Production from the offshore field which supplies gas for the Top End's electricity generation has decreased by nearly 50 per cent this year — raising concerns about the long-term security of the resource.
Key points:
- Blacktip gas field's output has dropped nearly 50 per cent this year
- Power and Water relies on Blacktip's gas for electricity generation
- The drop in production has forced the shutdown of the Northern Gas Pipeline
Power and Water Corporation (PWC) has an agreement with Italian company ENI to buy gas from its Blacktip field until 2031, using the gas to generate electricity for the Darwin to Katherine grid.
But over the past 12 months, gas output from the field has been steadily dropping.
Blacktip's production has decreased so much that there is not enough gas to run the Tennant Creek to Mount Isa pipeline, where PWC normally sends its excess supply.
Wood Mackenzie energy research analyst Anne Forbes said it was common for gas fields to have production issues, but Blacktip's problems seemed particularly bad.
"There's been quite a significant [production] decline, much more severe than we would generally assume would happen for this type of gas field," she said.
"It's been quite unexpected."
The Blacktip field is made up of 12 separate stacked reservoirs across four different geological formations — meaning it is difficult to extract gas from.
"[A gas reservoir] will always not perform as you expect — it might be better or it might be worse," Ms Forbes said.
"In this case it's not been as good as [ENI] had hoped."
What does this mean for the Top End's electricity supply?
PWC has emergency backup supply agreements with the LNG exporters in Darwin Harbour — Santos and Inpex.
The corporation would not confirm if Blacktip was supplying enough gas to meet demand from its power plants, citing a legal matter before the WA Supreme Court involving ENI.
But using information from the Australian Energy Market Operator and the Australian Energy Market Commission, ABC Rural estimated a current gas shortfall of around 19 terajoules per day.
So, PWC is receiving enough gas to keep the NT's lights on, but it is likely having to rely on emergency supplies.
Minister for Essential Services Selena Uibo's office referred questions about the emergency supply agreement to PWC, which said it was commercial in confidence.
A spokesperson for Inpex said the company was "pleased to support the Northern Territory's energy security as required" but would not comment on "operational or commercial specifics".
Demand for the emergency gas is being reduced by the roughly 100 megawatts of rooftop solar on residential and commercial buildings.
But another 55 megawatts of power from four new solar farms — three of which are owned by ENI — cannot be put into the grid because the farms are still undergoing commissioning.
The Utilities Commission, environmental groups and energy experts have been critical of the slow commissioning process for the solar farms.
Can Blacktip's problems be fixed?
ENI is working to fix its production issues at Blacktip.
In August, the company applied to the offshore regulator NOPSEMA to conduct "workover activities" including "well clean-up" on one of Blacktip's wells, and for permission to drill two new wells in the gas field.
ENI is hoping for the work to take place later this year or in early 2023, depending on the availability of drill rigs.
But Ms Forbes said there was a risk, given the geological complexity of the gas field, that the supply issues would not be fixed and "the wells [may] start to decline again quite quickly".
"ENI might have to keep on top of this, in terms of drilling more wells, doing well workovers and monitoring production quite closely," she said.
"They may end up just not being able to produce all of the gas that they thought they had in the reservoir."
Complicating PWC's issues is the fact that its emergency supply contract with Santos' Darwin LNG facility is due to end this year.
"Whilst we transition to renewables, it's really important we have a solid supply of gas to ensure the stability of our [electricity] grid across the Northern Territory," Shadow Minister for Essential Services Josh Burgoyne said.
"We want to make sure we can keep the lights on, I think everyone can agree to that."
In 2020, ENI tried to sell its Australian assets, including Blacktip but later pulled them from the market.
The company did not respond to multiple requests for comment.
No NT gas going east
No Northern Territory gas has been sent to east coast markets since early September, after the Northern Gas Pipeline's owner, Jemena shut it down, citing safety concerns with such low supply.
That means PWC hasn't been able to sell gas to its customer, Incitec Pivot's Phosphate Hill fertiliser plant near of Mount Isa.
Also missing out on cashing in on lucrative east coast gas markets is Central Petroleum, which produces gas in the Mereenie Basin near Alice Springs.
Chief executive Leon Devaney said the NGP shutdown was "not ideal" for the company, but it had been able to find buyers for its uncontracted gas within the NT.
Mr Devaney called upon Jemena to "fix" the NGP, "so it can handle lower volumes so that this [situation] doesn't get repeated in the future".
"That pipeline is a fundamental connection between the Northern Territory and the east coast," he said.
"There is significant supply that is being relied on by customers... and suppliers themselves need the ability to have firm transport to sell to customers on the east coast."
Jemena rejected claims that the pipeline needed to be fixed, with a spokesperson saying "this shut down does not relate to the performance or operation of the pipeline".
"Rather it reflects the fact that the pipeline and Phillip Creek Compressor Station are not consistently receiving adequate gas flows to enable the safe operation of the facility."
"At this stage we do not have a confirmed return to service date."