Santos winning approval from planning authorities for its $3.6bn Narrabri coal-seam gas project in NSW looks set to spark a broader stoush with the proposed Andrew Forrest-backed LNG import plant in the state’s south at Port Kembla.
Santos has consistently argued that Narrabri will provide a cheaper option than any LNG import schemes and could even provide supplies to industrial customers first, given the delays among import plants in progressing their facilities.
Credit Suisse analyst Saul Kavonic stoked tensions on Wednesday, saying approvals for Narrabri had made the economic case for an LNG import terminal in NSW more tenuous.
However, the Australian Industrial Energy import plant said it remained on track to provide gas ahead of Narrabri.
“While Santos’s conditional environmental approval, which is subject to 134 conditions, provides a pathway to completing the project, there are many hurdles to overcome and if it does proceed, its ability to deliver significant quantities of gas to the market will be many years away,” AIE project head Peter Mitchley said.
“AIE’s Port Kembla Gas Terminal is the only new project that can deliver substantial quantities of natural gas to market as early as 2022 and address the east coast’s predicted short-term gas supply challenges.”
The hefty $3.6bn bill for bringing Narrabri online was also highlighted. However, Mr Mitchley, a former Santos executive who worked on the Narrabri development, did concede the two projects could coexist.
“The capital cost of our import terminal, approximately $250m, is also a fraction of the cost of Narrabri’s development and the hundreds of kilometres of yet-to-be-built pipeline,” Mr Mitchley said.
“Over the long term, should Narrabri proceed, it can coexist with Port Kembla. We hold the view that the market will only benefit from having the option to source both local and international gas. AIE continues to engage with customers and is working towards first gas by 2022
or 2023.”
EnergyAustralia, which owns 20 per cent of Narrabri, has also struck a five-year, $500m supply deal with the Port Kembla LNG terminal, underlining the two projects are effectively competing for gas customers.
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