Northern Territory Power Provider Upgrades Pipeline for Gas Supply

In a strategic move to alleviate persistent gas shortages, the Power and Water Corporation (PWC), the sole energy provider in the Northern Territory (NT), has successfully completed upgrades to the Northern Gas Pipeline (NGP), enabling bi-directional gas flow. This infrastructure enhancement allows for the importation of natural gas from Queensland, a critical step for the NT as it grapples with a significant supply deficit.

The completion of the NGP's upgrade comes amidst ongoing challenges with gas supply, primarily stemming from a long-term agreement with Italian energy firm Eni for gas from the Blacktip field in the Joseph Bonaparte Gulf. The deal, valued at $5.5 billion, was intended to secure a stable gas supply for the NT's electricity generation needs; however, gas production from this field has been dramatically reduced since early 2021.

According to PWC, the reversal of the NGP is part of a broader strategy to ensure reliable gas supplies for the territory. A spokesperson stated, "Reversal of the NGP provides a backup solution if gas supply is not available from alternative arrangements." The NGP can now deliver approximately 60 terajoules of gas daily into the NT, equating to the typical daily consumption for energy generation and residential use.

The upgrades, executed by Zinfra, were completed within an eight-month timeframe, significantly enhancing the capacity of the NGP to respond to the NT's energy demands. However, the financial implications of the gas supply shortfall are severe, with PWC projecting a staggering operating loss of $95.6 million in its gas division for the current financial year, primarily due to inflated costs of emergency gas purchases from alternative sources.

Mark Ogge, principal advisor and gas analyst at The Australia Institute, expressed serious concerns over PWC's management of the gas supply issue, stating, "It’s hard to conclude that Power and Water Corporation is competently doing their job of providing electricity to Territorians at a reasonable cost." He added that PWC's shift towards engaging in the wholesale gas market has led to significant complications, particularly following the failure of their primary gas supplier.

Conversely, Saul Kavonic, a senior energy analyst at MST Financial, noted that although it is uncommon for government entities to trade gas on the wholesale market in Australia, it is a common practice globally. He argued that the Blacktip deal has ultimately benefited the NT, despite the current challenges.

The NT government continues to pursue legal avenues regarding the contract with Eni, as PWC seeks to enforce its rights under the gas sale agreement. The ability to now import gas from Queensland could provide a necessary lifeline, particularly as the NT seeks to stabilize its energy supply amid ongoing fluctuations in production and demand.

As the energy landscape continues to evolve, the implications of this pipeline upgrade extend beyond immediate supply concerns, highlighting the need for a cohesive and adaptable energy strategy for the Northern Territory in the face of future challenges.