Hit em up, move em out. The Gorgon gas show is on the road and ready to roll with everybody falling in line to get the wheels moving for early development. The trouble is, nobody seems to have evaluated the wider aspects of this project and why it has suddenly become ‘commercially viable, urgent and necessary’. In reality there are two individual projects rolled into a single development at Gorgon. This has the effect of forcing regulators into creating a default statutory framework for a concept that has previously been soundly rejected by an overwhelming majority of the Australian public.


There are many boundaries being tested with the Gorgon Gas project. This project has commercial, technical, geoscientific, economic, legal, political, geographic and timing elements involved, some of which appear to ‘jump the gun’ on co-operative international agendas that are currently being worked on. There are 2 separate projects on the go here that have been rolled into one development. This has blurred the lines about what is being proposed and turned a scientific discussion that has previously been publicly rejected on more than one occasion into an economic one with a much better chance of success.

According to company and government published data, the Gorgon gas project represents a unique opportunity to bring to fruition, gas reserves that would otherwise remain ‘stranded’ and ‘out of reach’. Whilst this may be correct in a direct economic sense, what is not adequately explained is the total scope of the project, its wider context or why individual elements of the project are necessary to make the development a viable commercial proposition.

Anyone reading the operating company project data is led to believe it is a straightforward LNG development just trying out a few new processes. It is not without problems with some readily identified, but trust us we’re experts in this area seems to be the theme. However, crucial data on the project is somewhat limited or subject to ‘commercial sensitivity’ so it is not easily understood what the full extent of proposed operations may be. Furthermore, when important factual events are omitted from review documents it therefore begs the question, ‘who is running the project agenda and why is it cloaked in stealth in critical areas?’ It appears that when the time is right everyone will be informed about what measures will be put in place to mitigate certain issues – which seems to put the cart before the horse. Given that the project is situated on a valuable nature reserve, shouldn’t the government have laid down early rules? You know, about what is or what is not permissible from an operational perspective, it being a world first and all that. It appears not. The facts of the matter are that this project is being driven by a political agenda and in certain areas the driver/s are operating in unknown territory that hasn’t been navigated previously, at least not on the scale proposed at Gorgon.

For purposes of clarity we will deal with this development as 2 separate projects.

  1. The production and development of the Gorgon gasfield and associated LNG liquefaction facilities on Barrow Island
  1. The sequestration of associated CO2 into a subterranean aquifer beneath Barrow Island

Project No 1. Development of the Gorgon gasfield and associated LNG facilities

There is nothing remarkable about the proposed LNG development at Gorgon apart from the politics, economics and proposed development location. The field, located approximately 130 km off the West Australian coast was discovered in the mid 90’s. Subsequent gas discoveries in the general vicinity of Gorgon have heightened the importance of Gorgon as a potential LNG development because the total gas reserves in the area contain approximately 25% of Australia’s known gas reserves.

One of the major problems facing the international oil and gas industry is that outside of the Middle East and parts of West Africa, oil discoveries and production are declining whilst demand is increasing. This has brought into sharp focus the issue of ‘stranded gas’ reserves that have previously been uneconomical for development. The Gorgon gas field and others further offshore comprising the ‘greater gorgon’ gas accumulations fall into this category. Gas is expensive to develop, particularly when it is a long way offshore, in deep water or has an impure product mix in the reservoir. A good example of this in Australia is the Scarborough field, also off the West Australian coast. The field was discovered back in the dark ages and is located 270km offshore in 1000 metres of water. There is a large parcel of gas present at Scarborough but the economics of development have never added up to allow commercial exploitation to be seriously considered, although BHP Billiton have recently raised the issue again.

In the late 1990’s there was massive consolidation in the oil and gas sector with some of the largest oil companies gobbling each other up or creating friendly, integrated new entities enabling greater economies of scale. Gas to LNG developments demand massive capital and operating expenditure and the payback time is over long periods, usually 20 to 30 years. It is not economically feasible to get a new LNG development up and running just to supply the international LNG spot market. At one level the major oil companies cooperate with each other and work together, sharing costs to bring developments on-stream. They have to because of the numbers involved. At another level they compete fiercely and play power games with each other to gain competitive advantage even when they share potential development assets. There is an element of this in the development of the greater gorgon gas fields as it competes with other potential Australian LNG developments targeting the same end user markets.

