The Future of Gas in NSW

Jones Day

Jones Day

The New South Wales Government recently announced that the land available for gas exploration will be significantly reduced.

The Future of Gas Statement published by the New South Wales ("NSW") Government outlines plans for the state's gas industry to improve certainty and reliability on the future of gas exploration and production in NSW. The "balanced approach" proposed by the government considers the need for secure and affordable gas supply to support economic development and employment but has been met with criticism from the industry.

There is a four-point action plan that involves: 

  • Improving certainty about future gas production and exploration; 
  • Enabling downstream users to access gas to unlock economic benefits;
  • Using gas for firming capacity where it is the most economic option to ensure reliability; and
  • Enabling gas-related infrastructure.

The land available for gas exploration will be significantly reduced by 77%, which, alongside limited renewals of exploration licences in the Narrabri region, is intended to reduce the footprint of land covered by exploration and resolve historical land use conflict. The reduction of exploration licences will kill off so-called "zombie licences", which have remained undeveloped for years.

The only gas project to receive government support in NSW will be the Narrabri Gas Project and its potential extensions, with the government planning to utilise interstate imports supplemented by liquefied natural gas imports ("LNG") from overseas to achieve supply security. The government will also support the development of LNG import terminals at Port Kembla and Newcastle. 

The statement notes the government's commitment to reducing domestic emissions and contemplates future investments in lower-emission initiatives. However, it notes that gas will still have an important role in the transition to renewables given that the change will likely take several decades. 

This statement follows complaints by NSW customers concerning reduced supply and high prices of gas. The industry has responded to the new plan stating it will cost customers, jobs, and businesses. The outcome of the statement could mean that NSW customers will have limited access to new gas supply sources, with businesses and manufacturers likely placing reliance on gas imports from other states or overseas at increased costs.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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