The phased approval of the $3.6 billion Narrabri Gas Project has devastated many in the local community. But there is another group who should be concerned about Narrabri gas - NSW energy consumers.
Despite claims we've seen from the gas industry, Narrabri gas cannot be guaranteed to even make a dent in power bills for the average NSW household. Narrabri gas is very expensive, costing an estimated $7.28-$9.36/GJ to extract and for transmission, double current international LNG spot prices which are projected to set at $4.71 in October 2020, according to the Australian Competition and Consumer Commission.
The only way Santos can make Narrabri commercially viable is by selling gas at a high price, and yet the company claims that it will somehow play a role in lowering electricity prices. Narrabri-produced gas is also too expensive to be produced at the $4/GJ target price needed to produce a competitive 'gas-fired' manufacturing market.
The numbers simply don't stack up. High-priced Narrabri gas will not produce cheaper electricity; in fact, it is likely to drive power prices up long term by introducing a more expensive option into the energy mix.
There is nothing in the Independent Planning Commission's decision that reserves Narrabri gas exclusively for the NSW market.
Narrabri gas can be distributed throughout the East Coast Gas Market. And, like any business, Santos will look to sell to the highest bidders. That's likely to be Victorians and other southern states with limited and dwindling gas supplies.
A big risk is that the Narrabri project could end up a stranded asset. The federal government supports a gas-led recovery which paves the way for public funds to be invested in gas projects, even as the gas industry takes massive write-downs due to a global oil and gas glut. The commercial environment for new gas assets is declining, as shown in Santos's write down of $1.13 billion worth of assets due to the rapid decline of oil prices. This could leave Australian taxpayers footing the bill for a gas project that can't turn a profit, if Santos on-sells the Narrabri Gas Project to a weaker player.
It's time to look to solutions that will actually bring down power prices. If the NSW government wants to secure a lower cost, reliable energy source for the state, building large-scale renewable energy and storage is cheaper and more sustainable long-term than Narrabri gas. The Narrabri Gas Project is a bad idea for many reasons, and, if it goes ahead, we're likely to be the ones who will be left footing the bill.
