Report analyses constraints of gas development

A REPORT to AGL Energy has outlined the economic benefits of increased coal seam gas development in the State.

The report by ACIL Allen Consulting was commissioned by AGL to analyse the economy wide impacts of NSW policies that constrain coal seam gas (CSG) development.

A report by ACIL Allen Consulting commissioned by AGL has analysed the economy wide impacts of NSW policies that constrain coal seam gas (CSG) development.

A report by ACIL Allen Consulting commissioned by AGL has analysed the economy wide impacts of NSW policies that constrain coal seam gas (CSG) development.

The firm considered two constrained gas development scenarios in comparison to a base case that was not government policy constrained.

The scenarios were a case in which no further gas exploration and development takes place (a CSG freeze case) and a second scenario which assumes that only the Gloucester basin is developed (the Gloucester only case).

The base case assumed CSG development would continue to grow in NSW with AGL projects in Gloucester, the Hunter and Camden as well as operations in the Pilliga and on the north coast producing the State’s gas.

According to the report, such a scenario would mean a resource base of about 25,000 petajoules, supporting 46 per cent of gas demand in the State by 2020 and 117 per cent of the State’s gas by 2030.

The CSG freeze case scenario looked at no additional CSG project growth beyond current levels with gas supply falling from six petajoules to almost zero while the Gloucester only case would see production peak at 22 petajoules.

AGL says the report findings show that constraints on the development of indigenous CSG resources would lead to significant losses of real economic output, real income and up to 16,000 jobs in NSW and Australia.

The company said that would mean a greater reliance on gas imports from other States and higher prices in NSW.

“It conclusively shows that new gas supply in NSW for NSW puts downward pressure on gas prices,” AGL’s head of economic policy and sustainability Tim Nelson said.

“The economic modelling shows that new gas supplies developed in NSW reduces wholesale gas prices in 2025 by 12 per cent compared to there being no new local supply.”

“The report shows NSW has the potential to be self sufficient in relation to long-term gas supply with significant downward pricing pressures, which will benefit NSW consumers.”

Opponents have labelled the report’s findings as nothing more than hot air.  

“Developing unsafe coal seam gas mines at Gloucester and Narrabri will do nothing to bring down the cost to domestic consumers of gas and the companies pushing to develop these resources know well that that is the case,” Lock the Gate Alliance spokeswoman George Woods said.

“Even if Santos and AGL promised to keep prices down for domestic consumers and even if we could believe anything they said the subsequent loss in productive farmland, the need to import food to fill that shortage and the cost of remediating water supplies poisoned by gas mining would end up costing consumers vastly more at the supermarket check-out for fresh produce than any supposed savings the industry might ‘promise’ to make on gas prices.

“The gas industry knows that its Achilles heel is the inevitable hike in domestic gas prices that will flow from the huge demand for exported gas being brought about by the overcapitalisation of gas hubs in Queensland.

 “These hungry export gas hubs simply can’t get enough to fill the contracts needed to keep them viable so the companies who have caused this problem now want to threaten the health, land and water of our nation by drilling into farmland and nature reserves to get every skerrick of available gas out of the ground.”

But Mr Nelson said the report showed that the Gloucester only and base case scenarios would mean reductions in wholesale gas pricing in NSW of eight per cent and 12 per cent respectively in 2025 and three per cent and six per cent respectively between 2018 and 2035.

He said the base case scenario in which government does not constrain CSG development demonstrated that NSW could become self sufficient in gas supply in the long-term.

“Producing gas in NSW avoids the need to import more costly gas from other States, leaving households and businesses with more money in their pockets to spend on other things,” he said.

“Money we are not spending on imported, more costly gas from interstate is money that can be spent in NSW, boosting local economic activity and employment.”

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