The Cooper Basin is for this reason the leading target for local small to mid-tier companies and the big national and international oil companies due to its access to infrastructure. When explorers unlock the resources of the ‘Cooper’ it will likely provide valuable insight to how other basin can be developed. That would accelerate development in subsequent basins, although differences will exist between the shales of the various basins. Kalgoorlie MtIsa Longreach Charleville AliceSprings Tarcolola Cairns Normanton Croydon Townsville Rockhampton Adelaide MelbourneWarrnambool Arat Bunbury Broken Hill Hobart Bairnsdale Shepparton Darwin Brisbane Newcastle Bomaderry/Nowra Albury Eucha Swan Hill Armidale Moree Dubbo Sydney Canberra Perth 10 Onshore Oil & Gas in the Northern Territory | October 2015
  • 16. KNOWLEDGE, INFORMATION & DATA GAPS Significant knowledge and information gaps currently exist in the Northern Territory regarding the geology of both conventional and unconventional (shale) basins, due to the very limited exploration that has occurred to date. We therefore have limited access to seismic and well data to aid in the identification of ‘sweet’ spots. The Northern Territory Geological Survey is tackling the issue with pre-competitive data, but it is an enormous task (the Northern Territory at 1.3m km2 is about twice the size of Texas) with some basins never having been previously drilled for conventional oil and gas let alone unconventional. These basins had scant seismic investigations undertaken, with only limited data from minerals exploration drilling available. The availability of water and particularly the sustainability of ground water sources are poorly defined and understood. As a result limited knowledge exists of where the best ground water resources are located in many cases. WATER RESOURCE The Northern Territory, for the most part, is a very dry environment with limited surface water resources and sparse water supply infrastructure. Therefore drilling and fraccing operations will be highly dependent on ground water supplies in most regions. A typical horizontal multi-stage hydraulically fractured well requires ten to twenty mega litres (ML) of water (Equivalent to 4 to 8 Olympic swimming pools). Each well may require up to 15 fraccing stages, with each frac stage requiring 0.04 to 0.4ML of water (ML = mega litre = 1 000 000 litres). It is therefore very important, for the efficient and effective growth of the shale gas industry that ground water resources are identified, mapped to determine their capacity to support operations. This will both ensure limited resources are managed sustainably and development of shale gas basins are optimised without detrimental impacts on other users. Low levels of salinity may be acceptable for some frac fluid blends. INDUSTRY BARRIERS & GAPS 11October 2015 | Onshore Oil & Gas in the Northern Territory
  • 17. FRACTURE STIMULATION SERVICES & SUPPLIES Fracture stimulation is the key to unlocking the gas, natural gas liquids (propane, butane and condensate) and oil found in deep fine-grained sedimentary rock layers. It is the application of pressure to fracture or crack the rock that leads to the release of oil and/or gas into the well. Fraccing Fluid – What is it? Fracture fluid is a proprietary fluid made up principally of water and sand, (which typically make up 99% of the mix) of the fluid, with the addition of a range of additives that act as lubricants, change its viscosity and suspend the sand evenly throughout the fluid. One of the key additives is Guar gum, a thickener used to make the fluid more viscose. Guar gum is also used as a food additive, particularly in chewing gum. The blend of the fraccing fluid is customised to each well and rock type. Guar Gum A key ingredient in fraccing fluids is guar gum, derived from guar (pronounced ‘gwa’) bean, is used to alter the viscosity of the base fluid (water) to enable it to hold the propping agent (typically sand) in suspension. Derived from the guar bean (also known as cluster bean - Cyamopsis tetragonoloba, family Leguminosae) it is used as a viscosity regulator in the complex fraccing fluid mix. A drought-resistant plant of the pea family, which is grown as a vegetable and fodder crop and as a source of guar gum, is native to dry regions of Africa and Asia. (Source: http://www.oxforddictionaries.com/definition/english/guar?q=guar ) The bulk of current global demand is sourced from India, the leading supplier, which grows about 80% of current global production. Guar powder or guar gum is a fine powder obtained by grinding guar seeds, which is used in the food, paper and oil & gas industries. Guar bean pricing has risen sharply over the past couple of years due to strong demand from the oil & gas sector in the US for use as fraccing fluid additive. Although it is anticipated that as more growers enter the market and production increases prices will moderate to a more sustainable level. Efforts have been made to cultivate guar in Texas, USA and New South Wales, Australia. 12 Onshore Oil & Gas in the Northern Territory | October 2015
