Wendy Pugh, Melbourne – In an upheaval of Australia's energy market, petroleum and pipeline companies are racing to nail down multi-billion-dollar projects to deliver new supplies of gas across the country's vast distances.

Plans totalling A$9 billion ($4.59 billion) to build thousands of kilometres of pipeline are on the drawing board. They promise to transform Australia's former monopoly gas sector, opening up competition as the industry moves towards its dream of a national pipeline grid.

Australia's populous south-east corner – which includes its two biggest cities, Sydney and Melbourne – has since the 1960s mostly received gas from the Cooper Basin in central Australia and the Gippsland Basin off the coast of Victoria. But the decline of the Cooper Basin, the expiry of long-term contracts and rising gas demand have opened the door to new projects, while industry deregulation has spurred competition. "By the latter half of this decade there should be sufficient market opportunities for another gas source to supply gas at the right price across the nation," says Australian Pipeline Trust Chief Executive Jim McDonald.

Piece of the action

The question of who will supply this gas has the promoters of a raft of projects, both big and small, jostling to sign up customers to underpin their plans. Australia has gas reserves of around 130 trillion cubic feet, enough for about 100 years, but more than 80 percent are offshore north and northwest Australia, thousands of kilometres from major cities. This has triggered ambitious pipeline proposals, including a US$3.5 billion undersea project led by Exxon Mobil to pipe gas from Papua New Guinea to Queensland. A series of delays, however, has seen the momentum shift to two competing plans for delivering gas from the Timor Sea off northern Australia.

Epic Energy, majority-owned by El Paso Energy Corp and Dominion Resources Inc , plans a A$1.5 billion pipeline extending 2,200 km to send Timor Sea gas from Darwin to Moomba in South Australia, assuming gas will be brought ashore from 2004. A rival Australian Pipeline Trust plan for a staged A$2.4 billion development aims to build a 4,500 km pipeline bringing Timor Sea gas first to eastern Australia and then south.

Companies have also been spurred to draw up plans to bring on undeveloped gas fields from the Gippsland, Bass and Otway basins offshore Victoria. Two competing projects propose to link Victoria with South Australia, which faces the most immediate supply problems, aiming to move into that market ahead of Timor Sea gas. Another new pipeline plan should deliver gas to Tasmania in 2002, while coal seam methane producers in New South Wales and Queensland are also seeking a piece of the action.

Long-term goals

Australia's long-distance gas network has already about doubled over the 1990s to around 17,000 km, and in the longer term there are hopes for a trans-continental pipeline linking eastern Australia with the giant undeveloped fields off north-west Western Australia. However, sceptics sound a note of caution, saying the industry is well-known for talking up projects long before there are firm customer contracts, let alone secure financing. "They make a lot of statements and promise a lot of things, but behind it all you really have to question the commercial logic," one analyst said.

Project proponents say much of the new demand is expected to be driven by power generation. The Electricity Supply Association of Australia estimates Australia needs 4,000 to 7,000 megawatts of extra power generation by the end of the decade, on top of 3,000 MW of renewable generation already mandated for 2010.

Australia is also under pressure to cut greenhouse gas emissions from coal-fired generation, while gas is also suited to meeting rising demand for more flexible peak-demand power plants.

Queensland last year indicated that from 2005 state retailers should source at least 13 percent of the electricity they sell from gas-fired plants. Major investment proposals such as liquefied natural gas plants, gas-to-liquids export projects and other downstream activities, partly attracted by Australia's vast gas reserves, are also increasing the chance new gas will be brought ashore.