The choice of Barrow Island as the preferred development site for Gorgon was driven by the oil majors’ inability to agree on utilising and adding to, infrastructure already in place at the Burrup peninsula, the site of Australia’s North West Shelf project. This would have been the optimum location for all concerned in the development of Australia’s valuable gas resources. This is particularly the case for Western Australia itself, which stands to gain very little with the Gorgon Barrow Island proposal because the royalties from the gas go directly to the Federal government in Canberra.

These things apart and subject to final approvals, Barrow Island will become home to a huge hydrocarbon development which, over time will probably be added to because of the volumes of resource and economics involved. To most it would appear somewhat incomprehensible when juxtaposed against the supposed importance of Barrow Island as an ‘A’ class nature reserve, greenie or otherwise.

Project No 2. Proposed sequestration of CO2 into subterranean aquifer beneath Barrow Island

The gorgon project involves far more than just the development of an isolated, deepwater, sour gas reservoir on an ‘A’ class nature reserve.The second project proposed at Gorgon involves the subterranean storage/disposal of approximately 5 million tonnes a year of CO2 into an underground aquifer. This element of the overall development constitutes a world first and is highly controversial given the history of geologic waste disposal in Australia and the proposed storage location. Currently, there are no laws, rules, indemnities or precedents in place that relate to what is being proposed in this project. Should the project receive final approval then the State government will have to introduce a regulatory framework that is applicable in law. By doing so they will in/advertently also create the necessary legal framework for the subterranean disposal/storage of other more noxious substances, ones that have been rejected in the past, at least in the public eye. This bifurcation is further explored in the article on carbon sequestration in this issue.

When looked at objectively almost every aspect of the proposed CO2 sequestration urges caution and further research to prove up the basic concept, yet here we are with in principle State government approval for the proposed location, subject only to final approvals and production of an environmental impact assessment. The EPA has already advised against the project taking place on Barrow Island but their advice has been ignored by the State government. Why have they done so and on what grounds? Why does the CO2 have to be sequestered in the first place, it adds hundreds of millions of dollars to the cost of the project? Why not just vent it to the atmosphere as is happening in other LNG projects around the world? Regardless of the rhetoric, neither major oil companies nor governments have a distinctly green bias when billions of dollars are involved. So what is the agenda here?

If the sequestration road is taken on Barrow Island why not ‘store’ the CO2 in the oilfield formations instead of the proposed aquifer, whose ability to retain the CO2 over a long period is unproven? You have a billion barrel oilfield here fairly close to maximum depletion with proven geological characteristics sufficient to seal and retain a large oil reservoir for millions of years. One would have thought these formations to be the logical choice for the storage site, particularly as most of the knowledge in the industry regarding ‘storage’ suitability has been gained through utilising CO2 as an enhanced oil recovery technique. Some say the oil formations are unsuitable because of the level of formation damage due to various enhanced oil recovery techniques used over a number of years. Many of these techniques involve fracturing the oil bearing rocks with explosives to increase hydrocarbon flows back to the surface. What does the operator have to say about this? Well nothing actually because no-one appears to have asked the question.

There are unresolved geotechnical issues with the storage of CO2. In addition, there are literally hundreds of other questions to be answered adequately before any notion of approval should be considered.

The only other example anywhere in the world of a dedicated CO2 sequestration project is at the Sleipner gas field development, offshore Norway. At Sleipner, where around 1 million tonnes a year of CO2 have been ‘deep stored’ since 1996, there has been seismic shot over the area as part of a monitoring campaign of what is happening in the disposal site, some of which is available in public documents. The relative success of the Sleipner project is being used as the driving example for why Gorgon CO2 sequestration should go ahead almost like it’s a ‘no brainer’ but the circumstances between the projects are like chalk and cheese on many fronts.

At Gorgon, the annual volume of CO2 to be stored is 5 times that of the Sleipner project. At Sleipner, a subsea aquifer is being used as the storage location but at Gorgon the proposed storage aquifer is under dry land. The storage location at Gorgon, some 2300 metres below the surface is 1500 metres deeper than at Sleipner. How will the CO2 react to the temperature and pressures at this depth? Where will it migrate to? What effect will it have on subsurface geology? What effect will buoyancy have on the sequestered CO2? Does the storage area have adequate seal integrity? Will previously drilled wellbores into the proposed storage area allow seepage back to the surface? What is the metallurgical integrity of those wells? CO2 is highly corrosive, so what effect will there be on the well architecture? What effects could it have on fauna or flora if it does seep out? What happens to the sequestered CO2 if there is a large earthquake in the immediate vicinity?

