Canberra, South Australia strike gas agreement

The Australian federal government and South Australia state government have struck a wide-ranging agreement worth A$1.08bn ($835mn) on energy supply and investment, including the addition of 50 PJ/yr (1.34mn m³/yr) of gas by the end of 2023 and a possible 80 PJ/yr by 2030.

Most of South Australia's gas production comes from its onshore Cooper basin region, which is in the northeast part of the state and has been producing for the best part of 50 years. It is largely seen as a mature field. Some gas is also produced in fields in the Otway basin offshore South Australia.

"This means getting more gas into the market to support the increase in renewable solar and wind power coming into the electricity system. One works with the other to deliver lower cost, lower emissions and reliable power," Australian prime minister Scott Morrison said.

Gas demand for power generation in east Australia dropped to its lowest levels in more than 13 years in 2020 as plant shutdowns and a higher share of electricity generated from renewable sources such as wind and solar reduced the share of gas as a fuel source for power generation.

Gas commands the highest share for power generation in South Australia than any other state, but it is expected to see a reduction in gas-fired power capacity in the coming years with the closure of two units at the Torrens Island gas-fired power plant, both with a capacity of 120MW. The shutdown of these units is part of the progressive closure of the 480MW Torrens Island A plan.

"The focus on gas will help South Australia meet its own gas needs and assist efforts to prevent forecast shortfalls in the broader east coast gas market from 2023, as part of our gas-fired recovery," Australian energy minister Angus Taylor said. Canberra would contribute A$660mn in funding under the agreement and South Australia will contribute A$422mn, he said.

The Australian Energy Market Operator (Aemo) last month said the proposed start-up of the 2mn t/yr Port Kembla Gas Terminal (PKGT) by 2023 is projected to push back a potential gas shortfall in east Australia to 2026 from a previous 2024 prediction. But if there is any delay to the planned LNG terminal, a shortfall could emerge in Victoria state during the June-August 2023 winter.

The agreement also includes some funding for the 800MW South Australia-New South Wales electricity interconnector, known as EnergyConnect, said South Australian energy minister Dan van Holst Pellekaan. The whole energy agreement would contribute to South Australia achieving a net-100pc renewables goal by 2030 and becoming an exporter of renewables and gas to support the national electricity market, he said.

The agreement also includes a commitment to develop hydrogen hubs in South Australia, van Holst Pellekaan said.

By Kevin Morrison