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Prime Minister Scott Morrison said on Friday the deal represented a “forward-looking commitment” from NSW that would unlock new gas supply and put “downward pressure on prices”.


Addressing media at the same time, NSW Premier Gladys Berejiklian emphasised the deal didn’t represent a green light for the contentious Narrabri gas project in the state’s North West Slopes, arguing that “the beauty” of the deal for NSW was it didn’t require the state to “change our policy position”.

NSW Energy Minister Matt Kean said NSW’s pre-existing “rigorous” planning and environmental assessment processes remained in place.

Ms Berejiklian said NSW had already opened the door for private companies to build liquefied natural gas (LNG) facilities at Port Kembla or Newcastle. Gas imports can produce a perverse resources cycle where private companies ship LNG back to Australia that they have imported from Queensland exporters.

Federal Energy and Emissions Reduction Minister Angus Taylor said 70 petajoules a year was “a massive increase in gas” for NSW, which consumes around 120 petajoules annually, and “more supply pushes down prices”.

Before Australia started exporting gas in late 2014, the long-term average wholesale price for gas on the east coast was $3 to $4 a petajoule. Queensland’s export industry has grown rapidly since then to make Australia the world’s largest gas exporter. Linking the domestic market to international prices has pushed up Australia’s wholesale price, which hovers around $8 to $12 a petajoule.



Grattan Institute energy program director Tony Wood said boosting NSW gas supply could result in slightly cheaper prices for local buyers, who wouldn’t have to pay the transport cost for piping in gas from interstate.

“More gas will bring down the price of gas, but the impact will be limited because the market’s linked to export parity,” Mr Wood said. “Most market indicators show gas supply and international prices are looking better, and new supply could potentially take us below $8, but we won’t get back to where we were in the past.”


Victoria Energy Policy Centre director Bruce Mountain said gas had a role in relatively small-scale, rapid-response gas plants to supplement the more intermittent supply from renewable energy sources, but there was no potential for new large-scale projects.

“Gas has a role as a peaking fuel source, but I think the window has closed for gas as a heavy lifter in electricity production – that ship has sailed. Our gas is now just too expensive and the alternatives [in renewables] are so much cheaper,” Dr Mountain said.

NSW will receive $960 million through a mix of federal funding grants and loans for emissions reductions initiatives such as methane capture from landfill and carbon farming projects in agriculture or forestry. The state will invest $1 billion of its own money into renewable energy and network upgrades.

The federal government has also committed to a mix of underwriting and financing for transmission network upgrades to link NSW’s 3000 megawatt renewable energy zone in the Central West to the grid, and for upgrades in the HumeLink interconnector from Snowy Hydro to southern NSW, which the state government expects to be worth around $1 billion.

Mike is the climate and energy correspondent for The Age and The Sydney Morning Herald.

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