  • 18. Proppant (Frac Sand and Ceramic Proppant) A large variety of differing materials have been used as proppant over the years including, walnut shells, plastic pellets, silica sand, steel shot, ceramic proppants, glass beads, resin coated proppants (sand), aluminium pellets, fused zirconia and fly ash. The ideal proppant according to Mike O’Driscoll of Industrial Minerals Research ‘is one that has: the specific gravity of water, the strength of iron and is cheaper than dirt!’iv Today, silica sand (frac sand) dominates with around 75% of the proppant market, with resin coated sand and ceramic proppants, (such as sintered bauxite), accounting for about 10% each. When the hydraulic fracturing of Australia’s shale basin gathers pace significant volumes of ‘frac sand’ will be required. See Appendix A for information on the industry specification of ‘frac sand’. This will represent a significant supply opportunity for the Northern Territory if suitable sands can be identified to meet the demanding standards of the industry. For instance the US state of Wisconsin is one of the largest suppliers of frac sand throughout the US due to the quality of its sandstone formations. It is an example of a region that is benefiting from the shale gas boom even though limited oil and gas drilling has occurred in that state to date. Potential sources of frac sand exist in the NT subject to confirmation of the sources meeting the industry’s specifications. (For further information please contact the Northern Territory Geological Survey (NTGS) on Telephone 08 8999 6443 to discuss the availability and potential of local frac sand sources). Alternatively, if suitable sands are not available then an option may be the manufacture of ‘Ceramic Proppant’, commonly made from calcined/sintered bauxite, alumina or kaolin. Ceramic Proppant currently makes up about 10% of the proppant market. Typically more expensive than natural sand proppant, it does have superior properties that make it attractive in deeper, higher pressure shales. Resin coated sand is another alternative to natural sands that improves its properties and performance, although there is greater concern around the environmental impact with its use. Given the higher cost of drilling shale gas wells and wafer thin margins in the US due to the low gas price, the industry is price sensitive. An indication of the size and growth potential of the proppant market, including frac-sand, resin coated sand and ceramic products, is the expectation that the US market will near $10 billion by 2017.v Ceramic proppants are expected to experience the lion’s share of future strong growth in the coming years as resin-coated proppants are falling out of favour due to environmental concerns. 13October 2015 | Onshore Oil & Gas in the Northern Territory
  • 19. The Northern Territory has an abundant supply of bauxite and one possibility may be to develop a ceramic proppant manufacturing industry to supply the Australian unconventional oil and gas market. The technical and commercial feasibility needs to be investigated further to determine the potential viability of such an industry and its competitiveness both locally and in global export markets. Proppant technology continues to evolve and develop as new products become available such as Schlumberger’s HiWAY™, synthetic fibre bonded slugs and Imerys Oilfield Services’ rod shaped proppants. Both of which seek to improve production and environmental results (reduce water/chemical use), and demonstrate the industry is actively seeking to improve outcomes through innovation. 14 Onshore Oil & Gas in the Northern Territory | October 2015
  • 20. Significant challenges exist for the industry, due to the remoteness of many of the shale basins in the Northern Territory. These challenges include: • A lack or low capacity / standard of infrastructure in the shale basins, particularly -- road -- communications -- pipelines for moving product to market. • Water resources -- limited availability of ground and surface water hydrology data -- ground water sustainability yet to be determined -- limited supply in some areas. • Proppants -- availability, suitability and economic viability of NT frac-sand resources. -- potential of bauxite based ceramic proppant. • Service Industry -- limited in regional areas but has potential to grow -- specialist suppliers (e.g. for fracture stimulation) dominated by big international players, with limited local (NT) presence -- some capability and capacity exists in Darwin and is rapidly expanding on back of offshore and LNG projects. Monetisation of proven commercially recoverable gas discoveries in remote basins also presents a major challenge due to the distances and lack and infrastructure in many regions. Explorers and project operators face a number of issues depending on the scale of the resource and distance to existing infrastructure and potential markets. Options or paths to monetisation include; • New gas pipeline (including spur lines from the existing Amadeus-Darwin pipeline). • Liquefaction of natural gas via mini, micro or Nano LNG liquefaction plants for use as a diesel replacement in transport (on and off road heavy vehicles, locomotives and shipping) and stationary power generation in remote communities. Either at a nearby regional centre or infield. This can offer an early monetisation option prior to full development via a pipeline. • Compressed natural gas (CNG). • Truck and/or rail transport of oil and other liquid products. DEVELOPMENT CHALLENGES 15October 2015 | Onshore Oil & Gas in the Northern Territory
