On 26 November last year, the Federal Government delivered the first National Gas Infrastructure Plan (NGIP) and Future Gas Infrastructure Investment Framework (Investment Framework).
These publications outline the Federal Government’s approach to ensuring that sufficient supplies of domestic gas are provided to the Australian east coast gas market. The NGIP and Investment Framework replace the interim NGIP and outline specific short and long-term gas infrastructure projects that the Government may support.
Gas demand outlook
The NGIP assumes that the demand for gas in the east coast gas market will remain relatively stable into the mid-2030s, notwithstanding the increasing penetration of renewable power generation and the development of a hydrogen industry. This is (in part) reinforced by the Government’s view of:
- the need for gas fired generation to provide dispatchable power due to increasing amounts of renewable generation capacity; and
- the potential for natural gas to be used as feedstock for the production of hydrogen.
The NGIP will be updated later this year to take into account the Government’s findings of its National Hydrogen Infrastructure Assessment (NHIA), which is currently being developed and will be published in 2022.
Short term priorities
To avoid shortfalls out to 2027, the Government proposes to support the following projects:
- development of the Golden Beach gas storage project, offshore in Gippsland, Victoria;
- expansion of the Iona storage project, near Port Campbell, Victoria;
- expansion of the South West Pipeline in Victoria; and
- construction of an LNG import terminal, with Port Kembla Gas Terminal identified as the most advanced project.
Longer term priorities
In the longer term (out to 2041), the Government adopts a more flexible approach and identifies the following priority actions:
- prove the viability of new gas resources, including development (or further development) of the Beetaloo, North Bowen, Galilee, Cooper and/or Adavale basins;
- advance infrastructure design and development for new basins;
- increase north-south transportation capacity from Queensland to the southern states; and
- coordinate gas infrastructure priorities with the NHIA.
The NGIP identifies specific infrastructure development projects that may be required to bring gas from new basin developments to the east coast market in the longer term.
Investment Framework – 6 key principles
The Investment Framework outlines the basis upon which the Government will provide support for the development of gas infrastructure projects. Government support will be guided by the following six principles:
- Mid-stream infrastructure only - The project must be for mid-stream gas infrastructure capable of delivering gas to domestic consumers (including gas transportation, processing, compression, import and regassification, and infrastructure linked to carbon capture and storage).
- Demonstrated need - The project must meet a demonstrated need in the market through either:
- being identified as a priority project or action in the NGIP; or
- otherwise demonstrating that it meets a specific market need or policy objective of the Government.
- Private sector-led - The project should be private sector led, supported by meaningful private co-investment and demonstrate why Government support is required.
- Support will only be provided where market failures or other barriers exist or where suitable commercial finance is unavailable.
- Project proponents must demonstrate that all reasonable efforts have been made to pursue other non-government support.
- Pre-final investment decision (FID) only - Support will be targeted at pre-FID activities, including:
- pre-feasibility and feasibility studies;
- geotechnical, route assessment, engineering and environmental studies;
- commercial and financial viability assessments;
- front-end engineering work and/or constructability studies;
- regulatory constraints analysis;
- short-term support to secure long lead capital items; and
- consideration of requirements to make gas infrastructure hydrogen-ready or related to carbon capture and storage.
- Viability - The project should have strong technical and commercial viability, including support from fit and proper project proponents that possess the requisite capability, and have appropriate interest from financiers.
- Enhances competition - The project should enhance competitive forces in the market, including through open access or common user arrangements.
Types of support
- Financial support - Targeted grants are anticipated through the most appropriate support mechanism, including recoupable and conditional grants and loans. Underwriting or offtake contracts are not available under the Investment Framework.
- Non-financial support - Project facilitation, including support to help navigate regulatory approval processes, may be provided.
Additional matters to note
- Specialist advice and due diligence - The Government has committed to undertaking due diligence to be satisfied of the:
- technical, commercial, and financial viability of the project; and
- claims made in the project proposal
before any financial support is provided. The potential project proponents are required to provide evidence and reports to support the due diligence process.
- Reviewing the Investment Framework - The Department of Industry, Science, Energy and Resources (Department) will review the Investment Framework at least once every two year.
- Support outside of the Investment Framework - Additional support may also be available, including through:
- the Government’s Strategic Basin Plans initiative for upstream activities;
- the Northern Australia Investment Fund; and
- State and Territory Government support.
- Completion of expression of interest (EOI) process - To support the implementation of the Investment Framework, the Government recently invited submissions to a non-binding EOI process seeking to identify proposed mid-stream infrastructure projects that the Government can help to reach FID. With submissions now closed, the Department will consider and provide advice to the Government on whether support is required to deliver on the 2021 NGIP actions.
- Build a business case - Mid-stream gas infrastructure developers should bear in mind the Investment Framework key principles while building a case for Government support. This will include demonstration of technical and commercial feasibility, attempts to obtain non-government support and any market failure to provide that support.
- Competing projects - The Government has shown a willingness to identify and support specific projects that will help to achieve its objectives. Therefore, competing project developers will need to demonstrate the superiority of their project, based on the principles.
- Customer commitments - Potential users of proposed infrastructure projects will likely be asked to contract with project developers on a preliminary basis, including for competing infrastructure projects. Such contractual commitments will need to include some flexibility.
- Impact of the election - There is some uncertainty regarding how the NGIP and Investment Framework will be impacted if the Federal Election due in May 2022 results in a change of Government.
Please do not hesitate to contact us if you have any specific queries regarding the NGIP or Investment Framework.
 Released on 7 May 2021: https://www.energy.gov.au/news-media/news/national-gas-infrastructure-plan-interim-report
 Submissions opened on 26 November 2021 and closed on 10 January 2022: https://www.industry.gov.au/news/invitation-for-expressions-of-interest-future-gas-infrastructure-investment-framework