Opinion: time for State Governments to carry the gas can

September 26th, 2017

The truculent responses of the NSW and Victorian Government to calls from Prime Minister Malcolm Turnbull to unlock gas reserves to ease tightening east coast supplies highlights the political quagmire surrounding natural gas at the moment.

With the release this week of separate reports from the competition regulator and the energy market operator, Malcolm Turnbull dialled up the pressure on state-based moratoria and exploration bans, calling on the southern states to ‘do more’ to bring gas supplies online.

In particular, the PM called on the NSW Government to fast track approvals for the Narrabri Gas Project in the State’s northwest. It’s estimated that the Narrabri project could supply half the State’s gas needs – and project proponent Santos says it doesn’t need to frack the wells to bring gas to the surface.

Instead of commenting on Narrabri, the Sydney Morning Herald reported that NSW Energy Minister Don Harwin:

“.. said the state’s gas plan was science-based, gas exploration was ongoing and new areas for exploration had recently been identified.”

To put that statement in context – the areas earmarked for exploration are in the far west of the State, well away from politically sensitive areas like the North Coast, where in 2014 the Government blinked in the face of a sustained campaign against gas exploration, suspending the exploration licences of a private company who they later compensated.

There’s no guarantee that the exploration in the far west will bear results, unlike Narrabri, which has proven reserves and could be in production in a relatively short timeframe, provided the project is approved.

At the moment, the only gas produced in NSW comes from AGL’s Camden Gas Project on Sydney’s southwestern outskirts, and even that is on the way out following AGL’s decision to wind down production in 2023, with some wells slated for closure in the next twelve months. Ironic that there is  local opposition to a project that was there a long time before vast tracts of housing were built atop the coal seams from which the project draws its gas.

We’ve written about Victoria’s populism over policy approach before (here, here and here), so it was no surprise to see a Government spokesman completely miss the point, telling the Sydney Morning Herald that:

“AEMO’s analysis indicates that as more renewable energy generation comes online in 2018 and 2019, there will be a reduction in the need for gas for gas-fired electricity generation. This shows that Labor government’s renewable energy targets are assisting with enhancing the security of electricity and gas supply.”

That’s a nice media grab, but it ignores the fact that even with additional renewable energy, there will still be a need for gas fired generation to compensate for the intermittent nature of wind and solar generation.

So, where to from here? The gas industry is doing its bit, sending more gas previously tagged for export into domestic markets. The Federal Government has readied the trigger for the Australian Domestic Gas Security Mechanism to be enacted. Consumers and manufacturers are waiting.

It’s time for the States to act.

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