Senior Resources Writer
Source from AFR
A $1.2 billion pipeline that could cut the cost of transporting gas from Queensland to NSW by 40 per cent won NSW planning approval, offering the hope of cheaper gas in the Newcastle region by the time AGL Energy's Liddell coal-powered generator closes.
The proposed 820-kilometre Hunter Gas Pipeline would run from Queensland's gas hub at Wallumbilla, near Roma, to Newcastle, via Moree and the Hunter Valley.
It would run adjacent to Santos's planned Narrabri coal seam gas project, offering an alternative route to market to APA Group's Western Slopes pipeline proposal and could supply gas power generation that may help replace Liddell.
With planning approval locked away, talks will now begin with Queensland gas suppliers such as Shell and Australia Pacific LNG as well as with smaller suppliers such as Senex Energy, said Garbis Simonian, managing director of Hunter Gas Pipeline and of gas wholesaler Weston Energy.
"We are just starting to talk to the large gas companies," Mr Simonian said. Estimating that the gas delivery cost would be about $1 a gigajoule less than the circa $2.50/GJ it currently costs to transport gas to NSW from Wallumbilla via the Moomba gas hub in South Australia's north.
He said the new line would help resolve the issue of inadequate gas transportation capacity from Queensland to the south that has been raised by competition czar Rod Sims and energy regulators. It would also ensure gas for a potential gas peaking plant at Liddell or at Tomago near Newcastle to help fill the gap when the Liddell coal generator shuts down, and provide a route to market for Narrabri gas and beef up supplies for the Colongra gas power generator on the Central Coast.
"Ours ticks all the boxes," Mr Simonian said. APA's proposed Western Slopes line, which has yet to be approved, would run from Narrabri towards the south-west to connect into the existing Moomba-Sydney pipeline, without any connection to Queensland.
Only one of the lines is expected to proceed, given construction will need to be underpinned by gas transportation contracts.
Hunter Gas, owned by Mr Simonian and five private investors, has an existing memorandum of understanding with APA's rival Jemena to build the line. But Mr Simonian said the group was considering other options and could seek to develop the project itself, with a target of having it operational in late 2022 or at least by the time Liddell closes, due in April 2023.
Announcing the planning approval, which extends an earlier clearance that had lapsed, the state government described the project as "critical" for the NSW energy sector as it would increase energy security, diversify gas supply and put downward pressure on gas prices.
It would also provide greater competition between APA and Jemena, support regional development and "facilitate the development of gas-fired dispatchable energy" to support the growth of renewable energy, the government said.
The Australian Competition and Consumer Commission and the Australian Energy Market Operator have both warned that gas users in the south-east will become increasingly reliant on gas from Queensland as the Gippsland Basin fields owned by ExxonMobil and BHP run down. That means some industrial users in Victoria will need to pay an extra $2.50 a gigajoule to transport south from Queensland.
But analysts are warning of a limited ability for Queensland to increase exports of gas to the south due to pipeline constraints in the existing system.
Meanwhile, NSW government planning authorities are still in the process of considering Santos' Narrabri gas project, where Weston Energy, Brickworks and Perdaman Group have provisionally signed up for gas and other manufacturers are lining up as potential customers.