Competitive Santos fuels hopes of gas price relief
Santos says its $3.5bn Narrabri coal seam gas project can “compete effectively” in the NSW market.
Santos says its $3.5bn Narrabri coal seam gas project can “compete effectively” in the NSW market even if two rival LNG terminals proceed with gas prices in Sydney up to 12 per cent lower, should the development receive the go ahead.
The gas producer touts the development — which could supply half the state’s gas needs — as a solution to the tight east coast market by undercutting LNG imports and offering the cheapest new supply source in the state if it does get the nod from planning tsars.
Gas market modelling “shows that the Narrabri gas project can compete effectively to supply gas to the NSW market post-2024, even with an LNG terminal operating at Port Kembla and at Crib Point in Victoria,” Santos said in a statement to the IPC on Friday, citing ACIL Allen modelling commissioned by the producer.
“As a result of the reallocation of gas supplies and the optimisation of the transmission network, the modelling shows that gas prices in Sydney would be between 4 per cent and 12 per cent lower from 2025 onwards over the 25-year evaluation period with the Narrabri gas project than without it.”
The NSW Independent Planning Commission — responsible for deciding the fate of the controversial development — will kick off a six-day public hearing on Monday with over 400 speakers registered to offer their views on the project. A final decision by the IPC is due by September 4.
Santos had taken a number of questions from the IPC on notice during a meeting on June 25 and on Friday formally responded with statements on pricing, how it would handle salt storage, power supply and pipeline options, emissions and extreme weather events.
Victoria, NSW and South Australia could experience gas shortages on peak demand days from 2023 as production from big offshore fields starts to dwindle, hiking pressure on big users trying to secure long-term supply deals, according to the Australian Energy Market Operator.
Santos hopes to bridge any shortfall through its Narrabri project, while rival LNG import plants including the Andrew Forrest-backed AIE plant in Port Kembla and AGL Energy’s Crib Point facility are also in the works, though doubts are growing on whether either option will reach the market in time to boost supplies.
Having locally produced gas would cut out transport costs, Santos noted.
If “gas from the Narrabri gas project is economic to serve the Sydney market, it means that less gas is required to be transmitted to Sydney from Victorian fields or from South Australian and Queensland fields. The ACCC has found that customers in NSW and Victoria pay $2 to $4 more per gigajoule for gas simply because of gas transportation costs.”
The price of gas in NSW and Australia’s east coast more broadly remains a contentious issue, with fertiliser and explosives maker Incitec Pivot disputing a claim made by energy major ExxonMobil that increased supply will lower tariffs while Qenos is also concerned over the market.
NSW Premier Gladys Berejiklian has indicated the state will tap LNG imports if Narrabri fails to be approved to meet a federal government deal to supply an extra 70 PJs of gas into the east coast domestic market.
Conventional gas production on Australia‘s east coast hit a 22-year low in the first three months of 2020, EnergyQuest said, piling pressure on new supply sources to come to market.
The coal seam gas project located in the Gunnedah Basin received a record 23,000 submissions on its environmental impact statement with many concerned about the development’s potential impact on groundwater and the surrounding agriculture.
The NSW Department of Planning recommended the project in June despite significant community concerns over the long-term effect on water supplies and contamination of farm land.
