APA Group launches east coast gas pipeline expansion to avoid ‘disastrous’ LNG imports

Pipeline company APA Group is expanding its gas network to ship 24 per cent more gas from northern Australia to the east coast to counter a looming shortage that has Victoria and NSW considering “disastrous” LNG imports.

APA will spend an initial $71 million on the five-year expansion to enhance the grid in the short term and start early-stage works on three other projects that will add significantly more transport and storage capacity from 2028.

The group said the plan would ensure there was sufficient capacity for producers to supply domestic gas to NSW and Victoria out to 2032, avoiding forecast annual shortages.

However, it is contingent on “early” support from gas producers and regulatory approvals.

Chief executive Adam Watson said the expansion was critical to giving Australia energy security and enabling it to transition to cleaner fuels while supporting a “more affordable and lower emissions energy system”.

“These investments will help the Australian economy avoid the disastrous option of importing higher cost, higher emissions LNG,” Mr Watson said.

The expansion was announced as APA disclosed a 54 per cent fall in first-half net profit to $34m, influenced by higher higher interest and finance charges.

However, underlying earnings before interest, tax, depreciation and amortisation were 9.1 per cent better at $1 billion, boosted by last year’s $1.7 billion purchase of Alinta Energy’s renewable power generation assets in WA’s Pilbara.

The deal gave APA a platform to offer better energy solutions to remote WA mines looking to replace diesel generators with electricity to meet carbon emission targets.

Group revenue for the six months to December 31 were up 7.1 per cent to $1.4b.

Directors lifted the interim dividend to 27¢ from 26.5¢ previously.

Mr Watson said east coast LNG imports into one of the world’s biggest gas producers would “undermine domestic energy security and expose Australia’s energy market to global supply chains and prices”.

“In contrast, APA’s investment will further support the development and commercialisation of Australia’s domestic gas industry, delivering critical security of supply and economic and employment benefits”.

APA noted that more than 90 per cent of the east coast’s identified gas resources were located in north and north-east Australia, including 31,000 petajoules in in the Surat and Bowen Basins, with another 200,000Pj thought to be in the Northern Territory’s Beetaloo Basin.

Its two proposed immediate upgrades for this year and 2026 provide for the conversion to gas of a pipeline that used to carry methane from Moomba in South Australia to Sydney, and a capacity expansion of the main separate Moomba to Sydney pipeline to enable it to carry more gas during the summer, or off-peak, periods.

Mr Watson said APA was “agnostic” about whether domestic gas or LNG supported increasing demand for energy in Australia, because it would be transporting and storing both.

“However, ... we need to ensure our market and policy settings translate into gas that is low-cost, low emission and reliable,” he said, citing price data that suggested LNG cost more than northern domestic gas.

“The case for domestic gas is conclusive.”

The gas industry and the Australian Energy Market Operator have warned that new sources of gas will be necessary to avoid shortages on the east coast from as early as 2026.

That has raised the prospect of Victoria and NSW importing LNG to meet the expected hortfall, a move that would likely increase power prices.

APA shares were 7.5 per cent higher at $7.06 as at 10.20am.