Natural gas is continuing to be transported south, showing that gas producers are serious in their response to East Coast demand no matter from where it comes.
South Australia is as far away from the high-demand liquefied natural gas (LNG) export plants, which have come on line in Queensland in the past year.
Anti-gas activists have claimed loudly that gas is being “sucked” from the southern East Coast States in order to feed the new Queensland LNG export operations. This is part of some kind of conspiracy to increase the price of gas, they claim.
The reality is that most of the gas for LNG export comes from Queensland’s own reserves. In fact, the LNG export industry would not have even begun without the development of the gas-rich coal seams of south-west Queensland.
Santos is the latest producer to put paid to the baseless conspiracy claim.
It announced this week that it is directing gas south from its production fields to the Pelican Point power station, 20 kilometres north-west of Adelaide.
Santos is not the first LNG exporter to send gas south. As we noted a few weeks ago, the gas supply numbers have improved recently for both export (LNG) and domestic supply.
A ramp-up in three producing areas underpins this improved outlook. One of the areas is northern South Australia’s Cooper Basin, which will be a source for some of the Santos gas flowing to Pelican Point.
Santos has struck a deal with Engie, the plant owner (and also owner of the decommissioned Hazelwood generator, in Victoria).
The deal will allow the Pelican Point power station to be able to return to full capacity, should it be required.
This is an important positive step for South Australia.
When SA suffered the nation’s first ever whole-of-State blackout last year, it was Pelican Point gas-fired power which the Government called on to get the lights back on.
That was last winter, a little over a year ago. A few months later, the SA system was again unstable – and again it was gas to the rescue.
As we explained in the aftermath, gas is the go-to solution for the Australian Energy Market Operator whenever there is instability in the SA network – instability which can be caused by too much wind or too little.
Pelican Point had been in mothballs. It was headed the way of the coal-fired generator at Port Augusta, put out of business by taxpayer-subsidised new wind energy.
South Australia is a world leader in deployment of renewable energy. It is a credit to its determination that it was willing to back its ideals to reach 40% renewable energy. However, the result was less than ideal for the electricity grid and customers across the State, including manufacturers who lost tens of millions of dollars and small businesses whom the Government encouraged to buy diesel generators to prepare themselves for further possible outages.
The SA blackout and subsequent incidents not only imposed massive costs directly on businesses. All taxpayers nationwide are forced to stump up for renewables deployment cost – estimated to be about $13 billion. To rub salt into the wound, if you live in or operate a business in SA, you are paying about 150% of the power costs paid in neighbouring NSW, which has a renewables percentage penetration in the single digits
This disparity is a function of the fact that States have freedom to design their own energy future, despite the fact that they are interdependent players in a multi-jurisdictional, interconnected East Coast electricity network.
In past years there has been little synchronicity between State and Federal policies. A number of States are now wrestling with the consequences of ‘go-it-alone’ policies.
For SA, its solution has been to bring more gas generation back into the system – and to urge other States to do likewise and remove their illogical blockers to natural gas development.