NSW gas policy change forces supply crunch: producers

The NSW government is set to slash the state’s petroleum exploration licences, except for those relating to Santos’ Narrabri gas project.

A Santos pilot well operates on a farm property in Narrabri. Picture: Bloomberg

NSW faces a crunch on gas supplies and the prospect of having to import LNG following the state government’s plan to limit future production, producers say.

While Santos’s big Narrabri project will still be able to tap petroleum exploration licences, the company has expressed concern over the move, saying overall it will increase NSW’s reliance on imported gas for its energy needs.

In a statement on Wednesday, NSW Deputy Premier John Barilaro said that under the state’s newly released Future of Gas Statement, the amount of land available for gas exploration under expired Petroleum Exploration Licences (PELs) would be cut by 77 per cent.

Mr Barilaro said the remaining licences would be dedicated supporting “the long-term future of the Narrabri gas project”.

The move has concerned farmers, environment groups and industry.

Australian Petroleum Production and Exploration Association NSW director Ashley Wells said the move would cost thousands of jobs and result in permanently high gas prices.

He also said a liquefied natural gas import facility would have to be built to meet a supply shortfall and honour the state’s energy agreement with the commonwealth.

“It is pretty simple – the cheapest gas is the gas closest to market. This shortsighted decision will mean higher gas prices in NSW are the norm, not the exception,” Mr Wells said.

In a statement, Santos also said the move would lead to an increased reliance on imports.

“Santos is disappointed that the NSW government sought to extinguish further areas with no regard to the investment that has already been made,” it said. “The statement means that NSW customers will still have ­limited access to new gas supply sources, consigning the state’s businesses and manufacturers to reliance on higher-priced gas imports from other states or overseas.”

The Narrabri gas project was approved by the state Independent Planning Commission last year, but is being held up by an ­appeal in the NSW Land and ­Environmental Court.

Santos CEO and managing ­director Kevin Gallagher said if the project went ahead, it would dedicate 100 per cent of production to the domestic market to alleviate supply issues.

“The only way to address gas shortfalls and price spikes at times of high demand is by developing local gas resources close to market instead of relying on imports from other states or overseas,” he said.

“With pipelines often full during periods of peak demand, there is no physical pathway to get more gas from Queensland into NSW and so the need for projects like Narrabri has never been more important for NSW.”

Farmer and environmental activist group Lock the Gate Alliance said that although the move “significantly restricts gas exploration” across the state, it left some of the state’s “most productive farmland” open to being “exploited by Santos for coal-seam gas”.

Spokeswoman Georgina Woods said the move was a betrayal of rural NSW communities.

“This announcement and this decision has been cooked up with Santos without any community consultation,” she said. “It is a betrayal of rural NSW and communities only just emerging from a record-breaking drought.”