Three events led The Slug to this discovery, and while each appears to have merit there is a concern that some of the games being played in the rapidly shrinking world of LNG might end in tears before bedtime.
The latest adventure in liquefaction surfaced a few days ago when Santos announced that it had the contract to supply gas to a mini-LNG plant being developed by the West Australian-based company, Wesfarmers.
This plan involves construction of a $138 million plant, to produce a modest 175 tonnes of LNG a day, mainly for the heavy-vehicle and industrial gas market, as well as remote-area power generation as a diesel replacement.
The Slug reckons that project looks pretty solid. Wesfarmers, after all, has a long track record in producing and marketing liquefied petroleum gas (LPG), and LNG is a natural extension of its business.
The next two mini-LNG projects look a little more fragile, and caught The Slug’s eye for two reasons. Firstly, because they appear to fit the description of courageous. Secondly, because the proponents appear to have limited experience in the gas liquefaction business, and also have a reputation for taking energy projects to the limit.
Energy Developments, a specialist in what might loosely be called alternative energy projects, is example number two of the mini-boom in mini-LNG. It is the company behind the development of the West Kimberley Power Project which will produce LNG near Karratha, and then truck it to remote-area power stations at places such as Broome, Derby and Halls Creek.
In theory, it sounds straightforward, and makes sense to Energy Developments, to the main customer, a WA Government agency called Horizon Power, and to the residents of the far north of WA.
But, Energy Developments is a company which understands how difficult sometimes seemingly simple energy projects can be. It’s only a few years ago that a subsidiary called Brightstar Environmental battled manfully to make sense of the $160 million Solid Waste and Energy Recycling Facility (SWERF) in Wollongong, only to discover in 2004 that it didn’t work. That courageous try resulted in heavy losses for everyone involved, and the consignment of SWERF to the scrap heap.
The third player in the new business of miniaturised LNG is Maurice Brand, the man behind a recently-listed company called LNG Ltd.
Maurice wants to sell LNG to Canadian clients, though there is a curious twist to his business plan. The first step, reported on the same day that Santos and Wesfarmers announced their gas-supply deal, was the securing of a Canadian customer to buy 1.8 million tonnes of LNG a year.
Hopefully, this venture will not prove as difficult as Maurice's last adventure with an Indonesian-based energy business called Energy Equity which had a few problems in getting paid.
The Slug, in the interests of fairness, passes no judgment on any of these bold LNG plans. In fact, he welcomes the way an industry once the preserve of big players has made its way down the food chain.
It has certainly made LNG an exciting business to watch – though whether excitement is what investors want is another interesting question for an interesting time.
Note: The views of Slugcatcher are not those of APPEA.
