Santos hopes price will seal Narrabri gas project
Santos has produced new economic modelling to sell the merits of its controversial $3.6bn Narrabri gas project.
Santos has produced new economic modelling to sell the merits of its controversial $3.6bn Narrabri gas project in NSW, telling the state’s Independent Planning Commission it will be in a position to ease the tight east coast market by offering large volumes of gas on long-term contracts to industrial customers.
The South Australian producer has already produced modelling showing gas prices in Sydney would be between around 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.
It has now produced updated modelling from ACIL Allen showing in addition to price relief is the ability of the project to provide security of supply on a long-term basis. Big gas users like Incitec Pivot have complained of problems striking long-term gas supply deals, putting the future of big manufacturing facilities under a cloud.
“The Narrabri project is likely to be in the position to offer large volumes of gas on long-term contracts. This has been difficult in recent times due to the tightness in supply and the relatively little competition in the upstream sector,” an ACIL Allen paper submitted to the IPC stated.
“With the commitment made by Santos to make all the gas produced from the Narrabri project available for the domestic market, a new competitive source of supply close to Sydney contributing around 75 PJ per annum is expected to lead to more competitive prices on long term gas contracts, particularly as the market moves into the late 2020s and 2030s.”
The IPC is currently undertaking a final assessment of the development, which included a major public hearing with more than 400 presentations after the facility received sign-off from the NSW government in June. Written submissions closed on August 10 and the IPC has until September 4 to make a recommendation.
Santos insists the development — which could supply half the state’s gas needs — is a near-term 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.
However, its critics including The Australia Institute said on Monday the project would fail to deliver cheaper gas and could not guarantee supplies for local users with the NSW Department of Planning uncritically repeating “misleading claims” made by Santos.
Santos chief executive Kevin Gallagher said modelling showed the project stacked up.
“In short, what the new analysis has found is that the impact for the local community and New South Wales more broadly has strengthened. It finds more jobs would be created. It confirms the project would put downward pressure on gas prices and would create increased levels of regional development,” Mr Gallagher said in Santos’ submission to the IPC.
Industrial giants Perdaman and Brickworks have warned up to $2bn of planned spending on NSW manufacturing plants could be axed if Narrabri fails to win approval.
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