MITEZ has released a new report outlining the high economic stakes in failing to ensure energy security for North-West Queensland and a raft of solutions, including calls for an enforceable domestic gas reservation policy.
Regional Economic Advisory prepared the North West Gas Market Analysis document for the Mount Isa to Townsville Economic Development Zone peak body.
“The main reason we commissioned it was to have an evidence-based piece of work that shows the volatility of gas prices in the North West and, given the tripling of cost, the effect the turbulence has on North West consumers,” MITEZ chief executive officer Maria James said.
The tripling of cost has occurred in the 10 years since the Gladstone Liquefied Natural Gas (LNG) terminal began exports, with well over two thirds of the East Coast’s gas production now exported as LNG.
In comparison, the West Coast – which has a long-standing reservation scheme separating the domestic and export markets – has seen relatively low price growth and effectively no volatility, according to the analysis.
The analysis points to energy costs materially impacting North-West Queensland’s resource operations, stalling investment (including forcing changes to higher emissions diesel generation), and precluding the region from value-added opportunities.
Major mining and processing operations in the North West are estimated to currently support (annually):
- $10 billion in output, including $5.8 billion in direct output
- $1.6 billion in wages paid to local workers, including $646.4 million directly
- 15,664 FTE jobs, including 5198 direct FTE
- $3.3 billion contribution to GRP, including $1.5 billion in direct GRP
The North West Power System (NWPS) is disconnected from the National Electricity Market (NEM) and relies on gas for about 80 per cent of its electricity generation capacity.
Consultation with industry indicated that energy costs for wholesale users were as much as twice as high in the NWPS as they were in the NEM, the report noted.
“Beyond just energy production, natural gas is also used extensively for industrial purposes in the region, most notably by Phosphate Hill ( about 30 per cent of total consumption),” the report states.
“About 80,000 GJ of gas is imported into the NWPS daily, at a conservative transport-included cost of $16/GJ, amounting to $1.28 million per day.
“Just five years ago, when transport-included costs were approximately $5/GJ, the same quantity of gas would have cost only $400,000.”
The report has laid out short- and mid- to long-term actions to achieve a competitive energy market in North-West Queensland.
“It might be uncomfortable to enforce an East Coast gas reservation policy, but it is the right thing to do,” Ms James said.
This was an immediate measure until the relief expected by having the CopperString transmission project delivered all the way to Mount Isa, she said.
“It would be wonderful if we could have a North West Energy Plan, as a subset to the Queensland Energy Plan – a roadmap for the MITEZ corridor so that the North West has affordable and reliable energy while building what we need for the future,” Ms James said.
“We need to ensure our sovereign manufacturing capability is as important as export contracts.
“Governments can’t continue to bail out gas-reliant industry, they need to think strategically and design and implement a reservation policy.”