Santos signs contract to use Jemena's new NT gas pipeline
Santos has signed up as the third customer for Jemena's new $800 million pipeline that will link the Northern Territory to the east coast gas grid, with gas to be transported to mining and mineral processing companies in Mount Isa.
The three-year contract for 8.3 terajoules a day of gas, to be announced on Friday, means that about 80 per cent of the Northern Gas Pipeline's capacity has been filled for its first year of operation.
With further contracts under negotiation, the pipeline should be fully utilised when it comes onstream late this year, said Jemena's head of corporate development Antoon Boey.
"The speed at which we've contracted the pipeline is fairly pleasing so we're on track compared to what we thought we'd be doing, and this is in an environment where end users are a bit uncertain around pricing and availability," Mr Boey told the
Australian Financial Review.
He said that while the Santos contract was a "small step forward for us in terms of the amount of volume, it's a fairly big step forward in terms of support for local industry".
"It brings gas into the market where it's needed most at the moment."
Customers were initially slow to sign up to use the NGP during
the NT's moratorium on fracking, which was lifted in April. Jemena, owned by China State Grid Corporation and Singapore Power,
won an NT tender to build the line in November 2015on the basis of a 10-year contract to transport gas to Incitec Pivot's Phosphate Hill plant in central-west Queensland.
The second contract involves 12 months of gas for Incitec Pivot's Gibson Island plant in Brisbane.
So far, 71 terajoules a day of gas will flow through the NGP. At full capacity of 32 petajoules a year, the NGP would meet almost 6 per cent of domestic east coast demand. It was
one of the reasons the energy market operator said in June it saw no shortfall in east coast gas in 2019.
Jemena is now working on a potential extension of the line eastwards past gas fields in the landlocked Galilee Basin and an expansion to open a path to market for
vast resources of unconventional gas in the NT.
"The policy environment at the moment does make it very difficult to make these long-term investments," Mr Boey said, calling for engagement by the government with industry to set the framework for infrastructure development.
Jemena, the country's second-biggest gas pipeline owner after takeover target APA Group, is meanwhile closely watching the government approvals process for
Hong Kong-listed CK Group's $13 billion bid for its rival.
Some commentators have highlighted that the deal would see the vast majority of the country's pipelines in the hands of Chinese-linked investors.
But Mr Boey said he was "bemused" by concerns voiced on foreign investment, which he said has been "good for the country and good for Australian jobs".
"Whether or not it's an owner from one country or another country doesn't really matter as long as they are long-term investors prepared to support the development of infrastructure," he said.
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