  • 21. DRILLING CONTRACTORS & SERVICES As the number of wells drilled per annum rises, drilling contractors with horizontal drilling capabilities and experience will be in high demand. The Northern Territory will face competition for horizontal drilling capacity from other jurisdictions such as Western Australia (Canning Basin), Queensland and South Australia (Cooper Basin). A sustained increase in drilling activity will also encourage drilling contractors to consider basing a rig in the Northern Territory, overcoming the current, ‘hit and run’ from interstate, approach for the delivery of annual drilling campaigns. Driven by the lower oil price excess capacity has emerged in the USA as drillers face reduced activity and pressure to innovate and become more efficient. As a result fewer drill rigs are now required to maintain and grow production. Excess rigs could be redeployed to the Northern Territory with US operators encouraged to establish a presence in the Northern Territory or joint venture with local businesses. Increasing activity is also expected to drive demand for support services, with opportunities emerging in the drilling supply chain in a diverse range of areas such as; mechanical services (diesel generators, pumps and vehicles), drilling muds, camp and catering services, pipe machining and spooling, transport and logistics. CIVIL WORKS Civil contractors – those delivering services covering earthworks, drainage, road and civil structures will benefit from a range of activities during both exploration and development. Key opportunities are expected to be drill pad preparation, access road upgrade / construction and maintenance will present a significant opportunity for regional contractors. FRACTURE STIMULATION SERVICES Australia currently only has one home-grown service company with capabilities in fracture stimulation services – Condor Energy. The sector is currently dominated by global oil service companies such as Halliburton and Schlumberger. Condor Energy has invested heavily - around $40 million - in specialised pumps, blenders and other equipment that form a fraccing set up. The company had the equipment custom made in the USA for the rugged Australian conditions expected in local shale basins such as the Cooper and DEVELOPMENT OPPORTUNITIES 16 Onshore Oil & Gas in the Northern Territory | October 2015
  • 22. Amadeus. The high cost of entry and specialised nature of the equipment and service may be a barrier to the development and growth a strong and diverse range of local (Australian) stimulation service companies. Condor Energy’s emergence is a cause for optimism in the potential of the sector. Techniques including ‘nitrogen lift’ used to aid recovery of well fluids will also benefit industrial gas producers supplying bulk inert gases such as nitrogen. FRACTURE STIMULATION EQUIPMENT Fracture stimulation services use a range of equipment and services, including pumps, generators and hydraulic hoses, just to name a few, all of which will require maintenance and servicing to ensure they operate safely and efficiently. They also use specialist equipment such as manifold trailers - integrated, self-transportable pipe connection systems used to connect multiple high pressure pumps to wells for fraccing operations, injecting the water-proppant fluid. US oil and gas equipment manufacturer Weir Oil & Gas has recently established a presence in Adelaide to manufacture manifold trailers for the shale gas sector – the only manifold trailer manufacturer in Australia. Weir established the Adelaide workshop in response to customer driven demand for in country manufacturing.iv Both the manufacture and maintenance of this equipment represents a significant opportunity for local fabrication and service companies, through either joint venture with US based manufacturers or local capability development. US suppliers seeking to enter the Australian market can benefit significantly by joint venturing with local businesses, through enhanced product localisation (standards and conditions) for the Australian market. FRAC FLUIDS Fracturing fluids are pumped into a well under high pressure to create conductive fractures in the hydrocarbon bearing zones. The result is an increase in the productive surface area of the well, which induces a hydrocarbon flow in the formation. Fracturing fluids typically consist of (about) 96.7% water, 3% proppant (silica/quartz sand or a ceramic) with the remaining 0.3% consisting of a series of chemical additives. These additives typically include a gelling agent (usually guar gum), scale inhibitor, biocide, algaecide, hydrochloric acid, corrosion inhibitor, friction reducer and detergent. These additives are designed to give the fluid the desired predictable set of properties. Guar Gum If demand for guar in the US remains strong or continues to rise due to growing global demand as other countries exploit their shale gas reserves, an opportunity to grow guar bean could be considered. In addition to the bean being used to produce the gum that acts as a viscosity regulator in fraccing fluid, as a legume it provides benefits in the crop rotation cycle and a high protein hay/fodder for livestock. Further work is required to determine the potential suitability, yield and economics of guar bean in the NT. 17October 2015 | Onshore Oil & Gas in the Northern Territory
