Why import gas?

Australia is one of the world's largest exporters of liquefied natural gas (LNG). However, most of this gas comes from Queensland and Western Australia – which is far away from the main domestic markets in Victoria, New South Wales, and South Australia.

In its 2019 Gas Statement of Opportunities, the Australian Energy Market Operator (AEMO) highlights that the southern states face tight gas supply from 2021, and shortfalls from winter 2024.

AGL is currently progressing plans to use an existing jetty in Crib Point, Western Port in Victoria to import LNG into Victoria, New South Wales, and South Australia, providing much needed additional supply of gas to customers. A floating regasification storage unit (essentially a type of ship) will be continuously moored at the end of the jetty.

The Australian Energy Market Operator, AEMO, has recently stated that an import facility in Victoria has the biggest projected impact to reduce projected gas shortfalls.

Here, we answer some of the most common questions we receive regarding the Gas Import Jetty Project at Crib Point.

How did this gas shortage happen?

There are several intersecting factors that are coming to a head to create this potential shortage:

  • Most of Australia's easily accessible and relatively low-cost gas fields in the southern states, particularly the Bass Strait legacy fields, are in decline; it is highly unlikely these low-cost fields can be replicated.
  • This will reduce Victoria's ability to meet its own gas needs, not to mention export surplus gas supplies to South Australia and New South Wales. This means that these states are more reliant on Queensland gas supplies to meet gas demand.
  • In the past decade, producers of gas could get a higher price for gas sold internationally and signed large long-term contracts with international customers to export Australian gas overseas. This has increased competition for domestic gas and linked the price of gas for domestic supply to international prices.

In this context, importing gas is likely to be Victoria's lowest cost solution despite Australia's significant gas reserves.

Why can't we pipe it from other states?

Our gas market is shaped by Australia's vast geography. While gas supply from the northern states can be transported to Victoria, the pipeline system does not have enough capacity to meet Victoria's peak winter demand.

In addition, accessing the reserves in Western Australia is even more difficult as there is no pipeline across the Nullarbor, and the cost of building one doesn't stack up because of the vast distance involved.

How does the gas shortage impact AGL?

We currently have 1.4 million gas customers who will benefit from additional supply of gas. AGL does not produce gas for export overseas. We're impacted by the current challenges in sourcing affordable gas to meet the needs of residential and business customers.

A number of our generation assets are also impacted by the potential gas shortfall in the southern states. As ageing coal generators close, existing gas generation assets are running for longer periods of time. As a result, high gas prices have the potential to increase the cost of generating electricity.

Why import gas from other markets?

We're proposing to import gas to Victoria (most likely from overseas markets) which would have the following benefits:

  • Improving the certainty of gas supply to head off potential shortages in 2024
  • Importing competitively priced gas directly to the Victorian market
  • Reducing the urgency of opening more gas fields in the southern states
  • Circumventing pipeline congestion and avoid the need to expand and modify the pipeline network
  • Introducing a new source of competition in the gas market
  • Contribute to Victoria's continued economic development and growth

What steps are being taken to protect an environmentally sensitive area?

Western Port is home to a site of international environmental significance. Waterways within it are covered by the Ramsar Convention on Wetlands of International Importance; it also contains three marine national parks. Many people in the local community are very concerned about the potential impacts the project could have on the local environment.

The community have made their concerns known to the Victorian Government and they have been successful in making sure the Project is now assessed independently through an Environment Effects Statement (EES) process (under the Environment Effects Act 1978). The EES will also be used by the Australian Government to assess the environmental impact of the Project under the Environment Protection and Biodiversity Conservation Act 1999.

The EES will look at the potential environmental, social, economic, and planning impacts of the Gas Import Jetty and Pipeline Project, the approach to mitigating these impacts, and will be considered by relevant government decision makers when determining the required approvals or conditions on the Project.

We will follow all assessment requirements required by Victorian and Australian Government agencies and are willing to be held to these rigorous standards.

Why do we need to import gas when the sector is transitioning to renewables?

As the energy sector progressively transitions from thermal power (like coal-fired plants) to more renewable energy (like wind and solar) – gas, which generally has lower emissions than coal, will play a role in enabling firming capacity to complement renewables at peak times or when renewables are not available.

Modern gas fired power plants can start up very quickly, stepping in to generate energy when it's needed most. Until the cost-competitiveness and storage capabilities of other firming capacity (like batteries and pumped hydro) improves, gas is a part of the transition balancing reliability, emissions reduction and affordability objectives.

Right now, we have $1.9 billion worth of energy supply projects under development, with a further $1.5 billion subject to feasibility, this includes the recently opened Barker Inlet Power Station, and the proposed Newcastle Power station, both of which are gas fired power plants.