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Department ‘contradicted Santos over cheaper gas’

A fresh spat has broken out over Santos’s promise that gas prices will fall should its $3.6bn Narrabri coal-seam gas project in NSW proceed, with claims the state’s Planning Department contradicted the energy producer by saying the development would not reduce tariffs.

Santos produced new modelling from ACIL Allen on the eve of the first day of public hearings on the project showing gas prices in Sydney would be 4-12 per cent lower from 2025 onwards over the 25-year evaluation period with the Narrabri gas project than without it.

The gas producer touts the development — which could supply half the state’s gas needs — as a solution to the tight east coast market by undercutting LNG imports and offering the cheapest new supply source in the state.

The Independent Planning Commission is considering the development.

On Monday it kicked off a public hearing ahead of a final decision due on September 4.

The NSW Planning Department, which recommended the development in June, said it could not conclude prices would fall if it did ultimately get the go-ahead.

“There are a number of levers available and I think it would be fair to say we are certainly not saying in our assessment the Narrabri gas project will reduce gas prices,” NSW Department of Planning, Industry & Environment director David Kitto told the Narrabri gas project hearing on Monday.

“When you look at it, it will produce a small amount of gas in relation to the whole of the domestic gas market.

“The critical advantages are it would produce that gas locally and it would be the gas that’s closest to the key markets.”

Asked by IPC counsel Richard Beasley whether greater competition would put some “downward pressure” on gas prices, Mr Kitto said he was reluctant to agree with that claim.

“We wouldn’t want to overstate that point and certainly we don’t think that gas prices will determine that issue. It’s more about reliability and security of supply.”

Santos had been contradicted by the NSW Planning Department, according to activist group Lock The Gate Alliance.

“Santos, along with Origin Energy and Shell, are the architects of the gas price crisis in this country because they built the LNG export terminals in Gladstone and locked in long-term fixed-price contracts with customers,” Lock the Gate Alliance NSW spokesperson Georgina Woods said.

“Australia is awash with gas — we have been, at various times over the last year and a half, the world’s biggest exporter of LNG. But thanks to companies like Santos, that means nothing for local manufacturers, who still face high prices due to the export contracts in place.”

Santos argues gas users in NSW and Victoria pay $2 to $4 more per gigajoule for supplies simply because of transportation costs, which would be eased for local manufacturers who are closer to the source of supply.

The probe into the controversial energy project in the Gunnedah Basin heard from several dozen concerned community members and interest groups opposed to the development’s potential impact on groundwater and the surrounding agriculture.

Source: The Australian