The Gorgon project is listed by the International Energy Agency as a carbon sequestration demonstration project yet there has been next to nothing released on how any migration of such large volumes of CO2 will be monitored. Will there be prescriptive regulatory demands on how much monitoring will be required and will it be proportionally greater than at Sleipner, or will the operator just let us know what they propose to do when it is politically and commerciallyadvantageous to do so?

What indemnities will be required from the project developers in the event of an unforseen event and for what length of time will such indemnities be held in force for? Unfortunately, companies come and go, with Enron being a classic example of the ‘never too big to fail’ syndrome. On the question of unforseen events; in the project developers’ document, “in response to submissions”, prepared for the EPA, April 2003, pages 96&97, there is an interesting overview on earthquake incidence in the region complete with map. On the question of consideration of earthquake impact on the storage reservoir the response is as follows:

“Since the commencement of European settlement in Western Australia in 1824, three (3) earthquakes are known to have caused rupturing of the earth’s surface. These were the

Meckering earthquake in 1968, the Calingiri earthquake in 1970, and the Cadoux earthquake in 1979. Barrow Island has large hydrocarbon accumulations that have been trapped beneath the Island for hundreds of millions of years, in formations closer to the

surface than the Dupuy reservoir. The natural seismic events recorded since 1824 have not lead to failure of trap integrity at Barrow Island.”

Read this response carefully because it is a classic case of misleading corporate doublespeak, although it does confirm the oilfield formations as the most suitable location for any proposed CO2 storage. I would have thought the original pioneers of this state, apart from the fact they were a 1000 miles away from Barrow Island, would have been concentrating on food, water and habitation matters and did they really bring all that sophisticated seismic recording equipment with them? Furthermore, rupturing of the earth’s surface is not really the issue here, it’s the integrity of the proposed storage site. Why wasn’t the earthquake of April 8th, 2000 recorded as being relevant, the data was available? (Geoscience Australia, Geohazards – Earthquake Information, Monthly Report No. 00/04A, April 2000). This 2,5 magnitude event at a depth of 5 km was potentially close enough to have a bearing on subsurface geology at the disposal site and who’s to say a larger event at more critical depth and location will not occur in the future? The point is that significant seismic disturbances can and do occur regularly in the general area around the location of the proposed storage site – how do you regulate or mitigate risk for that?

There are many other issues that have not been covered with Gorgon such as the legal ramifications and the forthcoming domestic election in Western Australia, upon which the announcement of the go ahead will have a significant effect on the perceptions of the general community.

As mentioned previously, the timing appears to be all wrong with the sequestration aspect of the project so perhaps the best way to finish off this piece is to examine Australia’s commitment to the Carbon Sequestration Leadership Forum (CSLF) and how it relates to this particular aspect of the Gorgon development. The CSLF is an international, high-level ministerial initiative set up to address global warming issues. It consists of 16 of the world’s leading nations. Formed in Mid 2003, the CSLF’s main objectives are to, consider the effectiveness of geologic storage, address public perceptions of the process, evaluate the requirement for large scale demonstrations and engage multiple stakeholders, including those in developing nations to participate in prospective resolutions to the issues at hand.

Australia has taken a leading role at the CSLF and is currently one of two Deputy Chairs of the CSLF Policy Group. At the second ministerial meeting of the CSLF which took place in Melbourne, during September last year, Mark Maddox, the acting Assistant Secretary for Fossil Energy of the United States Department of Energy; and chairman of the Forum’s Policy Group gave a speech which outlined the timetable envisioned by the CSLF as being relevant to the implementation of full scale carbon sequestration activities. The following text is taken directly from his speech.

“From now through 2008 – steps include setting cost goals and identifying the most promising technological pathways, the best reservoir types and the technological requirements of monitoring and verification. 

From 2009 through 2013 – pilot demonstration projects on costs, understanding of world reservoir capacity and testing of monitoring and verification technology. And, from 2014 into the future – capture and transportation at costs below goals, commercial availability of reliable monitoring and verification technology, and the initiation of large scale storage.”

Given what has been written previously in this article, it would appear approval for the Gorgon project is being pushed a tad quicker than the bodies set up to bring the process to fruition, are themselves prepared to admit is a sensible timetable.