Why is it necessary to expand pipeline assets?
Expansion of our transmission assets is necessary to meet growth in demand from existing and/or new customers so our customers are responding to anticipated growth in their own markets in general and the New South Wales market in particular where a shortfall in future gas supplies for that market is predicted given Moomba supplies will soon be re-directed north to the lucrative LNG export market ex-Gladstone.
Jemena is finalising project plans to install a 35 km loop near the Rolleston Compressor Station on the Queensland Gas Pipeline (QGP). Construction on a looping project is scheduled to start in June 2014 and our aim is to complete this project by January 2015. This is the second major looping project to expand the QGP, which links the Wallumbilla gas hub in south-central Queensland to large industrial gas users in Gladstone and Rockhampton, in less than five years.
Jemena has a proud track record of delivering pipeline infrastructure and investment. In 2010, in response to the economic and industrial growth in the Gladstone region, Jemena invested more than $100 million in doubling the QGP’s capacity to 52 petajoules per annum via 113 km of looping and the installation of two midline compressors – one at Banana and one at Rolleston.
There has been industry discussion over the potential construction of new compressor stations along the Eastern Gas Pipeline (EGP). What benefits will these bring for the industry and the local towns?
Generally speaking, construction projects often create opportunities in nearby towns but more broadly, when we expand the capacity of a transmission main, this is for the benefit of all customers ranging from homes and small businesses to commercial and industrial sites.
The EGP supplies customers not only in Victoria and the ACT, it also supplies more than half the gas consumed in NSW.
If you were to expand the EGP, do you think it would assist in contributing to fixing the predicted east coast gas supply crisis?
Yes; expanding the EGP would contribute by increasing the amount of gas that can be transported from Bass Strait thereby replacing supplies from Moomba which are flowing to Queensland. However, in the longer run, the more new supplies of gas Australia can unlock the better.
What are some of the challenges facing the pipeline industry in your view?
The number one challenge is that rising wholesale gas prices combined with government policy-related barriers are currently impeding the development of new gas supplies. There is no doubt that the move to create an east coast LNG export market is already placing upward pressure on domestic gas prices and large industrial consumers of gas in particular are hurting. There is more than enough gas in the ground; however, we need to access this gas to ensure there is enough to supply both the relatively modest requirements of the domestic market and the large volumes earmarked for the export markets.
Although Jemena supports the growth of gas production, due to the small size of the domestic market, it is concerned about the impact on domestic customers by increasing gas prices. The Federal Government, like those in other gas expanding nations, is considering these gas price impacts on the domestic market and it also needs to ensure that it takes Australia’s national interest into account in balancing the export and domestic markets when making long-term policy decisions.
If Australia is to succeed in finding a balance between domestic supply and demand, there will need to be a streamlined approval process, greater access to new gas fields and better engagement with the community to address the concerns such as those around extracting coal seam gas (CSG). If new gas reserves are able to be developed to bring downward pressure to pricing, Jemena is ready to support the development of these resources through augmentation of existing assets or development of new pipelines in conjunction with the proponents of these projects.
As we go through what is already an upward shift in gas prices, governments may need to provide temporary support to large gas users if a significant spike in gas prices eventuates. There is also a need to adjust downstream policy settings to level the playing field for gas-fired electricity generation and gas appliances. The current Renewable Energy Target should be modified so that it is practically achievable and reflects the original policy intent of 20 per cent of total electricity generated. The design of the Federal Government’s new Emissions Reduction Fund needs to be technology neutral to ensure that gas-related projects are eligible for support along with all other low carbon technologies.
How do you believe Australia’s gas industry can balance community concerns about unconventional gas such as CSG with the need to access this necessary fuel source?
The key to this is improving the quality of the industry’s engagement with local communities and addressing their concerns. A strong social license is critical to getting these important resources out of the ground and quickly to market where they are needed. Robust design and operation of the extraction process is obviously a given.
What are Jemena’s main focuses in the gas industry at the moment and what do you envision for the next five years?
When it comes to the Jemena Gas Distribution Network, which delivers natural gas to over 1.1 million customer sites throughout NSW, our focus now and over the next five years is to do everything in our power to ensure we continue to deliver reliable, safe, competitive and efficient supply of gas to customers at an affordable price – particularly in an environment where the wholesale price of gas is rising.
The prices we charge retailers for transporting gas over our distribution network are regulated by the Australian Energy Regulator (AER) and are determined by the Access Arrangement process. Every five years, we submit a five-year plan to the AER in which we propose these prices, based on our view of the forecast cost of providing a safe, reliable and competitive gas service. The AER, guided by the National Gas Rules and their consultation with customers, assesses our proposal and then makes a decision on prices we can charge.
The Access Arrangement for Jemena Gas Network gets underway later this year with our submission due in June, public submissions in August and then a draft decision due from the AER in December. The new tariffs will take effect from 1 July 2015.
When it comes to our transmission assets – the QGP and the EGP – we have the same customer focus. We will expand the capacity of these assets to meet growth in demand from existing and new customers. We will also continue to explore opportunities for new greenfields pipelines. It is important to note that pipelines do not pose a constraint for getting gas supplies to market. Jemena has a strong track record in delivering the pipeline infrastructure required to ensure sufficient gas can be transported to market when it is needed.