Blue Energy shares fire up on ScoMo’s new gas policy
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Gas company Blue Energy (ASX:BLU) said it is “delighted” Queensland’s North Bowen and Galilee basins have been made the centrepiece of government plans to boost Australia’s gas supply.
The Morrison government will provide $28.3m to unlock gas supply from five Australian gas basins including North Bowen, Galilee and Beetaloo in the Northern Territory.
“Blue Energy stands ready to work with domestic manufacturers and gas users who require long-term stable gas supply and to develop our gas resource for the east coast domestic market,” said the company in an ASX statement.
Blue Energy has acreage positions in all three nominated basins, certified gas reserves in the North Bowen and Galilee basins, and has long advocated their development “which have been hamstrung by the lack of critical gas infrastructure”, it said.
Shares in the company leapt to 73c Tuesday and retraced slightly this morning to 68c.
The Bowen basin contains 15,000 petajoules of gas resources, which if fully developed via a southern pipeline is enough to supply the east coast gas market for 30 years, said Blue Energy.
“In doing so, it would act to lower east coast gas prices to end users, and importantly, enable manufacturers and gas users to enter long term gas contracts and give certainty of gas supply and price for decades,” the company added.
Queensland’s Palaszczuk government has pledged to invest $5m in a study for a pipeline from the North Bowen basin to the east coast to bring Queensland gas to the NSW market.
Currently, some Bowen basin gas is sent to Townsville for electricity generation via the North Queensland Gas Pipeline that has been in operation since 2005.
Independent energy consultancy firm Energy Quest said in its latest report that government action to unlock the Beetaloo, North Bowen and Galilee gas basins was “worthwhile”.
However, Energy Quest stated it was “early days” for the basins’ development and added the plans may clash with proposals for energy-intensive manufacturing in Darwin.
“The history of the North Bowen basin to date has been disappointing, notwithstanding numerous wells drilled. The basin used to have significant 2P reserves booked but most of this has now been reclassified as contingent resources,” Energy Quest said.
2P reserves are defined as proven reserves plus reserves that are deemed probable (at least 50 per cent likely) to be commercially recoverable, according to oil and gas industry body APPEA.
“Overall, the best chance of finding affordable gas for NSW and Victorian manufacturers is onshore NSW and Victoria,” it added.
Prime Minister Scott Morrison said Tuesday the government is taking action to reset competition in Australia’s east coast gas market by unlocking gas supply and building new pipelines.
“We’ll work with industry to deliver a gas hub for Australia that will ensure households and businesses enjoy the benefits of our abundant local gas while we hold our position as one of the top global liquefied natural gas exporters,” Morrison said.
Australian LNG is a huge export earner and the trade was valued at $49bn in 2019.
The new Australian gas trading hub will be located at Wallumbilla in Queensland.
The Morrison government also proposes a gas reservation scheme for local energy users, and will strike agreements with three east coast LNG exporters to avoid any supply shortfall in the domestic gas market.
New gas supply targets for each state and territory and strict use-it or lose-it requirements on gas licences will be introduced by the government.
Around $11m will be spent on identifying priority pipelines and critical gas infrastructure as part of a new National Gas Infrastructure Plan, identifying areas of government action.
The Morrison government will also improve access to existing pipelines and reform regulations around pipeline infrastructure to improve competition and transparency.
“This is about making Australia’s gas work for all Australians. Gas is a critical enabler of Australia’s economy,” said the prime minister.
In addition, the Morrison government said it will back a new gas-fired power plant for the Hunter Valley region in NSW, if the electricity industry does not replace the area’s existing Liddell coal-fired power plant before its scheduled closure in 2023.
Gas supports Australian manufacturing which employs 850,000 people, said the government.