The New South Wales Government has released its Future Gas Statement, which outlines plans for the gas industry in NSW.
The Statement reads that ‘given the expected longer-term outlook for gas demand amid the broader energy mix, ongoing land use conflict in areas subject to gas exploration and proposed investments in additional supply infrastructure, the NSW Government will not release further areas for gas exploration in NSW’.
This means that the Government will only support limited gas production projects in NSW, specifically, Santos’ Narrabri Gas Project and its potential extensions.
The Government notes that supply security will be achieved through the Narrabri Gas Project, and interstate imports, supplemented by LNG imports from overseas.
Once confirmed and operational, the Narrabri Gas Project is forecast to produce up to 70 petajoules of gas each year across its 25-year life. The project would represent around half of the gas used in the state.
The Future of Gas Statement sets out the NSW’s Government’s vision for the future of the industry and a four-point action plan:
- Improving certainty about future gas production and exploration
- Enabling downstream users to access gas to unlock economic benefits
- Using gas for firming capacity where it is the most economic option to ensure reliability
- Enabling gas-related infrastructure
As part of the first point, the Government plans to significantly scale back the area where gas exploration and production will be permitted in NSW, to provide certainty to local communities and regional industry.
This will result in a 77 per cent reduction in the total area currently covered by Petroleum Exploration Licences (PELs).
The NSW Government will only renew a limited number of PELs in the Narrabri region, in order to support the future of the Narrabri Gas Project. Renewal will be based on factors including resource potential and feedback from the community.
Industry was quick to respond to the new Statement. Santos warned that NSW businesses and manufacturers will face a significant disadvantage because their gas has to be imported from other states.
Santos Chief Executive Officer and Managing Director, Kevin Gallagher, said: “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.”
“With pipelines often full during periods of peak demand, there is no physical pathway to get more gas from Queensland into New South Wales and so the need for projects like Narrabri has never been more important for NSW.”
Australian Petroleum Production and Exploration Association (APPEA) NSW Director, Ashley Wells, said after nearly a decade of uncertainty on gas development, the decision to limit future gas development to a single project will mean NSW customers face higher gas prices for the long term.
“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.
“For the NSW Government to effectively ban a proven, safe and highly regulated industry doesn’t make sense.”
“The failure of NSW to respond to increasing gas demand and develop its gas reserves will have unfortunate consequences, in the form of lost jobs, higher energy prices, and foregone economic opportunity. Manufacturing jobs will go to other states and territories or overseas.”
The Future of Gas Statement can be found here.