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Interview

with Paul Henderson, Chief Minister of the Northern Territory, Northern Territory Government – Department of the Chief Minister

29.04.2011 / Energyboardroom

You began as Chief Minister in 2007 in what was a more subdued landscape for the oil and gas industry in the Northern Territory, relative to the stream of investment that will soon flow in. Since INPEX announced Darwin as the onshore base to develop its Ichthys project the potential of Darwin as a major international gas hub has risen significantly. How have the city and the Northern Territory evolved over the past several years to accept the role that has been placed upon it?

This is a very exciting time for the Northern Territory and for Darwin in particular. Our time has come as a major international player in the oil and gas industry, particularly with LNG given its increasing importance as a greener form of baseload energy in a carbon constrained world. To our north and northwest, trillions of cubic feet of gas have been discovered and are waiting to be commercialized. With the INPEX decision to base its project here, we are now well and truly on the global map. We are open for business and talking to many other companies about the opportunities for doing business out of Darwin.

When speaking at the ceremony at which Darwin was announced as the Ichthys onshore development site, you noted that the decision was the result of a very outgoing “can-do” Territorian attitude. What was the main message that you wanted to put forth to ensure INPEX that The Northern Territory can do this project?

The main message that I gave to INPEX was that we could deliver certainty. We could deliver certainty on the land that was available to develop their project. We could give certainty with regards to indigenous issues. We could deliver a certainty of process around environmental approvals. And we could provide certainty around exactly what land was available and the terms and conditions for its sale. Nowhere else in northern Australia has land that is ready today for gas developments. Western Australia still has no land available for new LNG projects. Their indigenous issues have not been resolved and there are still very complex environmental questions to be overcome. We provided certainty to INPEX and that is why they brought their project to Darwin.

While The Northern Territory has the advantage of available land, on the maintenance, supply, and servicing side there is significant competition to be encountered from Asia given its mature support industry. How can The Northern Territory best catch-up to its northern neighbors?

We are in the marketplace at the moment looking for a joint venture partner to deliver a marine supply base in Darwin and have shortlisted three consortia. My vision for Darwin is to not just be a significant producer of LNG in our own right but the region’s service and supply hub for offshore exploration and production. I believe that we can capture business out of Singapore and Perth to service fields such as Ichthys from Darwin. We are talking about thousands of rig tender movements every year that attract the deep level maintenance that are required from offshore platforms. With the emergence of FLNG technology we are in a prime position to become a world leader in supporting, servicing, supplying, and maintaining offshore floating platforms, as well as training operators to work on those platforms.

The lasting presence of an oil and gas industry in Darwin will truly revolutionize the city and reshape its urban landscape. What do you believe are the most important criteria for constructing a next generation city that sustains a permanent presence and obviates a temporary fly-in/fly-out culture?

One of the main attractions for INPEX choosing Darwin is that they are basing their project in a capital city. Darwin is a capital city with a university, two hospitals, world class schools, top notch sport and recreation facilities, and a very vibrant and multicultural community. Very few places in the world to develop this industry are as attractive as Darwin.

A key consideration for any projects is where to procure a workforce. It is a tremendous asset for a company to be able to relocate a worker to Darwin where there is a multicultural community, a strong university, and a population of 120,000 people. As opposed to a mining town in a remote part of the northwest an employee will be living and working in a capital city. Their family can live a comfortable life in a multicultural community. Oil and gas being a global industry with human resources coming and going from all around the world, people can come to Darwin and feel at home.

Together with Premiers Colin Barnett and Anna Bligh you have repeatedly stressed the need for each of your states/territories to cooperate on the human resources front and prevent worker poaching from creating an inflationary wage cycle across local economies. What is the roadmap to achieve this considering that projects in each of your jurisdictions have overlapping construction and production timetables?

I have an agreement with Premiers Barnett and Bligh that we do need to work together. The first step is therefore agreement at the political level. Even though Anna and I lead Labor governments and Colin leads a Liberal government, we take the politics out of it and work together in the interest of industry and the interest of Australia.

The second thing that we seek is the cooperation of the companies in allowing us to truly understand their workforce needs on a project by project basis. We then need to map those needs into a big project chart across northern Australia and assess the stages that will require a massive civil workforce and construction workforce, respectively. The companies have all of that information within their own project planning. We need to seek their cooperation to access that information so that we can map requirements over a 10 year period across northern Australia.

