By Rob Wheals, Squadron Energy CEO
Australia has everything it needs. The best wind and solar resources on the planet, an increasingly renewable grid, and now, sitting completed at Port Kembla, a piece of infrastructure that ties it all together.
We need access to gas. It provides firming for renewables to allow coal to retire. It’s flexible, and it’s reliable. The opportunity now is to make sure our energy policy takes full advantage of that flexibility.
Global shocks, fractured trade and increasingly volatile energy markets are testing energy systems around the world and raising a very practical question for Australia: can we physically deliver secure, affordable energy where it’s needed, when it’s needed?
That question matters more as our electricity system becomes increasingly renewable. LNG also gives us increased security of supply by having the ability to access global markets, many times the size of our domestic gas market.
Wind and solar can provide enormous volumes of low-cost electricity, but every system also needs firm capacity for the periods when renewable output falls or demand rises sharply.
Gas has an important role in providing that flexibility. But having gas somewhere in Australia is not enough. It has to be able to reach customers when they need it.
That is where infrastructure matters.
LNG regasification is not a new or untested concept. More than 45 countries import LNG, and LNG infrastructure is used around the world as a ‘virtual pipeline’ to move gas within domestic markets where pipelines cannot easily do the job. It provides another supply route and helps energy systems respond to disruption. Europe rapidly expanded its regasification capacity during the 2022 energy crisis as Russian pipeline supply collapsed. New Zealand is now procuring its own floating regasification facility to strengthen energy security and provide backup during periods of tight supply.
Australia’s challenge is different, but the principle is the same: resilient energy systems need options.
Southern Australia is becoming more dependent on gas from further north as local production declines. But north-south pipeline capacity is limited.
That means gas can be stranded in the north while NSW and Victoria supplies tighten during periods of peak winter demand. Prices can spike when cold weather, outages, low renewable output or other supply disruptions combine to put pressure on the system.
This is not simply a question of whether Australia has enough gas. It is a question of whether enough gas can physically get to customers at the right time.
LNG terminals provide another route – and Australia’s has already been built just over an hour south of Sydney – in Port Kembla.
The terminal is Australia’s only completed LNG regasification terminal. It is privately funded, connected to the Eastern Gas Pipeline and capable of bringing large volumes of gas directly into the southern market.
That means gas landed at Port Kembla can supply NSW and, through the existing pipeline network, flow south into Victoria. It also opens up a pathway for Australian gas from Queensland, the Northern Territory and Western Australia to reach southern customers through LNG shipping and regasification.
That flexibility is valuable.
Pipelines will remain essential and are highly efficient when large volumes move steadily. But building enough permanent pipeline capacity to meet short periods of extreme winter demand can leave substantial capacity underused for much of the year. Flexible infrastructure can complement pipelines by providing another route when the system is under pressure.
That is exactly the kind of resilience Australia should be building into its energy transition.
The Federal Government’s proposed Domestic Gas Reservation Scheme is a genuine and welcome step. But reserving gas does not, by itself, get that gas to NSW and Victoria when north-south pipelines are constrained.
That is the gap Port Kembla Energy Terminal can help close.
The scheme should recognise all practical and commercially available ways of moving reserved gas to Australian customers – pipelines, LNG shipping and regasification, or combinations of them. The objective should not be to favour one type of infrastructure over another. It should be to get gas to customers reliably, competitively, and at the lowest practical delivered cost.
Australia has already built a critical part of that solution at Port Kembla. The opportunity now is to make sure our energy policy recognises the flexibility it provides.
Hear Rob Wheals, Squadron Energy CEO discuss the big picture at the AFR Energy & Climate Summit, Hilton Sydney, 13–14 October.