Reforming Australia’s Domestic Gas Security Mechanism: guidelines

23 February 2022

Australian Domestic Gas Security Mechanism (ADGSM) Consultation
Department of Industry, Science and Resources
Australian Government

Reforming Australia’s Domestic Gas Security Mechanism: guidelines

Dear Madam/Sir

Thank you for the opportunity to respond to the Draft ADGSM Guidelines, February 2023.

Squadron Energy is an Australian-owned renewable energy investor. We are proud to have 1.1GW of renewable energy under operation, 400MW under construction, a further 400MW to commence construction and atotal Australian development pipeline of over 20GW.

We are also constructing critical projects to enable the energy transition to happen at pace without interruption to supply, such as the large-scale storage Port Kembla Energy Terminal (PKET) project. The PKET will be Australia's first LNG import terminal.

In this submission we would like to highlight three key points:

1. PKET provides a unique solution to provide certainty of supply and remove logistical transport barriers in
the transport of gas to southern states, particularly through enabling a source of firming during peak
demand or capacity in shortfall periods;

2. assessment of a shortfall should consider the availability of transport capacity, not just volumes of
production or gas purchased; and

3. the Draft Guideline should clarify the meaning of LNG facility in the definition of LNG project.

Port Kembla Energy Terminal is a key part of the gas solution – supporting firming needs for renewables and providing an alternative path to market for gas from across Australia
Once constructed, Squadron Energy's PKET will include a floating storage and regasification unit (FSRU) to enable third party LNG producers to increase supply to the domestic market. Squadron Energy can also itself procure
LNG for re-gasification and on-sale to the domestic market. The PKET is expected to store and deliver up to 130 petajoules of gas per annum, or more than 70% of the total gas needs for NSW.
The PKET is a unique and compelling project that can provide certainty of supply to meet the nation’s changing energy needs and deliver on Australia’s 2030 emission target.. In the context of the projected depletion of
Victorian gas fields and the growing need for firming as more renewables come online, PKET is a viable option to provide firm capacity across southern states depending on market needs and conditions. The terminal will support firming Squadron Energy’s expanding renewable portfolio and can assist by providing capacity for others developing firmed renewable generation.
The PKET can also remove logistical transport barriers in getting gas from across Australia to southern states.
This provides flexibility where capacity in the transmission pipelines is constrained and, in the longer-term, reduces the need for additional transmission to support north-south flows.

+61 8 6460 4949 Level 8, ABN 13 615 221 559 info@squadronenergy.com 55 Market Street ACN 615 221 559 squadronenergy.com Sydney NSW 2000 Squadron Energy Pty Ltd
In the case that there is forecast to be a shortfall in the Eastern gas market, but prior to the Minister taking any action to alleviate a shortfall through redirecting or imposing restrictions on Eastern exporters, there may be opportunities for exploring the availability of an Australia-wide industry-led solution to an identified shortfall.

In a practical sense, this could involve investigating whether gas from Northern Territory or Western Australia producers, delivered as LNG via the PKET into the Eastern gas market would be preferable, from an economic or wider commercial perspective, to curtailment of the Eastern exporters.

This additional step and using the PKET in this manner opens up more Australian-sourced solutions for dealing with shortfalls and capacity constraints in the Eastern market. It also would demonstrate to both domestic and international stakeholders that Australia is using all tools in its toolkit to address the challenges caused by shortfalls before curtailing exports.

Assessment of a shortfall should consider the availability of transport capacity, not just volumes of production or gas purchased

The Draft Guideline sets out the process for the Minister to determine whether the forthcoming quarter will be a domestic shortfall quarter.1 At face value, the proposed method for determining a domestic shortfall quarter focus on measures related to volumes of gas production or domestic gas purchase by and LNG project. A further consideration that should be captured in the assessment of a shortfall is the availability of transport capacity.
Circumstances may arise where a shortfall in supply is a result of limitations in transport capacity in pipelines as opposed to any material shortfall in the availability of gas. To this end, the PKET represents a new and additional supply channel to increase gas supply to the domestic market by providing an alternate and flexible means of transportation.
The Rules should clarify the meaning of LNG facility in the definition of LNG project

The Draft Guidelines should clarify that the meaning of LNG facility in the definition of LNG projects relates to parties involved in LNG exporting.2 Under the current definition, it is unclear whether the meaning of facility would capture PKET and the FSRU. In our view the PKET should be excluded from the definition.
Squadron does not consider it is appropriate for our assets to be covered under the Guidance because as an LNG regasification terminal and infrastructure provider, Squadron does not have the market or bargaining power held by the LNG producer / exporters, which is of such concern to the Government and ACCC.
Squadron Energy is invested to ensure that its role as an Australian-first Regas Terminal Provider is appropriately considered in developing the development of the ADGSM, so that Australians can benefit from the solutions that the PKET can provide.

1 A shortfall is defined in the Draft Guideline as ‘an insufficient supply of natural gas for Australian consumers’.
2 LNG project is defined in the Draft Guideline as ‘the entity, or group of entities, which own, control or operate an LNG facility and its associated upstream operations,
and any related bodies corporate’.

+61 8 6460 4949 Level 8, ABN 13 615 221 559 info@squadronenergy.com 55 Market Street ACN 615 221 559 squadronenergy.com Sydney NSW 2000 Squadron Energy Pty Ltd
We are happy to provide further information and assistance as required.
Your sincerely

Jason Willoughby

CEO Squadron Energy

+61 8 6460 4949 Level 8, ABN 13 615 221 559 info@squadronenergy.com 55 Market Street ACN 615 221 559 squadronenergy.com Sydney NSW 2000 Squadron Energy Pty Ltd