Comment: Why Australia's need for gas won't wait

AS A former pipeline CEO and now one the proponents behind an LNG import project, I want to respond to Slugcatcher’s unequivocal support for a transnational pipeline of last week. 
Comment: Why Australia's need for gas won't wait Comment: Why Australia's need for gas won't wait Comment: Why Australia's need for gas won't wait Comment: Why Australia's need for gas won't wait Comment: Why Australia's need for gas won't wait

Stuart Johnston

Stuart Johnston

It's wrong to characterise the issue as a pipeline versus LNG import.  
 
It is not a case of either/or - Australia needs both.
 
For the longer term, I agree that a pipeline joining the West's abundant gas resource to the tight eastern markets is technically feasible and could play an important role in building future national energy infrastructure. 
 
A west - east pipeline may also pave the way for the development of unconventional gas resources in Western Australia and the Northern Territory. 
 
However, there are a few essential realties that need to be recognised today:
 
• Timing - We are speaking to many industrial customers in New South Wales and Victoria and their need for affordable gas is acute now; an LNG import terminal could be supplying gas in a little over two years.
 
A new transnational pipeline would take a minimum of five years, and more likely longer than seven years to develop.  Many industrial users would simply not be able to sustain their businesses for over seven years, while waiting and hoping for a west-east pipeline to become a reality. 
 
 It's worth noting that development of Jemena's Northern Gas Pipeline between Tennant Creek and Mount Isa (about 25% of the distance from WA to Moomba) began in 2014 and is expected to come into service late this year or early next.
 
 A west-east pipeline could be a feasible long-term solution, but we need action to fill the market shortfall now. It may well be the case that LNG import acts as a temporary bridge to support demand while a pipeline can be developed. 
 
• Cost - A transnational pipeline would cost about $5 billion while an LNG import terminal would cost between $200 million and $300 million, which is a fraction of the cost of the pipeline, not the 25% as mentioned by Slugcatcher. 
 
An LNG import terminal, by its nature is flexible, both in terms of the volume of gas it can deliver, and the length of time it is in operation. When the market no longer requires it the floating storage regasification unit (FSRU) can be redeployed elsewhere. The payback on a pipeline, at a tariff acceptable to customers, would be over several decades.  
 
• Reliability - There is little to choose between a pipeline and regasification terminal as both are built around established technologies. In the case of supply disruption, a pipeline can continue to supply using its linepack, whereas a FSRU will operate with a buffer of LNG on board, but has the advantage of having multiple supply sources.
 
• Gas prices - Slugcatcher claimed that LNG import would be subject to the "vagaries of the international market" but this is not a valid argument. 
 
As the world's second largest LNG producer, Australia is connected to global energy markets. Our historically cheap gas is just that, history. It's true that Australia still has large undeveloped conventional gas fields, particularly in the Browse and Bonaparte basins, but the new volumes needed to fill a pipeline would take several years to develop and would not be inexpensive.  
 
Unconventional gas could take even longer and cost more. In the short term our consortium intends to develop a project that aggregates the cheapest combined supply of LNG from existing supplies wherever they come from (including from WA itself).  
 
We will market it to industrial customers at a transparent price, fixed for the duration of their contract.
 
In time, if further supplies of indigenous gas and a pipeline can be developed we will be at the front of the queue to support the pipeline development. 
 
Australia's energy security and the viability of our manufacturing base depend upon more sources of competitively priced gas.  
 
Discouraging or dismissing any new source from entering the market is simply counter-productive and damaging to the market.
 
 
 
 
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