Once we have understood their requirements we can analyze how much of that workforce will come from our existing communities; how much will come from Western Australia; and how much will potentially need to come from overseas in order to facilitate projects.

The second part of the issue stems from the fact that a lot of our community here in Darwin will leave to work on the projects because of the high wages on offer. Many of our small and medium sized businesses will lose skilled workers. We need agreements in place with the Commonwealth Government about how to backfill workers into those businesses so that the price of electricians for moms and dads in Darwin does not go through the roof because all of the electricians have gone to work for the Ichthys project.

Offshore gas fields are estimated to produce for the better part of 40 years generating tens of billions of dollars of revenue in the process. Forty years is just a generation away. How can Territory revenues be reinvested to leave a legacy beyond the life of the fields?

The Commonwealth Government receives tax revenue with regards to the offshore industry which is redistributed amongst the states and territories in a complicated forum. For us in The Northern Territory we have a very significant impact in three ways. First, we see a very considerable opportunity for our business people to participate on the construction phase. It is an opportunity for Territorians to work on the project, earn big money, and spend it back home here.

Second, current project planning provides a massive confidence boost for existing businesses in The Northern Territory. People who see these projects progress can confidently invest even further in The Northern Territory. Through oil and gas projects we will be globally on the map and people will come here to look for investment opportunities in The Northern Territory.

The third phase – which goes into why we are investing in a marine supply bas – is that the ongoing service, supply, and maintenance of these projects will provide the real economic stimulus for The Northern Territory. Our aim is to develop and grow the engineering capacity of businesses here in Darwin to participate in the facility shutdown and maintenance. To give an example, when ConocoPhillips had a major shutdown of its Bayu Undan project and gas pipe last year we had 700 people working offshore to strip, refurbish, and upgrade the plant. Similarly, we had 600 people working onshore on the LNG plant shutdown. We want to see that work demand coming to Northern Territory businesses that are building their engineering capacity rather than having a fly-in/fly-out workforce. While tax revenues go to the Commonwealth Government, the real opportunity and legacy factor for us is the sustained engineering industry. We not only want the construction impact of the projects, but the ongoing development of our engineering, service, and supply base to support our daily operations.

LNG being both a cleaner fuel and a reliable source of energy security makes its development very much of the global interest. I imagine that as Chief Minister of the Northern Territory you are as much an ambassador at-large to end user markets, particularly Asia. How do you approach the diplomatic element of your job?

We have very strong government to government relations with Japan. Security of energy supply is one of the top considerations of the Japanese government given that all of their energy sources have to be imported – coal, uranium, or LNG. I visit Japan at least once a year to meet with senior representatives, the Japanese minister responsible for securing energy supplies, LNG purchasers, INPEX representatives, and project financiers. My resources minister, business minister, deputy chief minister, and treasurer all visit Japan at least once a year. The strength of our government to government relations is underpinned by the certainty that Japan has in dealing with governments in The Northern Territory and throughout all of Australia; this will only magnify in importance in the future considering the growth of China, India, Japan, and South Korea and the current political volatility in the Middle East. Investing in Australia and partnering with the resources sector in a Western democracy with mature political, legal, and financial systems has to be very important when talking about securing energy supplies for an economy. I take that part of my job very seriously.

Through your interactions with the international community, what do you gauge is the impression that foreigners have of The Northern Territory? How much room is there still to strengthen the name and image of the Territory?

Five years ago nobody knew who we were. Now we are well and truly on the global map. We are well received in Japan and we have similarly strong relations with China. Last year the vice president of China visited Australia for three nights and spent two of those nights here in Darwin. For us here in The Northern Territory it is all about recognizing that two massive economies need Australia’s resources which we are well placed to provide.

While five years ago we were knocking at the door trying to put our foot into the international energy discussion, just last week at the APPEA conference my breakfast presentation was sold out and had a line of people waiting to get in. Our time has arrived and we are certainly at the forefront of the LNG wave in Australia. Not only securing the projects is important, but being a service and supply hub for Australasia and building the capacity of our university to deliver the skills into the region is all part of the bigger picture and the brighter vision of Darwin.

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