‘Strongly against new projects’: Forrest’s LNG venture hits out at Santos, Woodside gas plans
Billionaire Andrew “Twiggy” Forrest’s energy venture has warned against green-lighting new gas fields to tackle unfolding price shocks, arguing its plan to import liquefied-gas shipments will be a better short-term solution that won’t prolong the use of planet-heating fossil fuels.
The mining magnate’s privately owned Australian Industrial Energy, which is building the nation’s first import terminal for liquefied natural gas (LNG) shipments at Port Kembla near Wollongong in NSW, is aiming to begin supplying gas into New South Wales and Victoria from as early as 2023.
Squadron’s LNG import facility is being built at a former coal terminal at Port Kembla.
As authorities issue alerts over dangerously low gas reserves across the nation’s southern states, Australian Industrial Energy chairman John Hartman said the Port Kembla floating import terminal offered the best solution for energy security and the climate.
“We strongly warn against the approval of new gas projects, such as those proposed by Santos and Woodside,” Hartman said.
“The Port Kembla Energy Terminal will help solve the short-term supply and transportation constraints of the east-coast market, but with infrastructure that can quickly be transitioned to green hydrogen and other green energy uses when the time is right.”
His comments come as Santos, one of the nation’s largest oil and gas producers, this week signalled it would seek to start gas flows from the controversial Narrabri coal-seam gas field in northern NSW up to a year earlier than its targeted production date in 2026.
Santos managing director Kevin Gallagher said the east-coast price shocks were the consequence of “more than a decade of policy failure” and onshore drilling moratoriums that had stifled the industry and led to a “frightening” lack of new projects capable of boosting domestic supplies.
“We could sell the Narrabri gas two or three times over … we have a lot of demand for that gas,” Gallagher said. “In the last few weeks, that demand has intensified. This is not a good situation for anyone.”
Australia is the world’s biggest exporter of natural gas and sends about three times as much offshore than is consumed locally. The fuel is widely used in power generation, heating and manufacturing – but most is produced in the nation’s north, far away from demand centres in the south-eastern states, and is sold on long-term contracts to overseas buyers.
The Port Kembla project is one of several proposed LNG import terminals across the south-eastern seaboard. Suppliers and manufacturing businesses that rely on gas for energy or as a feedstock are turning to imported LNG as a way to increase competition, place downward pressure on prices and secure long-term supply.
Western sanctions imposed on Russian exports of oil, gas and coal to starve Moscow of revenue to fund the war in Ukraine have added to global shortages and sent prices of the commodities soaring.
Graeme Bethune, chief executive of consultancy EnergyQuest, said the recent spike in the gas spot price was caused by a shortage of coal to power to electricity supply.
Around two-thirds of the National Electricity Market’s electricity is typically generated at coal-fired power stations, while gas fired power plants usually supply about 6 per cent.
But a spate of coal outages, due to plant failure, has coincided with increased electricity demand due to a cold snap on the eastern seaboard and extra gas fired power has been bought in to bolster power supplies.
″Renewables have only been able to partially fill the gap so gas-use has jumped from supplying 6 per cent of the National Electricity Market generation in May 2021 to 9 per cent in May 2022, with predictable gas price consequences,” Bethune said.
The spot market for gas rocketed upwards in recent weeks, prompting the Australian Energy Market Operator to impose a $40 a gigajoule price cap on the open, which is four times the long term average.
Australian Workers Union national secretary Daniel Walton said he was sceptical that government and industry could work together to deliver a solution to the price crunch for manufacturers that are struggling with high energy prices.
Resources Minister Madeleine King is in talks with Queensland gas producers about reserving some of their exports to boost local supply and lower domestic prices.
“The government absolutely cannot rely on negotiations with gas companies. They will promise supply but they will never guarantee affordability and that’s the critical point,” Walton said.
Federal government has powers to force gas companies to reserve exports under the Australian Domestic Gas Security Mechanism (ADGSM), but it cannot control the prices charged on the local market.
Walton said the government must reform the ADGSM “so that it controls price and not just supply”.
“Australian manufacturers should have access to affordable Australian gas. It’s a national competitive advantage and we’re squandering it to boost the super profits of a handful of multinational gas companies.”
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