Pipelines not pipedreams: Why investing in gas will improve productivity

Investing in gas pipelines will deliver a clear return to the nation through cheaper electricity prices and higher productivity. by Nick cater.

The Energy Minister often talks a lot about the pipeline of investment, the renewable energy projects that are waiting for a final investment decision (FID).

He seldom talks about investment in actual pipelines: the arteries that will deliver gas to industry and homes for the foreseeable future.

The boost to productivity that boosting gas pipelines brings was one of the many topics that should have been on the agenda at the Government's economic reform roundtable last week, but wasn't. It should have been high up the list, next to the word URGENT in bold type, for there are few other categories of infrastructure capable of delivering such a clear return to the nation in relatively short order.

The re-election of the Albanese Government pushes any realistic hopes of nuclear power into the 2040s. In the meantime, the best hope and perhaps the only hope for the economy is an abundance of domestic gas at an affordable price.

Reducing the price of gas by connecting new fields and easing congestion on the East Coast pipeline will take the pressure off power prices, encourage new industry and jobs and enable us to build the energy-hungry data centres that will allow us to reap the benefits of AI and keep our data out of foreign hands.

Electricity will not only be cheaper but also more reliable as a solution to the intermittency and synchronicity challenges presented by wind and solar.

The good news is that there are sufficient proven reserves in Australia to last hundreds of years. Yet, the obstacles associated with it have increased considerably over the last 15 years.

In these circumstances, a government that merely pays lip service to the importance of gas will not be enough. We need leaders who are prepared to challenge the dismal narrative and explicitly champion gas. Two tasks stand out:

1. Work with the states and territories to fast-track new reserves. The Gunnedah Basin in NSW and the Beetaloo Basin in the NT must be top priorities.

2. Make the East Coast distribution network fit-for-purpose. Improve the capacity of the north-south pipeline to remove bottlenecks and extend it to the Beetaloo Basin.

Reform is essential. The Government must tackle the scourge of lawfare. As the MRC noted in its 2024 report "Open Lawfare", Australia has the most climate lawsuits in the world on a per capita basis. This offers a template for action. Approvals must be streamlined and duplication between the state, territory and federal governments removed.

The infrastructure plan must learn from the mistakes made in the renewables sector and return to the first principles of public sector management outlined by Dr Brian Fisher in his 2020 report for the Menzies Research Centre, "Unleashing the Potential of Gas." New proposals must be subject to a comprehensive cost-benefit comparison. The Government should crowd in private capital and prioritise projects that do most to increase supply and competition.

Fisher highlighted five gaps to fix:

1. Connecting Narrabri with Newcastle

2. Expanding capacity from Moomba to Adelaide

3. Bi-directional flow on the Eastern Gas Pipeline between Sydney and Melbourne

4. A connection with the Bowen Basin flowing south

5. Consideration of connections with the Beetaloo Basin to Darwin and/or Wallumbilla.

Since the report was published, test drilling by Empire Energy and Tamboran Resources has confirmed the Beetaloo's potential to supply the domestic market and expand Australia's LNG exports.

A new pipeline between the Beetaloo and Mt Isa could make a material difference to East Coast gas prices, meeting Fisher's requirements by increasing both supply and competition.

The Albanese Government's failure to tackle the infrastructure challenge is inexcusable. The National Gas Infrastructure Plan, commissioned by the Morrison Government and published the previous year would have been sitting on minsters’ desks when Labor took office in 2022. It listed four urgent projects that would reduce a forecast gas shortfall by 2024, including the expansion of the South-West Pipeline in Victoria. Yet the report was inexplicably shelved.

Instead, the Government commissioned the Future Gas Strategy report, published last year. Although the terms of reference were heavily skewed towards emissions, it pointed in the right direction by confirming that gas will remain part of our energy mix until 2050 and likely beyond. The report recommended expanding gas infrastructure, including pipelines and LNG import terminals.

The reaction was instructive. The Strategy provoked a mini-backbench revolt with six MPs complaining to the ABC that they had been "blindsided". MP Kate Thwaites said to the broadcaster: "The focus has to be on the transition to renewable energy, not prolonging fossil fuels."

Gas is a touchy subject in Labor ranks, which helps explain why Resources Minister Madeleine King and Energy Minister Chris Bowen have effectively sat on their hands, no doubt with the Prime Minister's encouragement.

It also explains why the Albanese Government delayed approving the expansion of the North West Shelf fields until after the election.

Ironically, at least one pipeline is on track to be completed in the next few years — but it won't be carrying gas.

In 2023, the Queensland Government made a foolish commitment of $983 million to build a pipeline to carry water from the Lower Fitzroy River to Gladstone. It was promoted as enabling a green hydrogen industry that would transform Central Queensland into a hub for clean energy exports.

In 2023, Bowen said green hydrogen was "a big deal for Gladstone", driving jobs and investment.

In June, the Gladstone hydrogen hub proposal collapsed when developers withdrew from a $14 billion green hydrogen export project in Gladstone, despite nearly $90 million in federal government funding commitments.

The water pipeline may offer marginal benefits for Gladstone. Yet, if productivity is our focus, a marginal benefit is not sufficient to justify the expense or the opportunity cost. A billion dollars invested in improving the Bruce Highway, for example, would doubtless have contributed more to productivity.

There is much that the Government must do to reverse the slump in productivity. None of it will be easy.

Investing in pipelines and abandoning pipe dreams would be a productive place to start.