Australia is exporting its gas to the world so why is Victoria facing a future shortage?


February 24, 2019 08:08:48

Mornington Peninsula mussel producer Michael Harris is usually focused on growing the biggest and tastiest molluscs in Victoria.

So finding himself in the middle of the debate about Victoria’s gas shortage was unexpected.

Yet here he is, wondering why AGL plans to build the country’s first gas import facility near his mussel farm, at a cost of $250 million, despite Australia being the biggest gas exporter in the world.

“It couldn’t be any more farcical. How can we be shipping off our resources and then buying them back,” he said.

Of chief concern to him and other worried locals is the environmental impact on Western Port Bay and plans by AGL to discharge chlorinated water back into the sea.

“I don’t have a science background, I just know things from what I’ve done and what I’ve seen. But the more I look into this … the more I’m concerned,” he said.

“I don’t think it’s going to bring gas prices down for customers.”

Although his expertise is as a fisherman, many energy analysts agree with him.

Supply crisis looming in 2021

Victorian households consume two-thirds of all residential gas used in Australia, and for the past 50 years that has not been a problem.

The state’s offshore gas fields have provided the bulk of the country’s supply and the resource has been cheap and plentiful.

But now those reserves are starting to run out.

Other gas reserves that were predicted to come online have not eventuated, and the anti-coal seam gas (CSG) movements in New South Wales and Victoria are having an impact.

“We have moratoriums on onshore development,” Tony Wood, the Grattan Institute’s energy program director, said.

“Meanwhile, getting [more gas] from elsewhere in the country is going to be expensive because the required pipelines would need to be built.

“So while all these conditions exist, Victoria is going to have [supply] issues.”

Added to that is the fact Australia’s east coast market was connected to international prices for the first time in 2015, through three export terminals at Gladstone, in Queensland.

Local prices went from $3 a gigajoule to $20 a gigajoule and gas flowed out of Victoria to feed the exports.

Victoria’s gas is no longer being sent offshore, but prices have remained relatively high and have contributed to soaring electricity prices.

AGL, which is predominantly a gas retailer, said that situation was forcing the company to get into the gas supply market.

“We know there is a supply crisis coming from 2021,” Phaedra Deckart, AGL’s head of the project, said.

“People aren’t going to be able to turn on their heaters or we’re not going to be able to run gas-fired power generators because there just won’t be enough gas. Manufacturers are going to suffer.”

Those doomsday predictions are not echoed by the Australian Energy Market Operator (AEMO), which believes it will be another decade before demand outstrips supply.

But locals are asking if that is the case, then is an import terminal the best solution and worth the environmental risk?

Mussels like ‘canaries of the sea’

AGL plans to moor a floating gas import terminal at Crib Point near the Port of Hastings in Western Port Bay, 80 kilometres from Melbourne.

It would essentially be a 300 metre-long ship that can hold 170,000 cubic metres of gas and be connected to Victoria’s gas network via a new 55-kilometre pipeline.

Between 12 and 40 ships carrying liquid natural gas (LNG) would transfer their contents to the terminal every year, from both interstate and overseas.

AGL argues the Hastings area is an ideal location — already home to a BlueScope steel plant, several fuel refineries, and roughly 100 ship movements every year — and when the terminal is no longer needed, it can simply be sailed away.

But environmental groups argue industry in the area has been winding down for decades and next to the proposed site is a rich mix of marine life that will be put at risk.

“We had a record number of whales this year and they come right up to where the floating gas plant would be,” Louise Page from the Save Western Port group said.

Every time a shipment of LNG was delivered, the terminal would take in sea water from Western Port to help warm the liquid gas back to a gaseous state.

The water, equivalent in volume to 180 Olympic swimming pools a day, would be chlorinated — killing any organisms to prevent bio-fouling — and then discharged back into the port seven degrees Celsius cooler than when it went in.

“There could be cold water plumes that could disturb the very sensitive marine life there … [the organisms in the seawater] are going to be dead when the water’s disgorged,” Ms Page said.

“We have no studies of the long-term effects that will have on the immediate environment and further afield.”

Mr Harris is also wondering what impact it would have on his mussel farm, located 20 kilometres from Crib Point.

“Mussels filter [and eat] algae from the water, and if anything is going to potentially harm those algae levels in Western Port Bay, then I’m concerned,” he said.

“They’re like the canaries of the sea.”

AGL has admitted the terminal would have some impact on the local environment, but said it would be minimal.

It said the chlorine levels in the water would be less than what is found in drinking water, while the cold water would dissipate quickly.

“We will continue to … do further studies to better understand the issue and to ensure the environmental impacts are dealt with, and that the community feels heard on these issues,” Ms Deckart said.

‘I didn’t think we’d be fighting against something like this’

Then there are concerns about the impact of the 55 kilometres of pipeline that would connect the terminal to Victoria’s existing gas network at Pakenham.

The pipeline would cut through internationally significant wetlands, private properties and Melbourne’s food bowl.

The Ramsar wetlands that border Western Port Bay are one of the most important habitats for migratory wader birds in south-east Australia and threatened species like the fairy tern.

Under the plan, more than a dozen landowners would also have some property forcibly acquired to accommodate the pipeline, which would be constructed by company APA on behalf of AGL.

Some people would be happy to get the compensation, but others like Sue and John Allnut would be devastated.

Their Pearcedale property backs on to the Ramsar wetland site, and they have worked for more than 20 years to rehabilitate much of it to its original state.

The new pipe would require a 30-metre wide corridor and they are concerned it would mean the removal of some of the vegetation they have painstakingly planted.

“I think we’re good caretakers of the land … everything here is done as low-impact as possible,” Ms Allnut explained.

“I didn’t think we’d get to this stage of our lives and be fighting against something like this.”

APA said it was in ongoing discussions with landowners about the route of the proposed pipeline, and it planned to drill the pipeline under the Ramsar areas to minimise the impact.

AGL ‘100 per cent committed’

Analysts are divided on whether AGL’s plan is the best way to address the gas supply shortage, but most agree it would not bring prices down.

The Australian Competition and Consumer Commission said last year the best way for that to happen would be to develop onshore gas resources in the south-eastern states.

Mr Wood said given that was not happening, AGL’s plan had merit.

“It would be a good thing for effectively putting on a cap and stabilising gas prices in Victoria,” he said.

“Whether it turns out to be commercially viable, and what price they will sell that gas is still difficult to tell.”

Despite some setbacks, and proposals by rival companies for other LNG import terminals across the country, AGL said it was still 100 per cent committed to the project.

It is working to complete a detailed environmental effects statement (EES) to submit to the federal and state governments by the end of the year, and wants the first gas to flow from the project in 2021.

In the meantime, the company is on a major public relations drive in Crib Point.

The ABC understands it has given more than $100,000 to community groups such as the local football-netball club, and has sponsored a local film festival.

“We know [the community] are … taking one for the team, I suppose, in helping Australia and particularly the southern states meet their energy supply needs,” Ms Deckart said.

“We need to balance their needs as a community with the broader needs of Victoria and the other states in terms of gas supply.”

But for property owner Mr Allnut, the equation is not that simple.

“People, businesses, manufacturers, they need energy. I understand that, but I just wonder whether it’s more about making dollars than supplying us with energy,” he said.

“If you want to [preserve] Western Port and Ramsar [wetland], there’s a cost involved. So maybe the cheapest way isn’t always the best.”











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