North West Shelf to Moomba gas pipeline could help end supply debate: Mick McCormack
Mick McCormack, the former boss of APA Group, has called for the Morrison government to back a $6bn transcontinental gas pipeline to ease a projected shortfall and high prices for users on the east coast.
Mr McCormack, appointed as a director of Central Petroleum on Tuesday, said the mooted west-east pipeline could solve the supply and cost problem “in one hit” by adding a new transport route from the North West Shelf to the Moomba pipeline.
Central is already in the planning stages for a Macquarie-backed $1bn-plus pipeline of its own linking Northern Territory to Moomba but the ex-APA chief said a grander nation-building facility was justified which could link in to the Central facility at Moomba.
“Australia is in recession and there are a million-plus out of work and if the government is going to put money into an infrastructure project and they’re looking at gas pipelines then they should look at a nation-building project which connects the North West Shelf to Moomba,” Mr McCormack told The Australian. “The cost could be as high as $5bn but it could charge a nominal tariff of $2 a gigajoule. The benefit of that is you solve the east coast gas crisis in one hit and critically you have affordable and much larger quantities of gas to revitalise Australian manufacturing.”
The Morrison government is weighing a final report from the National COVID-19 Coordination Commission manufacturing taskforce chaired by former Dow boss Andrew Liveris. A draft proposal suggested a ‘gas-led’ recovery involving guaranteeing gas volumes, open new fields and build pipelines to halve the price of the fossil fuel to a $4 a gigajoule target.
While some support remains for the long-mooted $6bn transcontinental pipeline, promoted by former West Australian premier Colin Barnett and backed by Mr Liveris in an early National COVID Coordination Commission report, many remain sceptical over the economics of a project. Questions over where the gas supply would be sourced from to justify the pipeline are also seen as a major hurdle,
Additionally, the WA government in August rejected any proposed facility after it banned local gas being sent to the nation’s east coast amid concern insufficient supplies would be available for the state’s users.
A 2019 study found that while the pipeline was technically feasible, “commercial and market risks present major challenges for the project”. The new policy restrictions appear set to hobble a source of cheap domestic gas for the facility although it is unclear if any project proponent could still strike an offtake deal with a WA producer that still keeps 15 per cent of gas for the local market.
Still, a year after he left the top job at APA, Mr McCormack said the gas debate on the east coast was “going round in circles” with little sign of progress over cost and supply issues.
“What’s annoying the stuffing out of me is that it’s the same problem for years now. The same old chestnuts keep getting trotted out. A decade ago gas on the east coast was $3-4 and call it a $1 for transport. Then LNG exports started in Gladstone and the market was told to accept a crude linked netback price. That set up the link. So now we have gas contract prices at $8 to $11 when the netback is $6 and producers say it’s a cost of production issue. But you can’t have it both ways.”
Mr McCormack has been working on his Queensland farm for the last year after agreeing not to take on another role in the industry for 12 months as part of his exit from APA.
Central’s Alice Springs to Moomba pipeline could also be part of the west-east pipeline solution for the Morrison government should it consider lending support to the proposed facility, Mr McCormack said, by expanding its capacity beyond the current 124 terajoule a day target.
“It could be 300TJs or 600TJs and then be extended to the North West Shelf and WA. You’ll fix the east coast gas crisis by introducing more gas supplies.”
Mr McCormack’s comments followed the release of an interim report into the Australian gas market by the ACCC earlier in August which provoked arguments between producers and users over the state of the market.
According to the competition regulator, offers in the market for 2021 were not matching the global fall in prices with demand cut due to the pandemic.
The report shows domestic customers were slugged between $8 and $11 per gigajoule in late 2019 and early 2020, compared to LNG export prices of below $6/GJ since early 2020.