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Speaking at the Australian Domestic Gas Outlook Conference, Mr Sims said after the ACCC began investigating, the market producers had complained about government intervention to divert gas back from exportation to domestic supply.
“The market was clearly, by any definition, dysfunctional,” said Mr Sims.
“In my strong view they [the gas industry] brought it on themselves.
ACCC Chair Rod Sims
“I have absolutely no sympathy for them, they should have been paying more attention to what was going on in the market.
“Some of the comments I got were ‘we didn’t know the market was short’. Give me a break.”
High gas prices on the east coast have continued to put pressure on manufacturing and industrial businesses, such as fertiliser and explosives maker Incitec Pivot, who is struggling to maintain economic feasibility for some of its operations.
Both the ACCC and EnergyQuest have repeatedly warned that continually high prices will cause businesses to fail or move away from the east coast, and Mr Sims said the gas industry had previously denied this possibility.
“We’ve got to all remember when the LNG projects in Queensland were being commissioned, they promised this current crisis would not happen,” he said.
“I remember suppliers assuring the Queensland Government that investment in gas exploration and development would be timely, that a reservation policy in the east coast was not required and that businesses would be protected and their futures secured.
“If more businesses start to fail, and I believe they will, pressure will inevitably ramp up on governments to do more. That’s just reality.”
Mr Sims said gas producers were the ones “best placed” to provide assistance to the manufacturing sector and help avoid more business closures.
“The east coast of Australia is just about the only region in the world that has both gas exports and a liberalised gas market,” he said.
“It should be a privilege for gas producers to operate in a country that embraces a free market but that privilege should not be taken for granted.”
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Arrow Energy, a joint venture between Shell and PetroChina, has been granted a total of 14 petroleum leases between Dalby and Wandoan for the southwest Queensland project, covering approximately 2,500 km².
The project is estimated to bring in 5,000 PJ of gas to market over 27 years and Queensland Premier Annastacia Palaszczuk said the economic benefits would be significant.
“The Surat Gas Project will create up to 800 construction jobs and 200 ongoing operational jobs, as well as millions of dollars in business opportunities for local suppliers,” she said.
“Currently scheduled to be operational in 2020, the project will produce gas for LNG for export and for domestic users.
“This is the biggest resources project since 2011 when the LNG projects were sanctioned.”
Construction on the project is expected to begin later this year, although Arrow is yet to make a final investment decision.
In December 2017, the company signed a 27-year gas supply deal with the Queensland Curtis LNG development to commercialise the majority of the company’s gas reserves in the Surat Basin.
Almost 25,000 km² has been released in the state for gas exploration since early 2017; however, only a third of it is for the domestic market.
According to APPEA Advisory Board Chair, and former Federal Minister for Resources and Energy, Martin Ferguson AM, import terminals are an option because policy is preventing new projects in Australia’s southern states.
Speaking at the Australian Domestic Gas Outlook Conference in Sydney, New South Wales, Mr Ferguson said the country’s east coast was paying less for gas than Japan, Korea and China, which is an obstacle for those backing import terminals.
“Import terminals are one way to expand supply in southern markets – in my view, a second-best option because Australia exports jobs and royalties by not developing our own resources,” he said.
“It is an option only under consideration because of the political barriers to local projects in the southern states.
“In terms of public policy, it is a spectacular own goal by governments which desperately need more gas but refuse to support local projects.”
Mr Ferguson said his analysis didn’t mean import terminals should be totally discounted, but said the focus needed to be on the continued development of domestic resources.
“The market needs, most of all, more supply and more suppliers,” he said.
“Using Queensland gas to supply southern markets does not deliver lower prices.
“The solution to tightening market conditions in NSW and Victoria is more local supply, not interventions which put at risk investment in developing Queensland gas reserves.
“Better access to develop local, onshore gas projects is essential.”
Key has entered into a memorandum of understanding (MoU) with Santos and its joint venture partner Beach Energy to cover proposed terms for the connection and transport of gas from Key’s Tanbar Gas Project into the gas gathering network and gas processing facilities at Moomba.
The MoU will form a basis for the negotiation of future formal processing and transportation agreements for the project’s gas as the company looks to supply the east coast market.
Located in ATP924 in Queensland’s Cooper-Eromanga Basin, the gas development has 14 billion m3 of prospective un-risked 2U resources and Key says the Moomba deal will support potential economic development of gas discoveries in the prospect.
“We are delighted to be working with Santos and Beach Energy and this MoU demonstrates a clear pathway to commercialisation of future gas discoveries within our Tanbar Gas Project, subject to final binding terms being agreed,” said Key Managing Director Kane Marshall.
“Importantly, there is flexibility for financing of future developments whereby capex intensive gas processing infrastructure may not be required if it can be processed and transported via Santos-operated infrastructure in the manner contemplated by this MoU.”
The commercial terms of the deal have not been revealed.
According to gas producers in the state, if the new rules are enforced they could threaten upcoming large-scale LNG projects.
The EPA’s new directive wants any new or expansion project in WA that emits more than 100,000 t per year of carbon dioxide to fully offset its emissions.
