In 2011, NSW gas transmission pipelines had an annual throughput of 196 petajoules (PJ). Gas distribution pipelines had an annual throughput of 105 PJ.
The DEC of gas pipelines in NSW in 2011 was estimated to be $476 million, made up of $123 million from transmission and $353 million from distribution.
The Audit projects an increase in the DEC of gas pipeline infrastructure in NSW of $191 million (a 40 per cent rise), made up of $49 million from transmission and $142 million from distribution. This is a relatively small increase, given that the state's economy is forecast to expand by 66 per cent over the same period.
In its 2013 Gas Statement of Opportunities, AEMO identified a potential supply shortfall in NSW based on increasing demand, continuing Liquefied Natural Gas (LNG) exports and slow development of coal seam gas (CSG) reserves in NSW. Any anticipated shortfalls are likely to be resolved by the market responding to the resultant price signals.
AEMO has forecast a modest decline in gas consumption in NSW, from 133 PJ in 2014 to 131 PJ in 2031, including a brief drop below 120 PJ per year early in the next decade.296
As with electricity, there are several reasons for the apparent inconsistency between the Audit's forecast rise in DEC in the gas sector, and AEMO's forecast of a fall in demand. In particular, the DEC analysis was finalised before the latest AEMO gas market forecasts were published. Those forecasts were the first to show a break in what had previously been a direct link between economic growth and rising energy consumption. Also, AEMO reports and forecasts gas consumption in petajoules, whereas DEC is a measure of the value-add provided by gas infrastructure, in dollars. The two are not necessarily perfectly correlated.
Although domestic gas consumption is forecast to continue declining, new LNG plants on the east coast have opened the market to export. Future value-add from gas infrastructure will come from both domestic usage (where demand may continue to fall), and from the export market. The impact of this will be felt largely in Queensland and the NT.
The NSW gas market is connected with Victoria, SA and (indirectly) Queensland via a number of gas pipelines. The main gas pipelines in NSW are the Moomba to Sydney Pipeline, Central West Pipeline (Marsden to Dubbo), Central Ranges Pipeline (Dubbo to Tamworth) and Eastern Gas Pipeline (Longford to Sydney). NSW has limited sources of conventional gas reserves, other than a small volume of deposits at Camden. Consequently, the majority of gas used in the state comes from Victoria, via the Eastern Gas Pipeline, and from the Cooper Basin, via the Moomba to Sydney pipeline.
Although NSW has limited conventional gas reserves, it has significant unconventional gas reserves, particularly in the form of CSG in the Gloucester and Gunnedah basins, with the Gunnedah Basin representing the largest undeveloped gas field in eastern Australia. However, the development of CSG reserves is a sensitive issue in NSW, with ongoing community concerns about the environmental impact of hydraulic fracturing. A recent report by the NSW Chief Scientist and Engineer concluded that the technical challenges and risks posed by the CSG industry can in general be managed 'within a clear, revised, legislative framework which is supported by an effective and transparent reporting and compliance regime and by drawing on appropriate expert advice'.297
Despite falling or, at best, low growth in gas demand in NSW, there is still a need for additional infrastructure investment over the next 10 or 15 years, driven by a combination of domestic and international factors. In the domestic context, conventional gas supplies from the Cooper and Bass basins - i.e., the main gas fields that supply NSW - are expected to diminish over time. Simultaneously, high demand for LNG in Japan and Korea has underwritten the construction of several massive LNG export terminals at the port of Gladstone. The high prices earned by LNG exports will raise domestic prices, as the opportunity cost of selling into the domestic market rises.
There are two potential sources of gas that could provide additional supply to NSW. One option is to develop CSG in NSW. The other, which is under consideration, is development of a pipeline that links another gas market to eastern Australia.
There have been a number of proposed actions to help Australia and NSW manage the significant changes in the gas industry, including:
■ AEMC's recommendation of a strategic review of the gas sector, including a review of future market developments over the next 10 to 15 years, and a review of the short term trading market and the declared wholesale gas market; and
■ the NSW Government's release of the NSW Gas Plan, which seeks to implement a framework for the CSG industry to operate within.
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296. Australian Energy Market Operator (2014b)
297. Kane, M. (2014), p. iv