AUS
NZ
UK
CA
USA
IND
Summary
- National Gas Development Plan to boost the economy and revive the manufacturing industry
- Government to provide subsidy for gas infrastructure development.
- Environmental Regulations to be diluted to provide speedy approvals to projects.
Government Impetus to Energy Sector
Australian Prime Minister Scott Morrison on September 15 announced a National Gas Development Plan. The strategy includes creating a hub for natural gas, development of gas fields and developing pipeline infrastructure for gas transportation.
The government is also willing to give subsidy and even interfere in infrastructure development if enough private parties do not show interest. The announcement came a day after the Prime Minister offered special incentives of A$ 2.3 Billion for 10 years to keep the four crude oil refineries running.
The National Covid -19 Coordination Commission (NCCC) has drafted plans to bring in new gas network pipelines to link northwest of Western Australia with the East Coast through government spending.
The commission has also suggested that new gas projects which meet the State’s Environment standards need to get Federal approvals for environmental clearances.
Australian Gas Standing tall with Three Major Gas Regions
The Australian gas market consists of three major regions:
- Eastern Gas Region: Queensland acts as a gas hub for the region. Australia’s major gas basins lie in this area and hold nearly one-third of the total reserves.
- Western Gas Region: This region is the main hub for the export of gas as LNG. Western Australia has become the world’s largest exporter of LNG. This region alone has 50% of Australia’s gas reserve.
- Northern Gas Region: On the scale of reserve and production, this is the smallest region. Most of the gas produced is directed towards domestic markets.
Source: Department of Industry, Science, Energy and Resource
Impact of Government Announcement on Industry
The upstream gas industry is optimistic after the National Gas Development Plan announcements. The relaxation in environmental regulations and subsidy will attract domestic as well as foreign investments.
Companies like Shell, ExxonMobil, Apache are already operating in Australia and have made Australia leading exporter of LNG. The job market is also pretty optimistic about the new projects which may start after the government announcements.
Arrow Energy (a joint venture of Shell and PetroChina) took its final investment decision on the Surat Gas project in Queensland. The project will cater to the domestic market and export through LNG terminal. The first gas sale is expected to occur in 2021.
The current market scenario where the demand has bottomed, investments in LNG and other natural gas projects have halted in the wake of low crude oil prices. The investment decision by Arrow Energy is in contrast to the trend where other investment decisions in LNG have been either cancelled or postponed.
Source (Department of Industry, Science, Energy and Resource0
Blue Energy (ASX: BLU)Blue Energy has assets in North Bowen Basin, Galilee Basin and Beetaloo Basin which are identified by the federal government to be developed as gas sources on a priority basis. The company is ready to supply gas to long term buyers for the domestic market. The State government of Queensland has already announced the investment of A$5 million on a gas pipeline route feasibility study from North Bowen Basin to East coast market. The company would be able to provide low priced gas to the consumers if large scale development of gas reserves is done, keeping the operational cost low with low transportation and processing cost.
Do read: Are These 4 Stocks Proving To Be ‘Horses For Courses’ - BGL, BLU, SOR, LDP?
Santos Limited (ASX: STO)The new proposed gas pipeline infrastructure will allow Santos to develop the Narrabri Gas Project, which may prove as the lowest priced gas source for the consumers in NSW. The existing pipeline to southern markets from Queensland is long and constrained, making gas transportation expensive. This gas infrastructure plan will provide more options to transport Queensland gas to South with affordable transportation cost. The new gas plan identifies Wallumbilla and Moomba as additional Australian Gas Hub. The location of the new hubs is strategic as these can be used to decarbonise energy with large scale carbon capture and storage.
Related : Santos Limited to Acquire Gas Assets
Strike Energy Limited (ASX: STX)The chairman of NCCC, Nev Power, is director and shareholder of Strike Energy Limited. Strike aspires to become the lowest-priced onshore gas producer in Western Australia. The Company has projects in West Erregulla Basin, Perth Basin and Cooper Basin.
Strike has a Gas Sales Agreement with consumers in Western Australia. The new gas infrastructure will prove most beneficial for Strike energy if it comes into place.
What may go wrong after implementation of the National Gas Development Plan
- Government Intervention: The government threat to intervene if private parties do not show enough interest in developing the gas infrastructure may face backlash as companies may fear a regular change in government policies or government intervention in setting prices and regulations.
- Environmental Regulations: The NCCC has advised for dilution in environmental regulations and ease of granting permissions. But in the past, it was seen that Coal Bed Methane (CBM) projects were shelved due to impacts on agriculture and groundwater. As new plans have not become government policy yet, it needs to be seen how the industry reacts to the environmental regulations.
- Subsidy: The subsidy for the four petrochemical complexes may trigger demand from other industry as well. All sorts of industries are going through turmoil due to Covid-19 pandemic.