The agency’s advice and recommendations are considered by the government in authorising major developments within the state.
While the WA state government can ignore the guidance, if enforced new multibillion-dollar projects such as Woodside’s Browse and Scarborough developments would be affected.
Woodside CEO Peter Coleman said the EPA’s guidelines would threaten WA jobs and investment in new projects.
“The EPA has not consulted with industry proponents who might be directly affected, which amounts to policy on the run in a complex and important area,” he said.
“Not only will this proposal put at risk new jobs, investment and domestic gas supplies, it positions WA at a competitive disadvantage in the global LNG marketplace.
“The state government should reject this approach and commit to tackling this important policy area in a way that compliments our national emissions reduction targets and recognises WA’s aspirations not only for the environment but for a sustainable economic future.”
“The EPA admits that it has not considered the social or economic impact of its guidelines. Its approach targets WA’s growth industries and will deter local investment, prompting projects to go interstate or overseas,” he said.
“As far as the LNG industry is concerned, our exports are contributing to a cleaner energy sector in north Asia. According to recent federal government estimates, Australian LNG exports are reducing emissions by at least 130 million t per year.
“APPEA urges the EPA and the WA government to put aside the guidelines while the state government completes its review of climate change policy.”
WA Environment Minister Stephen Dawson said the McGowan government would listen to the LNG industry as part of its response to the EPA.
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According to Chevron, Wheatstone’s domestic plant has the capacity to supply up to 200 TJ/d of gas to Western Australia customers, and Chevron Australia Managing Director Al Williams said the company would continue to supply the state for decades.
“Our investment in the Gorgon and Wheatstone natural gas facilities are a major contributor to Australia now being one of the world’s largest liquefied natural gas (LNG) suppliers and has enabled the development of a secure domestic gas supply for the State’s industrial, commercial and household users,” he said.
“As a reliable and cost-effective way to generate electricity, cleaner burning natural gas is a vital energy source for current and future energy needs.”
Located near Onslow, WA, the Wheatstone project is a joint venture (JV) between Chevron (operator, 64.14 per cent), Woodside Energy (13 per cent), KUFPEC (13.4 per cent), PE Wheatstone (partly-owned by JERA, 8 per cent) and Kyushu Electric Power Company (1.46 per cent).
Wheatstone’s two trains can export 8.9 million t/a of LNG, and domestic gas is sold separately by the JV participants.
AGL is investing $295 million in the 210 MW fast-start gas plant to be built alongside the existing Torrens Island Power Station in the northwest suburbs of Adelaide.
The new facility will replace part of the old Torrens Island station and AGL General Manger Gas and Renewables Operations Colin Mills said it would be capable of delivering power when needed.
“This will be a high efficiency plant which is a good fit for the SA market and will efficiently and cost-effectively complement the high renewable energy mix we see today and expect to continue to see in the future,” he said.
“With significant wind generation in SA, it’s more important than ever to have dispatchable capacity such as the Barker Island Power Station in our portfolio, which can be switched on to bolster energy supply when the market needs it.”
It will take the new power station five minutes to ramp up to full capacity and ALG said it will be 28 per cent more efficient than the Torrens A units it will replace.
“We’re getting a lot of interest right now from manufacturers and potential buyers looking to put offtake agreements in place, some of which are looking to set up operations in the region,” said Santos CEO Kevin Gallagher.
“It’s the single largest and quickest source of gas for the market here on the east coast.”
If Narribri enters development, the company expects manufacturing, reliant on gas, to be set up on the east coast, allowing businesses access to cheap gas.
Mr Gallagher said manufacturers “would be moving closer to supply and taking out pipeline costs and transport costs.”
The event, which features a conference and exhibition, is the world’s largest dedicated to LNG.
In 2019, LNG2019 is supported by the Shanghai Municipal People’s Government and hosted by the China LNG association, China Gas Society, the Chinese Association of Refrigeration and the China Gas Association.
Since its inception in 1968, this series of events has grown into one of the most important global LNG forums with the aim of hosting strategic, technical and commercial meetings for the LNG industry.
The event is held every three years between exporting and importing countries and this year will include a wide range of speakers including Royal Dutch Shell CEO Ben van Beurden, Sinopec Chairman Houliang Dai and Petronet LNG Managing Director and CEO Prabhat Singh.
The event will cover the entire scope of the LNG sector, from shipping, trucking and liquefaction, to FLNG, shale gas and much more.
ADGO is a four-day event commencing on Monday 4 March with in-depth learning sessions, followed by two days of conference sessions.
The last day of the event, Thursday 7 March, will be entirely focused on the emergence of hydrogen as a sustainable fuel, bringing together leading experts and gas companies to discuss how pipeline infrastructure, storage and other assets can be used in the emerging hydrogen economy.
Speakers on the day will include Energy Networks Australia Head of Gas Dennis Van Puyvelde, Future Fuels Cooperative Research Centre CEO David Norman and Hydrogen Mobility Australia CEO Clair Johnson.
Proceedings will tap into a growing opportunity for major research and innovation institutions, such as the CSIRO and Australia’s Chief Scientist Alan Finkel, in looking at the potential of a hydrogen industry in the country.