Re: proposed pipeline Westernport Bay

AGL Employee

Hi Stefsta,

 

Thank you for your response.

 

There have been mixed responses in the media about the supply gap forecast.

 

Early in 2018 the media reported Victoria would experience significant gas shortages within three years based on a gas forecast report from the Australian Energy Market Operator (AEMO) despite falling gas consumption in the state. AEMO told the media it was hoping the report would encourage a market response to help fill the gap but warned some intervention may be needed if the private sector does not come up with a solution. 

 

In the June 2018 AEMO Gas Statement of Opportunity, the AEMO stated ‘no supply gaps are forecast before 2030 under expected market conditions.’ But the AEMO’s executive general manager of planning and forecasting, David Swift still warned that the supply-demand balance in the Australian gas market was still very tight. 

 

The recently released AEMO 2019 Gas Statement of Opportunities (GSOO) said the east coast gas market faces tight supply from 2021 and shortfalls from winter 2024 if more is not done to replace rapidly declining output from Bass Strait and supplies from Queensland limited by pipeline capacity.

 

‘‘Southern Australia’s overall supply demand balance for 2021-2023 remains very finely balanced, reflecting the ever-tightening integration of Australia’s electricity and gas markets in the context of an evolving and dynamic energy system,’’  AEMO’s chief system design and engineering officer Alex Wonhas told the ‘Australian Financial Review’ when the report was published on March 28, 2019.

The report said:

“Supply from existing and committed gas developments is forecast to provide adequate supply to meet gas demands until 2023. However, risks remain that any weather-driven variances in consumption or electricity market activity that could increase gas demand, creating potential peak-day shortages as outlined in AEMO’s 2019 Victorian Gas Planning Report.”

 

We certainly support your suggestions around electricity. While we support this move and are working towards a more energy efficient future, it unfortunately will not happen overnight. The move will take time and money to guarantee energy for us and our customers. LNG imports have an important role in this transition. 

 

Over 80 per cent of electricity produced in Australia is sourced from the combustion of fossil fuels. Given its sheer scale, decarbonising the generation sector is likely to take several decades of replacing the existing generation fleet with low-emissions substitute technology such as solar and windfarms. 

To deliver reliable and sustainable energy at the lowest cost possible requires renewable energy from wind and solar combined with more flexible energy sources, like quick-start gas generation, that can be turned on whenever renewables are not available (i.e. low wind, night time and when there is cloud cover).

 

While we undertake this transition, the Gas Import Jetty will be used to provide a reliable and secure supply of gas for quick-start gas powered electricity generation which, in turn, is needed to enable a cost-effective energy transition to occur, both for AGL, and for the Australian electricity sector.

 

Even if the supply of gas from unconventional fields in Queensland was available to the pipeline connecting them with Victoria, Victoria would not be able to supply enough during peak winter gas demand due to the limited capacity of the pipeline. Pipeline capacity constraints and the lead times of new gas production underpin the proposals for LNG imports. Gas supplies from the North West Shelf are not available to Victoria because there is no pipeline across the Nullarbor. 

 

We understand your concerns around the selection of Crib Point, particularly considering its environmental significance. It was not a decision we undertook lightly. We investigated several different sites across Australia, including Crib Point in Victoria, Port Adelaide in South Australia and Port Kembla in New South Wales. The evaluation process considered several factors including access to key gas markets, cost of incremental pipeline transmission, availability of suitable land for onshore facilities, cost of existing or new build pipelines, existing investments within AGL’s wholesale gas portfolio and marine and port suitability. 

 

Crib Point was selected due to its existing jetty, already importing liquid fuels and only requires bed levelling to shave off some high points at the berth.

 

A FSRU has in-built flexibility because unlike a coal fired power station, which takes seven or eight years to build and leaves a lasting imprint, Crib Point will host a FSRU which will receive gas from the most competitive source via a jetty which has been there for 50 years. If the demand for gas reduces, we can bring in less gas. The FSRU is likely to be leased and if the facility is no longer needed the FSRU will be unmoored and will sail away.

 

We are looking into whether the existing 26 or more FSRU’s operating around the world are being evaluated. However, it is up to the experts who conduct the report as to whether this will be included in their reports. There is a requirement from the Victorian Government to assess these types of potential impacts. Under s.4.2 of the EES Scoping Requirements, the biodiversity requires the assessment of impact such as, entrainment, discharges, noise in relation to flora and fauna and leaks or spills.

 

We agree Western Port is an important environmental asset that must be cared for and recognise the strongly held community views about the unique environmental significance of Western Port as a Ramsar site. 

 

To even consider this project, we must plan for any possible environmental impacts (the worst case scenarios) assuming they could happen no matter how unlikely.   We cannot guarantee that the project would have no effect on the environment, and we realise for many in the community, this is not good enough. The Victorian Government has required us to undergo an Environment Effects Statement to assess the potential effects of the project on the environment and assess alternatives to avoid and mitigate effects. The Minister for Planning Richard Wynne said “The EES will investigate the proposal’s effects on native vegetation, wildlife and marine life as well as Aboriginal cultural heritage areas.” This is currently in progress.

 

A final EES assessment is made by the Minister for Planning, not AGL. If these potential environment effects cannot be acceptably addressed the project would not go ahead. 

The AGL Board has not made a final decision on whether or not to proceed with the proposal.  A final investment decision will not be made until the final EES assessment is complete.