David Gillespie shares Southern Gas Strategy with national media

While the Iran War and Strait of Hormuz have revealed just how susceptible energy supply chains are to bottlenecks, 12,000 km away a bottleneck in our own backyard is threatening to curtail the future flow of gas into Australia’s south-east.

 

Failing to resolve it may see price pain in the vein of the 2022 gas price shock – when the wholesale price of gas soared above $40 a gigajoule. 

 

Historically Australia’s gas networks have served us well, however changing supply conditions – notably the rapid decline of the Bass Strait gas field – mean the south-east gas market will soon be reliant on gas transported thousands of kilometres from the country’s north.  

 

Released this week, the Federal Government’s gas reservation framework is not only a tacit acknowledgement of this reality, it is also an acknowledgement that gas underpins commercial and industrial operations right across the country – operations which support thousands of jobs and are worth billions each year to the Australian economy. 

 

While the success of the gas reservation framework will ultimately depend on how well it incentivises new gas production in the long-term (rather than just redistributing existing supply), domestic gas supply is just part of the puzzle. 

 

Because even if the country’s north starts producing enough gas to address the forecast shortfall, with just one pipeline currently providing a pathway for this gas to reach the market we may still face gas shortages should the unexpected happen. 

 

If we’re serious then about addressing this challenge, we need to consider what the future gas grid looks like, with our response being guided by three key principles: optionality, resilience, and cost efficiency. 

 

The first, optionality, reminds us to not place our eggs all in one basket. What the south-east gas market needs now is multiple solutions – new pipeline builds, storage, pipeline augmentation, and regasification terminals – which together act as a natural insurance policy against shocks to any one part of the system. This integrated view of the gas network demands a rethink on the part of the sector, one which sees us view these technologies as complementary tools rather than competing answers to be pitted against one another. 

 

While it may sound simple, it is worth repeating - a network with multiple pathways allows gas to be rerouted quickly, lessening price spikes and reducing the likelihood that consumers bear the price implications of short‑term disruptions.

 

Delivering this type of optionality will also require significant investment. Investment which is grounded in what is in the best interest of gas customers. For while big investment numbers can lead to impressive news headlines, ultimately it is customers who are left to foot the bill. Our investment strategy should therefore be focused on getting the most out of the infrastructure we already have so that consumers only pay for targeted expenditure where and when it’s needed. 

 

This week Jemena revealed plans to do just that, announcing an $80 million investment (a modest figure by pipeline standards) to make the Eastern Gas Pipeline fully bidirectional. This work can be done quickly (again by pipeline standards) and importantly doesn’t come with the price tag associated with large new infrastructure build outs. When complete this work will provide a second pathway for gas to reach Victoria – effectively helping avert potential bottlenecks down the line. 

 

Depending on the needs of the market Jemena is ready to add additional compression to the Eastern Gas Pipeline so that it can transport increasing volumes of gas from north-to-south. A lower-cost solution, which can be brought online before shortages materialise. 

 

It’s the same story in the Northern Territory, where once production commences in the Beetaloo Basin, Jemena can transport around 10 per cent of the east coast’s gas needs by simply adding additional compression to the existing Northern Gas Pipeline. Another small investment which will punch well above its weight. 

 

This work doesn’t come with bells and whistles, but it does offer an economically efficient pathway to resolve the challenges before us – it can also be delivered in a much shorter timeframe and with less risk than larger megaprojects. 

 

Australia’s gas reservation framework is the first step in tackling Australia’s complex supply-side issues. Equally though, when it comes to getting this gas to where it needs to be, we can’t afford to be complacent. As supply shifts north and demand centres remain in the south, we must ensure our system is resilient enough to handle the unexpected.

 

The answer is clear: disciplined, cost‑effective investment which builds system resilience, reduces the risk of bottlenecks, and stops customers paying for gold‑plated solutions that don’t stack up.