AGL Energy Ltd has signed a “foundation gas transportation agreement” with Epic Energy which will allow the construction of a $140-million gas pipeline to complete the final link between the Queensland, South Australia, and New South Wales gas markets. AGL, based in St Leonards, New South Wales, says that the deal fits squarely with it’s aim of recognizing the importance of key utility infrastructure, whilst avoiding direct investment.
The pipeline, known as the QSN Link, will be a 14-in (350-mm) diameter, 180-km long, high-pressure line which will transport gas from Queensland to connect with the Moomba-Adelaide pipeline system and the Moomba-Sydney pipeline. AGL’s managing director, Paul Anthony, said the agreement will underpin the owner’s financing of the pipeline, and was another significant step in cementing AGL’s “four corners” strategy of securing upstream gas and electricity generation linking to its downstream markets. He went on to say that the pipeline will create the final link to form a “truly interconnected eastern Australia pipeline network, as well as delivering gas into AGL’s wholesale gas hub at Moomba at prices below existing contract levels.
“This link is strategically important in monetizing and delivering the coal-seam methane AGL acquired with our recent upstream gas investment in, and gas contract with, QGC,” he said. AGL has an agreement for the transport of up to 390 petajoules (PJ) of natural gas along the Wallumbilla to Moomba corridor from January, 2009, over a 15-yr period with attractive and flexible options to increase this amount in the future. Epic Energy will build, own and operate the QSN Link and new compression facilities as an extension of its South West Queensland Pipeline.
Paul Anthony went on: “This AGL-Epic initiative will materially enhance the overall competitiveness of our gas supplies into the east coast energy markets by driving basin-on-basin gas competition and pipeline-on pipeline gas competition. It will introduce new competitive sources of gas into the New South Wales, South Australia, and Mt Isa gas markets to facilitate our future gas-fired power generation growth, and help secure supply into all the eastern states. Committing to a pipeline initiative such as this one was only possible following two recent upstream and downstream investments made by AGL – the acquisition of a 27.6% stake in QGC in conjunction with entering into a 20-year, 740-PJ, gas contract, followed by the recent acquisition of the Torrens Island Power Station in South Australia.”
Following the recent winter gas shortages in southern markets, AGL has ensured an important element in the development of this pipeline project is that the pipeline design will permit gas to flow from Queensland to the New South Wales and South Australian gas markets entirely avoiding the existing Moomba and Ballera gas plants. This will provide a level of security of gas supply to AGL’s customers from 2009 onward that will be superior to other gas retailers in the market and reduce the company’s exposure to gas supply interruptions. Construction of this pipeline will commence immediately, with completion of the project scheduled for December, 2008.