APA defers FID for Australian gas pipeline's stage 3

Market: Natural gas
13/05/24

Australian pipeline operator APA has deferred a final investment decision (FID) for stage 3 of its planned east coast grid expansion, given potential rule changes for the South West Queensland pipeline (SWQP).

APA is pushing back the FID by about 6-12 months to the first-half of 2025, and was likely initially planning to make the FID this year. The operator postponed the FID because of recent action by the Australian Energy Regulator (AER), which said it might recommend rule changes for the SWQP. A review was announced in February and is not expected to be completed until November at the earliest, APA said.

The firm opposes any further regulation of the SWQP, maintaining that it does not return excessive profits. APA said the lack of a single arbitration case involving the facility since such a regime was instituted in 2017 is evidence that its customers accept present arrangements.

"We've probably got around six to 12 months at the very most for us to work through and hopefully there's no change to regulation, but basically the time frame is we need to get started pretty much early next year on building stage 3," APA's chief executive Adam Watson said on 9 May.

If the AER decides to make the lightly regulated SWQP subject to reference price regulation, an access arrangement would need to be determined which will take 2-3 years to complete, APA said. This means any changes would be instituted in the fiscal year to 30 June 2028.

The SWQP can carry 440 TJ/d (11.75mn m³/d) in a westerly direction from Wallumbilla to the Moomba hub, from where gas can enter the APA-operated Moomba-Sydney and Epic Energy-owned Moomba-Adelaide pipelines for transport to southeastern facilities. Expanding the capacity of pipelines allowing the north-south transit of gas is considered critical to avoiding shortfalls owing to the depletion of Gippsland basin fields this decade.

Stage 1 of APA's east coast grid expansion was completed in 2023, with stage 2 also now operational in line with guidance. These two stages increased capacity by 25pc, allowing about 50 TJ/d more gas to flow on the SWQP to southern markets, with similar increased volumes expected from stages 3 and 4.

By Tom Major

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