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Australian Government Looks To Gas To Save The Nation

A long-mooted $6 billion gas pipeline connecting Western Australia to the east coast is back on the agenda as part of a raft of energy sector changes floated as the federal government looks to gas to save the nation.

Connecting the east and west via South Australia’s Moomba pipeline was supported by former premier Colin Barnett, and a new report to the government on resurrecting the national economy says it should potentially be included in an urgent three-stage plan to expand the pipeline network.

The National COVID-19 Coordination Commission, formed in March to help mitigate the impact of the pandemic, revived discussion on the plan as it looked at ways to kickstart recovery and formed a taskforce to investigate growing manufacturing to become a cornerstone of the economy.

MM has seen copies of a May 14 draft interim report and presentation spruiking a gas-powered recovery. The documents state they have focused on two things: growing advanced manufacturing, and creating a competitive domestic gas market.

Australia has large gas reserves and is the world’s largest exporter of liquefied natural gas. WA long ago established a domestic gas reserve, locking in cheap prices, but the east coast is in a very different situation.

COVID-19 has recently seen prices fall on the east coast from about $11 a gigajoule to about $4 but this is expected to provide only temporary relief with an expectation it will settle to about $6-7.

The documents said in the past decade the cost of electricity in Australia had risen almost 90 per cent and gas by nearly 50 per cent.

Reserves supplying east coast population centers were in decline and contracts for any substantial volumes unavailable.

Shortfalls were forecast by 2029 if no new low cost reserves are confirmed, the reports said.

High domestic prices failing to promote new supply indicated the market had failed and was holding back domestic manufacturing; gas, being 20???40 per cent of many industries’ cost structures, was key to driving down electricity costs and improving manufacturing investment.

“Historical experience suggests that unlocking supply is critical for supporting future demand growth,” the reports said.

The documents align with gas industry rhetoric that gas will drive a greener Australian future, displacing direct emissions from diesel and coal use.

They make only token mention of renewables, speaking of weaving in gas development with hydrogen industry development.

As coal became unreliable and pumped hydro and batteries remained high-priced renewables generation would require gas if we were to “have a reliable transition and achieve cost reduction.”

The reports recommended attempting to achieve a per-gigajoule price of $4 would make the east coast domestic gas market competitive.

Making the equivalent of just 3 per cent of the current LNG export volumes available domestically would create a globally competitive domestic market, create “hundreds of thousands of high-paying jobs” and lift gross domestic product by $10-$20 billion.

Near-term recommendations are to remove supply barriers and build a bridge of supply, including through lifting moratoria in New South Wales and Victoria; developing a gas development regulatory framework in the Northern Territory; and accelerating developments for major gas fields such as Beetaloo, Bowen and Perth Basin.

Co-ordinating with hydrogen development would ensure long-term demand potential including avoiding “demand destruction”.

Medium-term recommendations towards a $6-per-gigajoule price were to “create the market”, lower the cost of pipelines and complete the network of pipelines to markets, including government underwriting priority supply-hubs, taking an active role in strategic pipeline developments and considering tax incentives for priority infrastructure.

The documents point to the precedent of the WA government in the 1970s funding development of the Dampier-Bunbury pipeline and committing to purchase fixed volumes of gas over the long term, with the result that this was privatized in 1998.

The longer term recommendation towards a $4 per gigajoule price was to “scale and win”, including attracting foreign-direct investment, align basin and pipeline prioritization, and continuing to coordinate with hydrogen.

In response to a question at a press conference on Wednesday, Premier Mark McGowan said WA’s domestic gas reservation would not be used to support the eastern states.

“In terms of a pipeline, if it can be financed and not take gas reserves from West Australians, great,” he said.

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