Santos touts second Queensland pipeline as east-coast gas crunch fix

Energy giant Santos has bought a company with plans to build a new pipeline to send gas from Queensland to Australia's southern states,which it says could help ease the threat of looming shortfalls in coming years.

Ahead of a meeting of state and federal energy ministers on Friday,which is expected to include talks on whether some Australian gas should be set aside for domestic use only,Santos said it had struck a deal to buy Hunter Gas Pipeline Limited.

The company owns an underground pipeline route that aims to connect Queensland’s Wallumbilla gas hub to markets in Newcastle and Sydney.

A NSW court has dismissed a legal challenge against energy giant Santos’ plans for a $3.6 billion coal-seam gas project at Narrabri.

A NSW court has dismissed a legal challenge against energy giant Santos’ plans for a $3.6 billion coal-seam gas project at Narrabri.Bloomberg

The underground pipeline route passes close to Santos’s controversial Narrabri coal-seam gas project in New South Wales,where the company is preparing to undertake appraisal drilling this year before giving the project the financial go-ahead.

“At a time when the Australian Competition and Consumer Commission (ACCC) is forecasting domestic gas shortfalls,our Narrabri project,which is 100 per cent committed to the domestic market,will inject new supply into southern domestic markets and put downward pressure on gas prices for New South Wales businesses,manufacturers and families,” Santos’ midstream and clean fuels president Brett Woods said.

The acquisition comes just a week after the ACCC warned it was expecting the eastern seaboard would face shortage of 56 petajoules in 2023 - about 10 per cent of demand. The shortfall is the largest since the ACCC began its inquiry into the east-coast gas market in 2017.

The Australian Energy Market Operator (AEMO) also remains on high alert over the east-coast energy crisis and the threat of gas shortfalls for the 2 million Victorian homes and businesses that rely on gas for energy,heating or as an industrial feedstock.

The Hunter Gas Pipeline offers an alternative to the single pipeline that currently transports gas from the large gas ventures in Queensland to Victoria and NSW via South Australia,which often runs at capacity during peak periods of peak gas demand.

Santos is aiming to start construction of the pipeline in 2024 subject to remaining approvals. However,it still needs to overcome potential hurdles from local landholders and councils that may be opposed to the project.

Credit Suisse analyst Saul Kavonic said the Hunter Gas Pipeline “makes the most sense” for the gas network,and could resolve infrastructure constraints on the east coast,but would likely run into significant environmental and land-access opposition

“In a world unconstrained by social licence and political considerations,the Hunter Gas Pipeline would be built every time,” Kavonic said. “But there are still lots of social licence matters to get through first.”

The Narrabri coal-seam gas project in northern NSW,which could supply half of the state’s gas needs,has been at the front line of a years-long struggle between the gas industry and Australians worried about the impact of drilling on the environment and the climate. Santos has spent $1.5 billion and faced years of delays to approve the project amid thousands of objections over its feared impacts to the Pilliga state forest and contribution to global warming.

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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.

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