APA to spend $75m to ‘slam door shut’ on LNG imports

Australia’s largest listed gas infrastructure owner and operator will spend $75m to increase pipeline capacity and negate the need for importing LNG into NSW and Victoria.

Australia’s largest listed gas infrastructure owner and operator will spend $75m to increase pipeline capacity by as much as 24 per cent and negate the need for importing LNG into NSW and Victoria.

The investment plan marks APA’s attempt to assure gas customers they will be able to source supplies via traditional means, after looming east coast shortages saw a growing number of end-users exploring contracts to import LNG.

APA chief executive Adam Watson said the company’s expansion plans showed the east coast would not need to reply on imports.

“It slams the door shut on the need to bring in high-cost, high-emissions and low-reliability LNG imports. We are very confident that we can incrementally build out the east coast gas grid (ECGG),” he said.

“We have been working on matching supply with demand and address the gas shortfalls that would have otherwise impacted the east coast over the next couple of years.”

APA said it would spend $40m upgrading the ECGG.

The first expansion will see APA spend $25m to increase capacity of its Moomba to Sydney Ethane Pipeline (MSEP).

APA said the expansion would deliver about 20 TJ per day extra gas from Moomba to Victoria or around 25 TJ/day to Sydney. After conversion to natural gas, the incremental MSEP capacity will increase the total southbound capacity from Moomba to Sydney from 565 TJ/day to 590 TJ/day, APA said. The infrastructure company said it would also spend $15m to install two pressure regulation skids to increase capacity in summer months when pipeline maintenance is being undertaken. APA said the project would increase capacity over summer this year and in 2026.

APA workers at the Wallumbilla gas hub in Queensland. Picture: Katrina Ayers

Both investments will be beneficial, though APA’s second tranche of spending shapes up as the most consequential. APA says it will spend $35m to undertake early stage works on potential new pipelines that could connect new sources of gas in the Beetaloo Basin in the NT and Surat Basin in Queensland to the east coast gas market.

The Surat Basin is home to several developments, including a Shell-owned joint venture moving ahead with expansions, and the Senex Energy project. Senex is part-owned by Gina Rinehart.

The Beetaloo Basin is less advanced but recent drilling tests by Tamboran have heightened confidence that it could be a major new source of gas – and the NT government has indicated its commitment to commercialising the supplies. APA said it would also explore an additional gas storage pipeline, a development that could add hundreds of terajoules of capacity to the country’s east coast grid.

Mr Watson said the projects could deliver gas to end users for between $9/TJ and $13/TJ, cheaper than LNG imports.

However, Rob Wheals, head of Squadron Energy – the developer of the Australia’s most advanced LNG import terminal in NSW’s Port Kembla, which is nearly competition – denied that importing supplies would be more ­expensive.

“Claims that LNG imports will drive up the price of domestic gas are wrong,” Mr Wheals said.

“Multiple independent analysts, including Bloomberg, EnergyQuest and Wood Mackenzie have forecast a global LNG oversupply in the coming years, driving prices down.

“Our Port Kembla Energy Terminal (PKET) is the only solution ready in time with enough capacity to prevent future gas shortages and price spikes, and no pipeline expansion will be large enough or ready in time to address this crisis.

“PKET will unlock access to cheaper global LNG supplies, allowing NSW and Victoria to secure lower-cost gas during northern hemisphere summers (our winter) when prices are at their lowest.

“What would be truly disastrous is failing to act now, locking Australia into a supply crunch and leaving households and businesses exposed to higher prices and shortages during winter peaks.”

Andrew Richards, head of the Australian Energy Users Association, said importing LNG would add costs to users that they cannot afford.

“We have long believed LNG imports is not a today solution as it would be too costly. The APA plan is vital not only to manufacturers, many of whom would simply not be able to pass on the increased costs, but it is important to those who use the products,” Mr Richards said.

“Higher energy bills would lead to higher prices for things like bricks, steel, glass and food. This is a cost of living issue. We know for some manufacturers they can’t pass that on to the fullest extent as they become less competitive against imports and we have already seen some manufacturers such as Qenos go under as they couldn’t compete.”

The Australian Energy Market Operator has warned traditional sources of gas to the country’s east coast are waning and shortages are possible as soon as 2026, but most likely by 2028.

Manufacturers have warned their future viability would be threatened as they cannot switch to renewables and can ill-afford to pay more for their fuel source.

Renewable energy developers insists the country’s transition to zero emission sources will also be stalled. Gas-fired electricity generation could be used when conditions are unfavourable for renewables, but dwindling supplies mean authorities are unable to close coal-fired plants.

Australia’s gas industry has also been urging the federal Labor government and its state counterparts to expedite approvals for new developments.

Investors cheered APA’s plan, with shares up 7.7 per cent on Monday.

APA reported a 54 per cent fall in half-year profits despite a lift in six-month earnings. Profits excluding significant items for the six months to December 31 totalled $34m, down on the $74m reported one year earlier.

Including significant items, the result, which was driven by higher interest, was below market forecasts.

But APA also revealed that revenue for the half-year rose nearly 7 per cent to total $1.621bn – higher than market expectations – having hit $1.516bn one year prior.

APA issued a dividend of 27c per share that was in line with forecasts, and reaffirmed its earnings guidance.