Federal government backs gas imports to southern states

Elouise FowlerReporter

May 9, 2024 – 6.24pm

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The Albanese government has thrown its weight behind importing gas to the southern states following persistent warnings of a shortfall by 2028 that cannot be plugged alone by local gas production.

In the 67-page planning strategy unveiled on Thursday, the government warned that a supply shock to the southern states could not be alleviated by additional gas production from existing offshore Victorian fields.

Furthermore, the three yet-to-be developed fields in the Surat Basin in Queensland, Narrabri in NSW and Beetaloo Sub-basin in the Northern Territory will not be online in time to plug the shortfall expected for 2028, the policy document shows.

The Albanese government says new gas supply is crucial to transition to net zero emissions.

Instead, the extra gas will need to be delivered from the northern states, from a retooled national gas network, the report says. Costly import terminals to transport gas to east coast users could also be required, the accompanying 110-page analytical report warned.

Echoing the Australian Energy Market Operator, the strategy says the eastern states face the risk of annual supply gaps emerging by 2028 on the east coast, and by 2030 on the west coast, without continued investment in supply sources.

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“Options to increase transportation to the south-eastern states from
potential future fields include additional pipelines and processing facilities,
as well as LNG import terminal,” the strategy document said.

Import terminals are much faster to complete than new gas fields, but face regulatory and commercial hurdles, the document warned, and the price of gas from import terminals is likely to be higher than current domestic prices.

Still, analysis in the report suggests the combination of two import terminals operating at maximum capacity would be nearly able to bridge the gap between expected supply and expected demand out to 2042.

“[They] should be considered alongside other avenues to improve supply or reduce demand.” However, this will expose south-eastern markets to the international LNG price, the document said.

Resources Minister Madeleine King proposed a series of methods to improve supply, including “use it or lose it” rules that would force the titleholders to develop the assets or lose them. Ms King also outlined collaborating with industry to minimise gas venting, a large source of carbon emissions, and to improve access to carbon capture and storage.

Adam Watson, the boss of gas pipeline owner APA Group, bristled at the prospect of building new LNG terminals to import gas. “If decarbonisation and lowering the cost of our energy are our objectives, neither extending the use of coal generators nor the development of LNG import terminals are solutions,” he told the Macquarie Australia Conference.

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“These are just higher emissions, higher-cost distractions from what really needs to happen,” he said, stating that new supply needed to deliver timely investment in new domestic gas supply and infrastructure for Australian households and industry.

Climate Council head of policy and advocacy Jennifer Rayner urged the government to reconsider its position. “Now is not the moment to add to our climate crisis by burning more gas,” Dr Rayner said. “Signing Australia up to a future made on gas ignores climate scientists, who warn we are at risk of smashing through 1.5 degrees of warming.”

The boss of Orica, one of Australia’s largest gas consumers, says the new gas policy won’t immediately reduce high gas prices, and reiterated his call for a lower cap than the Commonwealth’s $12 per GJ placed on the price of the molecule last year.

Sanjeev Gandhi said he endorsed the government pushing the “use it or lose it” provisions on gas explorers and producers. But gas projects take years to develop, said Mr Gandhi, who helms the world’s No. 1 commercial explosives maker, which uses the molecule as a key ingredient to make ammonia nitrate – a chemical cocktail used in explosives.

“We need a solution that’s much faster than developing gas projects 10 years or five years down the line,” he said.

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