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Hunter Gas Pipeline angles for government backing

Angela Macdonald-Smith
Angela Macdonald-SmithSenior resources writer

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The backers of a $1.2 billion gas pipeline project that could shave $1 a gigajoule off the price of Queensland gas for Newcastle have held talks with the federal government on underwriting support in a clear sign that the proposal to support new gas infrastructure has gained traction.

Garbis Simonian, one of the backers of the Hunter Gas Pipeline, said the project is "becoming very real now", with a pick-up of interest over the past few weeks from the office of federal Energy Minister Angus Taylor.

The Hunter Gas Pipeline is one of several pipeline ventures angling for federal government support. James Davies

"The policy has changed to favour us," Mr Simonian told The Australian Financial Review, pointing to the recommendations from the National COVID-19 Co-ordination Commission for gas to help underpin an economic recovery from the pandemic.

NCCC chairman Nev Power confirmed earlier in August that the body had recommended the federal government underwrite major new gas pipelines and other infrastructure to deliver cheaper supply.

The Australian Competition and Consumer Commission's latest report on the east coast gas market two weeks ago confirmed pipeline capacity could act as a constraint on transporting Queensland gas south to NSW and Victoria, which is at risk of being caught short as mature fields in the Bass Strait decline.

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"The policy has changed in a way that supports us building this project," Mr Simonian said.

"We're holding discussions [with the government] and they are assisting us in securing GTAs [gas transportation agreements] by encouraging customers and gas suppliers to come to an agreement to bridge the gap," he added, referring to the duration of the transportation agreements which need to be long enough to underpin financing of the project. He was not able to comment further for confidentiality reasons.

A spokesperson for Mr Taylor's office said: "The government is working with a range of gas market players on how we can stimulate a gas-fired recovery."

The proposed 820-kilometre pipeline would run from Queensland's gas hub at Wallumbilla, near Roma, to Newcastle, via Moree and the Hunter Valley.

It would run close to Santos' Narrabri gas project but although it could transport that gas, Mr Simonian said it did not hinge on that development going ahead. That $3.6 billion project is still seeking planning approval, with a decision from the NSW Independent Planning Commission due by September 30.

Backers of the pipeline venture include real estate investment and advisory group Ashe Morgan, two directors of Hunter Land, petroleum land access firm RLMS and Greg Soghomonian, a former president of Honeywell Asia and current chairman of aluminium recycler Weston Aluminium Pty., where Mr Simonian is managing director.

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Mr Simonian said talks had also taken place with some large equity investors and with two major banks that could provide financing for the pipeline through equity and debt. The venture is targeting financial close in mid-2021, with the start of construction pencilled in for mid-2022 and the pipeline coming online in the second half of 2023.

Mr Simonian said the cost of delivering gas from Queensland would be about $1.40-$1.50/GJ, about $1/GJ less than the cost to transport it to NSW from Wallumbilla via the Moomba gas hub in South Australia's north. The project already has planning approval.

Federal support is also a possibility for the circa $1.2 billion pipeline proposed by Central Petroleum and Australian Gas Infrastructure Group from Alice Springs to Moomba, while the Queensland government recently committed $5 million to study the feasibility of a new gas pipeline from the Bowen Basin and called for matching support from the federal government.

Queensland gas explorer Blue Energy has long been pointing to the need for a pipeline to open up Bowen Basin gas, which currently only has a gateway to market towards the north to Townsville.

Blue said the line would help struggling east coast manufacturers and help rebuild the economy after the COVID-19 pandemic, providing gas that would be critical to firm up large renewable energy projects given Queensland's target of 50 per cent renewables by 2030.

Angela Macdonald-Smith writes on the resources industry with a focus on energy, including gas, oil, electricity and renewables. Connect with Angela on Twitter. Email Angela at amacdonald-smith@afr.com

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