Narrabri gas project risky even if approved: Kean
Warning comes with the danger of the project becoming a stranded asset, NSW Energy Minister Matt Kean says.
Santos’s board faces a big risk proceeding with its $3.6bn Narrabri gas project if it wins approval from planning authorities given the danger of the project becoming a stranded asset, NSW Energy Minister Matt Kean has warned.
The Independent Planning Commission is due to make its recommendation for Narrabri on Wednesday following a high-profile public hearing. Santos first submitted its environmental impact statement for the development in February 2017.
While the IPC may approve the project with conditions, according to Mr Kean, the bigger question is whether the energy producer will sanction the facility given his view that gas may prove a poor investment in the long term.
“I just think it’s a big gamble for them, particularly in this environment,” Mr Kean told The Australian.
“You only need to look at capital and investment cycles. Already we’re seeing people getting out of fossil fuels and that will only increase.
“There will still be a market for gas for a long time, but will it be as big a market? Probably not.
“Could that market be satisfied in a cheaper way through LNG import terminals? Probably, so why would they do it?”
Global energy giants including BP have signalled a change in investment strategy in recent months, warning it may leave oil and gas in the ground in the future amid a rapid transition away from fossil fuels due to climate change.
Still, Santos and other producers point to a looming shortfall in gas supplies on Australia’s east coast and argue new projects need to be sanctioned to ensure heavy industry and manufacturing remain operating and competitive.
NSW Premier Gladys Berejklian has indicated the state will tap LNG imports if Narrabri fails to be approved, to meet a federal government deal to supply an extra 70PJ of gas into the east coast domestic market.
Santos took a $1bn writedown in August, with the value of its GLNG gas export project in Queensland slashed, and Mr Kean said it faced a difficult choice should it get the green light from the IPC.
“I just think they‘re taking a big risk — how long is gas going to be viable for? Maybe 5-10 years at best. Are they going to take a punt at it? I doubt it,” Mr Kean said.
“That’s why I’m so confused why the government wants to expose taxpayer dollars. I suspect the IPC will probably approve it but put so many conditions in it that it will just make it impossible.
“Santos just had that massive writedown on some of their other assets and if you‘re a director on that board are you really going to be saying ‘hold on, let’s go bet our house on a risky venture over here’.”
A deadline for the IPC to make a recommendation was extended to September 30 from the original September 4 deadline following a request by the independent body to the state’s Department of Planning, Industry & Environment.
The IPC asked for extra time after a record seven-day public hearing and 10,000 submissions.
Among the chief concerns raised by critics of the proposed gas facility was the potential for the Gunnedah Basin and surrounding aquifers to be poisoned due to underground drilling, threatening farms and the region’s agricultural products.
More Coverage
