26 August 2014
James Massola, Angela Macdonald-Smith and Brian Robins
The federal government may help underwrite the investment risk of a proposed $1.3 billion gas link that could see gas flow from northern Australia to NSW to stave off expected supply shortfalls from 2016.
Northern Territory chief minister Adam Giles says Industry Minister Ian Macfarlane has told him that if the approximately 1000 kilometre pipeline, from Moomba in South Australia to Alice Springs doesn’t stack up economically, the federal minister would propose underwriting the plan to the federal cabinet.
The pipeline could potentially stem price hikes in south-eastern Australia, which are feared could come into play as soon as long-term supply contracts for NSW expire from 2017.
This has already resulted in some wholesale gas supply contract prices doubling, with prices expected to rise further in the coming years.
Mr Giles said the pipeline was a crucial piece of national infrastructure that would create jobs in remote communities, spur investment in roads and housing and generate royalties for the top end.
“I’ve talked to Minister MacFarlane about whether or not the federal government would underwrite the pipeline. He has agreed that should that necessity come up, he would consider it and take it to the cabinet,” Mr Giles said.
“If it doesn’t get up on the economics in the short term, we may need some market intervention by territory and federal governments.”
However, Mr Giles cautioned that letting the private sector build the pipeline without government support was the ideal and preferred solution of government.
At a cost estimated at $1.2-1.3 billion, a pipeline linking Alice Springs to Moomba, the main gas processing centre in central Australia, would take an estimated 18 months to build, while it would take at least another 18 months to receive all of the required permits.
On Tuesday The Sydney Morning Herald reported federal resources minister Ian Macfarlane had put his support behind the creation of a national gas market, to help ensure supply stability to NSW.
“The only solution to the gas supply problem in NSW appears to be interconnection,” he said. “[Gas] could become very expensive. There are people speculating it could cost $10 a gigajoule.”
Mr Macfarlane said the Commonwealth was not considering putting money into the pipeline project at the present time and his office ruled out federal funding on Tuesday.
Private sector groups such as APA Group and Canada’s Enbridge are two of what is understood to be a number of competing parties advancing competing plans to connect the existing gas pipeline, which extends from Darwin to Alice Springs to Moomba, in central Australia.
APA has estimated that connecting the Darwin link to the newly built pipeline connecting Mt Isa with southern Queensland could be the cheapest route at $800-900 million.
Group chief executive Mick McCormack said that “of course federal funding would assist in getting the project over the line. But we haven’t sought that, right now we just want to see what the market will support”.
“We haven’t commenced a [$2 million, two year] feasibility study seeking support for that, in a perfect world [the] market will underwrite the project,” he said.
“The cheapest in the long term would be to go down to Moomba, since it doesn’t need the construction or upgrades of other pipelines.”
NSW energy minister Anthony Roberts also signalled that no taxpayer money would be put to the pipeline link, that could connect Alice Springs with Moomba, a gas hub in central Australia. Once at Moomba, gas could be transported through existing pipelines to Sydney.
“I and my department have met with the Northern Territory Government to understand their proposals to connect to the east coast market and we are looking at where NSW can become involved or assist with the feasibility assessment of these projects,” Mr Roberts said.
“But ultimately funding and developing this project is a decision for the private sector.”
But South Australia said it was up to NSW to solve its own gas supply problems.
“The fastest, most sensible way to address the east coast gas crisis is to develop the vast gas resources on the east coast,” South Australia’s Treasurer and Mineral Resources and Energy Minister Tom Koutsantonis said. “NSW should be encouraging investment and exploration of its own gas reserves, not stifling it through policies based on emotion rather than science.”
Courtesy of the Brisbane Times