  • 23. Water Services – Supply and Treatment Competitive businesses providing water services including transport, pumping, storage and recycling or disposal, may benefit significantly from shale gas activity. The industry has steadily increased its focus on reusing returned frac water to reduce overall consumption, as well as increasing the percentage of frac fluid, thus water, that returns to the surface for recycling for example by utilising nitrogen lift techniques. In addition to environmental benefits such techniques can result in increased oil and/or gas flows. A study by US Duke University has identified the potential for Frac water (flow-back fluid) recycling via the complementary use of using saline waste frac water to neutralise acid mine drainage. See Water & Wastewater Treatment online article - Blending fracking and acid mine wastewaters could remove contaminants http://wwtonline.edie.net/news/blending- fracking-and-acid-mine-wastewaters-could-remove-contaminants. EXTRACTIVE RESOURCES INDUSTRY - SAND, GRAVEL AND ROCK Supplies of materials for road and drill pad construction will need to be identified in or close to the key shale basins. This will aid the quick and economic development of the shale resources. This should also ensure resources are adequate for the shale industry and other users such as the general building and construction industry. Local sources of frac sand (Proppant) will also be highly sought after. If, as discussed previously, suitable supplies can be identified this could prove a lucrative business for the local community, suppling frac operations both locally, and eventually across the region. Other opportunities will include the supply of sand, gravel and fill material for construction or upgrading of access roads and drill pad (worksite) preparation. WASTE MANAGEMENT SERVICES Commensurate with environmental requirements, waste management services associated with drilling, well preparation and fracture stimulation operations will be in high demand such as; collection, storage, removal and disposal of industrial waste including • Cuttings recycling • Lubricants • Coolants • Returned drilling fluids • Other process fluids and • Hard rubbish. TRANSPORT & LOGISTICS HUBS The Northern Territory has a modern and efficient national rail connection via the Adelaide to Darwin railway that links the Northern Territory to all major capital cities of Australia. Its proximity to the Amadeus, Beetaloo and Georgina Basins may be a significant benefit to regional centres along the route. While Alice Springs has a well- established transport hub and can expect to benefit from shale and conventional oil & gas development in region (Amadeus Basin), opportunity exists for Katherine to benefit significantly and to a lesser extent Tennant Creek from the movement of equipment and supplies to and from the shale basins to support the industry, particularly for hydraulic fracturing including frac sand. 18 Onshore Oil & Gas in the Northern Territory | October 2015
  • 24. RESEARCH AND INNOVATION Institutions and businesses in the Northern Territory have the opportunity to engage the unconventional oil and gas industry in a number of areas of research and innovation including but not limited to: • Logistics. • Frac fluid – recovery and recycling. • Frac fluid composition including alternatives to using water such as liquid CO2. • Flare gas minimisation and / or utilisation. • Proppant – natural (sand) and ceramic (manufactured). • Standardisation and specialisation. • Waste recovery, recycling and disposal of well and / or returned frac fluids • Environmental monitoring. Alternative Stimulation Technologies Other alternative well stimulation technologies have also emerged, such as radial jet drilling or ‘jetting’ which can be used as a standalone enhancement or in conjunction with acidizing or fraccing. A recent innovation in this area is the Fishbones™ stimulation system, which uses a proprietary open-hole liner completion incorporating small diameter (jetting) tubes / needles. The needles are released by pressurising the liner, the fluid flows through the needles and jets out through the nozzles, achieving lateral penetration of up to 12 metres, with up to 300 laterals being installed per well. For further information regarding the Fishbones™ stimulation system refer to: www.fishbones.as. Alternative & Recycled Frac Fluids In response to the need to conserve natural water resources the industry has begun exploring alternatives to fresh water as the base in fraccing fluids. Most of the world’s ‘energy generation processes require significant amounts of water, and water requires energy (mainly electricity) for treatment (purification) and transport (pumping) these two resources are inextricably linked. This relationship is the energy- water nexus.’ (Thirsty Energy: Diego J. Rodriguez, Anna Delgado, Pat DeLaquil, Antonia Sohns - The World Bank www.worldbank.org/water). The available water resources play a central role in interdependence of energy security, (potable) water supply security and food security (agricultural production). Liquid Carbon Dioxide is one alternative to water and has been used on a limited basis for decades to fracture wells in places such as Wyoming, USA where CO2 infrastructure already exist.vii Benefits include reduction or elimination of water requirement in the fraccing process and potential to sequester CO2 at the end of production life when the well is shut-in, plugged and abandoned. Its wide spread adoption would require the development of significant infrastructure to support supply, transport and disposal of returned fluids. General Electric Company (GE) is reportedly studying the issue as part of a $10 billion research program, but admits it may be years before it is a viable alternative in fraccing due to technical challenges and limited infrastructure.viii Recycling of returned frac fluid also holds potential to reduce the demand on fresh water resources made by the fraccing process and in cases where water is trucked to the well site may also significantly reduce truck movements on local roads, which has broader social and economic benefits. 19October 2015 | Onshore Oil & Gas in the Northern Territory
  • 25. The nascent unconventional (shale) oil and gas industry in the Northern Territory has significant potential for growth in the medium to long term. In the short term early exploration will confirm the potential and scale of that opportunity and provides government and industry time to develop knowledge and infrastructure to support the sustainable growth of the industry and maximise the benefit to the Northern Territory. Given much of the activity will take place in regional areas; it represents an opportunity for these regions to participate in the economic growth the industry will bring. Increasing knowledge based work is decoupling from services and activities in regional areas and being undertaken in major centres. For example 40% of all mining jobs in Queensland are based in Brisbane due to the knowledge based nature of the activity.ix This decoupling is not limited to mining (resource sector) increasingly farmers (agricultural businesses) which are seeking to maximise productivity and value are decoupling knowledge based activities and sourcing skills and services from the capital cities. The role of Government in helping industry meet these challenges and opportunities includes: • Provision of robust information. • Promotion of opportunities for new investment. • Facilitation of new external investment in infrastructure to support industry growth. • Supportive policy settings, including robust balanced regulatory and approval processes. • Encouragement of collaboration and joint ventures to grow capability and capacity to service the industry. Local business and industry needs to begin planning now for participation and engaging with the oil companies and their major service contractors to establish and build relationships as developments in the region begin to emerge. Businesses need to increase their understanding of the unconventional oil and gas business, the expectations and standards of the industry, relative to their place in supply chain in terms of Workplace Health and Safety, Environment and Quality Management. This is in effect a continuation of the work that the Department of Business has been carrying out for a number of years to encourage businesses to improve their readiness for the resource sector. CONCLUSION 20 Onshore Oil & Gas in the Northern Territory | October 2015
  • 26. WHERE TO FROM HERE The Department of Business will progressively undertake work to determine the viability of the opportunities identified. The Department will also work with other agencies to identify ways to overcome the obstacles and barriers identified to the responsible growth of the unconventional oil and gas industry in the Northern Territory. As the industry grows over the coming three to five years specific actions, as the need arises may include: • Further research of the proppant industry potential -- frac sand -- ceramic proppants derived from bauxite. • Develop a strategy to grow or attract a field service industry including: -- hydraulic stimulation services -- manufacture of stimulation equipment (e.g. manifold trailers). • Engage industry and key stakeholders. • Monitor, track and communicate industry developments and trends. 21October 2015 | Onshore Oil & Gas in the Northern Territory
