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Santos cool on COVID-19 taskforce’s $6b gas pipe dream

“My view is that the transcontinental pipeline is difficult, and it’s almost an admission of defeat, saying we couldn’t get the regulatory processes and the state approvals processes fixed.”

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Mr Gallagher said the obvious way to achieve lower gas prices was to expand supply close to the users that need it. But Santos’ hopes of developing the Narrabri gas fields in north-western NSW, believed to be capable of supplying half of NSW’s gas needs, have been mired in red tape amid thousands of objections over potential impacts to waterways and farmland. After years of delays, the NSW planning umpire is expected to hand down its verdict in coming months.

The National COVID-19 Co-ordination Committee, led by former Fortescue Metals boss Nev Power, is considering the construction of a pipeline, underwriting new gas projects and a gas reservation policy as draft options to address a looming gas shortage in the southern states and keep prices under $7 a gigajoule and potentially as low as $4. The price range, aimed at boosting manufacturers struggling under rising prices, has prompted concerns from gas producers who warned it could be unrealistic.

Industry representatives on Thursday said new gas projects had production costs of up to $8.25 a gigajoule.

“The right price for gas is the price agreed by participants in a competitive market,” said Andrew McConville, chief executive of the Australian Petroleum Production and Exploration Association.

“In the current challenging environment, governments can help ease pressures by releasing more acreage for natural gas encouraging exploration and development and removing unscientific bans on onshore gas development.”

Mr Gallagher said he backed the commission’s calls for less red tape but did not agree with the price expectations. “You can’t get prices below the cost of supply on a sustainable basis, that just doesn’t work,” he said.

The ASX-listed oil giant is bracing for a heavy hit when the coronavirus-driven oil price crash flows through to sales of Australia’s LNG. “Quarter three will be the toughest part of the year, that’s because of the lag impact on LNG pricing, Mr Gallagher said. “Hopefully, oil prices recover through to the end of the year and being LNG prices back up by the end of the year.”

The push to make gas a central pillar of the country’s coronavirus recovery process has been the cause of environmental controversy in recent weeks, with green groups and renewable energy advocates arguing public investment in fossil fuels will lock in higher emissions, while industry groups say gas remains a vital fuel source for manufacturing and could assist the energy market’s transition to more-intermittent renewable energy sources through gas-fired power generation.

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