Darwin’s location on the doorstep of a growing Asian economy is an enviable base for any importer or exporter.
Not only does the port already feature in a number of key regional trade lines, but the recent signing of free trade agreements with China, Japan and Korea, as well as the Trans-Pacific Partnership Agreement (which is yet to be formally ratified), are likely to see the port’s prominence grow exponentially in the coming years.
Its strategic importance has also been acknowledged by the Royal Australian Navy, listing Darwin as a vitally important port, a gateway to Australia’s northern neighbours and the centre from which it conducts border integrity operations.
In order to encourage investment in the Port of Darwin, the Northern Territory Government sought a private-sector partner to operate the port, which resulted in the signing of a 99-year lease with China’s Landbridge Group in October 2015 covering the land and facilities of East Arm Wharf and Fort Hill Wharf.
A CONSIDERABLE OPPORTUNITY
Landbridge already has experience in the Australian gas industry through its subsidiary WestSide Corporation, of which it gained majority ownership in July 2014. The group operates the Meridian coal seam gas fields, located 160 km west of Gladstone in Queensland’s Bowen Basin, in joint venture with the Australian subsidiary of Japan’s Mitsui E&P.
As for where the lease agreement fits in with the group’s plans, Landbridge Infrastructure Australia Director Mike Hughes says “Through our significant investment in the Port of Darwin, Landbridge intends to grow two-way trade between Australia and Asia, leveraging Landbridge’s existing port and logistics businesses and firmly putting Darwin on the map for Chinese business.
“We plan on making considerable financial investment in the Port of Darwin,”? he told Gas Today.
“Given the scope of development opportunities in the Territory, we hope to invest a lot more.”?
Under the partnership, Landbridge will contribute upfront cash proceeds of AU$506 million to the NT Government, along with a share of future revenue where it is better than expected in terms of trade performance.
Landbridge’s initial investment will see AU$35 million go towards port infrastructure and development over the first five years, with the first project to commence in early 2016.
Landbridge also projects in excess of AU$200 million of capital expenditure over the next 25 years, with a “stable and competitive”? pricing regime for port services involving no more than consumer price indexed (CPI) pricing adjustments for the use of current port facilities.
In order to ensure fair price and access arrangements for port users, the NT Government has also established a statutory price monitoring and access regime.
DARWIN LNG AND INPEX: ESTABLISHED INVESTMENTS
ConocoPhillips’ Darwin LNG Project has been exporting LNG from Wickham Point in Darwin Harbour since February 2006 and as such, the gas industry has been a major presence in the area for the past decade.
Averaging one cargo of LNG per week for sale to Tokyo Electric and Tokyo Gas in Japan, gas from the Darwin LNG Plant is received via a 502 km pipeline from the offshore Bayu-Undan gas field in the Timor Sea.
Meanwhile, another important enterprise which is currently under construction, the INPEX-operated Ichthys LNG Project, connects onshore facilities at Blaydin Point in Darwin to the Ichthys gas and condensate field in the Browse Basin, offshore Western Australia.
The Ichthys LNG Project, which is expected to achieve start-up in 2017, represents the largest investment by a Japanese company outside of Japan, with the project’s joint venture partners including TOTAL, CPC, Tokyo Gas, Osaka Gas, Chubu Electric and Toho Gas.
On dealing with the Federal and NT governments, INPEX told Gas Today that “Australia provides an investment environment of regulatory and commercial certainty – a critical factor for successful development of a mega-project like the Ichthys LNG Project.
“The strategic location of the Port of Darwin was a factor in INPEX’s decision-making when it chose the Northern Territory as the site for the Ichthys LNG Project’s onshore LNG facilities in 2008,”? the company said.
“With an operator now having been appointed, INPEX encourages the NT Government to ensure transparency and visibility on port fees and access arrangements, and above all, to ensure high standards of safety and environmental protection are maintained.
“There are many commercial and government stakeholders involved in the Ichthys LNG Project and INPEX looks forward to working with the Landbridge Group on the successful delivery, start-up and operation of the project.”?
FORGING NEW RELATIONSHIPS
Along with INPEX’s planned investment in the region and Landbridge’s plans for the port, Darwin’s role in connecting Australia to the Asian market continues to attract interest from some big players.
Commenting on opportunities in Northern Australia, China’s Vice Minister for the Ministry of Land and Resources
Dr Wan Min has said the partnership between the NT Government and Landbridge sends a message to Chinese companies that the Territory is a place to do business.
Echoing this sentiment, NT Asian Engagement and Trade Minister Peter Styles is adamant the government is committed to forging strategic partnerships.
“Deepening our co-operation with China is in the best interests of a prosperous Territory economy,”? Mr Styles said.
Already Australia’s largest resources and energy market, with the Department of Foreign Affairs and Trade placing exports at over AU$77 billion in 2014, LNG’s role in this mix is set to increase with the China-Australia Free Trade Agreement locking-in current zero tariffs on LNG exports, while projections from the Chief Economist have China set to account for 23.1 per cent of LNG exports in 2018-19.
In order to remain on target for this growth as Australia positions itself to overtake Qatar as the world’s largest LNG exporter, it remains crucial that the necessary infrastructure is in place.
Investing in the Port of Darwin will be an important step towards achieving this.