Unlock gas to fire up economy

The decision by the NSW Independent Planning Commission to give Santos the green light for its $3.6bn coal-seam gas project is timely for two reasons. First, it comes as government and industry are seeking to kickstart productivity, including the expansion of manufacturing, as the national economy emerges from the pandemic. Second, as the Australian Energy Market Operator warned in March, NSW, Victoria and South Australia could experience gas shortages on peak demand days from 2023 as production from existing fields begins to dwindle. In winter, average demand for gas in southern states is three times higher than in summer.

In March last year, Australian Competition & Consumer Commission chairman Rod Sims warned that the high cost of gas posed an imminent threat to east coast manufacturers, making them internationally uncompetitive and increasing the likelihood they would wind up or relocate their operations. On Wednesday, Alberto Calderon, chief executive of Orica, which manufactures explosives and blasting equipment for the mining industry, noted Australia was “the only major gas-producing country which doesn’t ensure adequate supply at competitive prices for its own domestic market”.

That indictment on years of energy policy failures and green tape needs to end now. The Narrabri project has taken 3½ years to approve, which is too slow. It has been touted as being able to supply 50 per cent of NSW’s gas needs via a pipeline linking into the existing Moomba-to-Sydney pipeline. Santos has accepted all 134 conditions imposed by the IPC and will seek final environmental approval from the Morrison government. If the government is true to its word about cutting green tape, it should move swiftly. And the APA Group will push ahead with a new $500m pipeline to transport gas to customers.

Critics of the gas project question its potential to poison the Gunnedah Basin and surrounding aquifers because of underground drilling, threatening agriculture. That concern needs to be addressed through the environmental protection process. But aside from the usual Greens and Lock the Gate activists, doubts about the project have been raised from a different direction.

NSW Energy Minister Matt Kean regards the project as “a big gamble”, Perry Williams reported on Tuesday. Mr Kean said gas might prove a poor investment in the long term and he pondered whether demand could be satisfied through liquefied natural gas import terminals. “Probably, so why would they do it?” Mr Kean said.

In light of Australia’s looming gas shortages and the threat they pose to manufacturing and jobs, especially in the current parlous economic climate, it makes more sense that a gas superpower such as Australia use its reserves to cut power prices and industry costs and play a role in the transition to cleaner energy. This is why The Australian has argued consistently in favour of the states unlocking their restrictions on gas exploration and production. A move by the Victorian government earlier this year to lift a ban on onshore exploration, while welcome, will not come into effect until July next year, meaning any supply from sources such as the Otway Basin are unlikely to be developed in time to ease the looming crisis.

Despite the nation’s abundant and largely untapped reserves, the Turnbull government deemed it necessary in 2017 to impose the Australian Domestic Gas Security Mechanism to direct LNG exporters to divert supplies to the local market if a shortfall is forecast. It is in place until 2023 and is a reminder that Australian customers need greater supply. There is also a lucrative international market to be tapped, as Queensland LNG suppliers are doing. Better late than never, the Narrabri approval is a step in the right direction for NSW and the nation.