  • 27. FRAC SAND SPECIFICATIONSX In the USA Frac sand specifications are the responsibility of the American Petroleum Institute (API) and the current standard is API RP 56. These specifications are very demanding and as a result suitable deposits are limited. The limited availability of natural reserves which are suitable for frac sand production coupled with growing demand ensures a high price for any producers able to meet the API RP 56 frac sand specifications. Natural sands must be from high silica (quartz) sandstones or unconsolidated deposits. Other essential requirements are that particles are well rounded, relatively clean of other minerals and impurities and will facilitate the production of fine, medium and coarse grain sands. GEOLOGY Frac sand must be >99% quartz or silica. Most silica sand deposits are either already being exploited or are at least known of due to the use of this material in many other industrial applications including glass making and filtration media. High purity quartz sands are common in the USA. These are made up of some deposits that are currently being exploited, some which have been abandoned and others that are so remotely located that costs of transporting material render them commercially unviable. The tight specifications for frac sands – especially in relation to roundness and sphericity – make many deposits unsuitable for frac sand production. From the work currently being done in the production of frac sands it seems that older quartzose sandstones have a better chance of producing a good frac sand. However, it is possible to upgrade other deposits if carefully controlled. APPENDIX A 22 Onshore Oil & Gas in the Northern Territory | October 2015
  • 28. GRAIN SIZE The sizes recommended by the API for frac sand are: Mesh mm 8/12 2.38-1.68 10/20 2.00-0.84 20/40 0.84-0.42 70/140 210-105 micron The 20/40 mesh size (0.42mm – 0.84mm) is the most widely used. SPHERICITY & ROUNDNESS The standards prepared by the API in this regard simply estimate how closely the quartz grain conforms to a spherical shape and its relative roundness. The grain is assessed as follows: “average radius of the corners / radius of the maximum inscribed circle” Krumbein and Sloss devised a chart for the visual estimation of sphericity and roundness in 1955 as shown below. API recommends sphericity and roundness of 0.6 or larger. 23October 2015 | Onshore Oil & Gas in the Northern Territory
  • 29. CRUSH RESISTANCE API requires frac sand to be subjected to between 4000psi and 600psi pressure for two minutes in a uniaxial compression cylinder to determine its crush resistance. The fines generated by this test are limited as shown below: Size / Max fines by weight 6-12 mesh / 20% 16-30 mesh / 14% 20-40 mesh / 14% 30-50 mesh / 10% 40-70 mesh / 6% SOLUBILITY This test measures the loss in weight of a sample that has been added to a 100ml solution made up of 12 parts Hydrochloric Acid (HCI) and 3 parts Hydrofluoric Acid (HCI) and subsequently heated at 150 degrees Fahrenheit (approximately 65.5 degrees centigrade) in a water bath for 30 minutes. The object of this test is to determine the amount of non-quartz minerals present. API specifications require that losses by weight as a result of this test are restricted to <2% across all mesh sizes up to 40-70 mesh where the loss permitted rises to 3%. TURBIDITY Turbidity refers to the amount of silt of clay sized particles in the sand sample. This is generally not an issue in frac sand production as production requires a washing process to be introduced which effectively removes these particles. There can also be an attrition process applied which also serves to remove unwanted fines as well as weaker grains. 24 Onshore Oil & Gas in the Northern Territory | October 2015
  • 30. i ‘SHALE GAS IN AUSTRALIA: THE POLICY OPTIONS, UCL AUSTRALIA Green paper 2013. CC BY Aus 3.0’ and linked to the original source. ii Country Comparison: Roadways – CIA The World Factbook iii Country Comparison: Roadways – CIA The World Factbook iv Proppant Prospects for Bauxite, Mike O’Driscoll, Global Head of Research, Industrial Minerals, presentation to 19th Bauxite & Alumina Conference 13-15 March 2013. v according to www.indmin.com article: Proppant market to be worth $10bn by 2017, by Emma Hughes, published 5 September 2013 vi Source Energy News Bulletin (energynewsbulletin.net) 29 October 2014 article – Weir fills hole in frac market. vii Skipping the Water in Fracking, by Kevin Bullis, MIT Technology Review 22 March 2013 viii Source Thomson Reuters article – Fracking with CO2 to replace water a distant goal, GE says, by Ernest Scheyder, 7 April 2014 (Reuters) www.reuters.com. ix What’s driving regional Australia? Dr Marcus Spiller, National Policy Advisory Leader, SGS Economics & Planning x American Petroleum Institute (API) specification for frac sand - API RP 56, source: http://www.cdeglobal.com/projects/category/30/frac-sand-specs END NOTES 25October 2015 | Onshore Oil & Gas in the Northern Territory
  • 31. Contact: Department of Business Northern Territory Government Phone: +61 8 8999 5201 | Email: industrydev@nt.gov.au Disclaimer: While care has been taken to ensure that information in this publication is true and correct at the time of publication, changes in circumstances after the time of publication may impact on the accuracy of the information. The Northern Territory of Australia gives no warranty of assurance, and makes no representation as to the accuracy of any information or advice contained in this publication, or that it is suitable for your intended use. You should not rely upon information in this publication for the purpose of making any serious, business or investment decisions without obtaining independent and/or professional advice in relation to your particular situation. The Northern Territory of Australia disclaims any liability or responsibility or duty of care towards any persons for loss or damage caused by any use of reliance on the information contained in this publication.