Gina Rinehart-backed Senex Energy given green light for $1bn expansion
Senex Energy has finally secured approval for its $1bn expansion, tempering some medium-term gas supply concerns for Australia’s east coast.
The federal Labor government has approved the $1bn expansion plan of Senex Energy, owned by South Korean steel giant Posco and Gina Rinehart’s Hancock Prospecting, in a decision which will temper some concerns over medium-term gas supplies across Australia’s east coast.
The approval, which has dragged on for months, will help relieve tensions between Australia’s gas industry and Labor, which remain in the doldrums amid a series of finger pointing.
Australia’s east coast faces a looming shortfall, with a structural deficit set to emerge by 2027 — though the situation is so precarious the market has been plagued by tightness during periods of prolonged cold weather.
The country’s gas industry has urged the government to approve a spate of new developments, but applications have continued to be held for months.
In a decision which will please Australia’s largest energy markets, Senex said it had secured the approvals and will begin drilling.
In a nod to the situation, Senex’s chief executive Ian Davies said the approval was timely.
“Today’s announcement is especially timely given the current pressures that the east coast energy system is experiencing and the forecast shortfall in years to come,” said Mr Davies.
“The solution to these energy system pressures and forecast shortfalls is more gas supply and our announcement today is part of that solution.”
The announcement will also be a relief to major users such as CSR, BlueScope, AGL Energy and EnergyAustralia, which all have supply agreements with Senex.
Continued regulatory delays would have threatened the capacity of Senex to deliver the gas for 2025, which would have forced users to either seek alternative supplies or reduce their operations.
Australia’s gas industry is already grappling with tight supplies.
The Australian Energy Market Operator last week convened an emergency meeting of users after supply issues at one of Australia’s biggest suppliers and heavy demand amid bitterly cold weather.
The market operator warned in March gas generators might be forced to burn diesel to keep the power grid running after authorities revealed states faced a catastrophic supply shortfall from next year, unless new sources of supply were developed.
Gas is predominantly used for residential heating in Victoria, but spikes in electricity demand will cause increased pull for gas across the national electricity market.
As gas supplies run low, the cost of gas-powered electricity will soar. The wholesale cost of electricity is not immediately passed to households and businesses, but drives up subsequent prices when tariffs are reset. The next annual tariff will be set on July 1, 2025.
Australia’s ageing coal power stations are experiencing a spate of small outages, which have constrained electricity generation.
Australia’s renewable energy generation is also likely to pick up soon. Victoria has for much of 2024 seen reduced wind supplies amid unseasonable weather.
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