A gas company looking to develop the Beetaloo Basin says the Northern Territory government could be one of its first customers for fracked gas.
Empire Energy is one of several companies approaching commercial production in the basin, 600 kilometres south-east of Darwin.
Managing director Alex Underwood said there was a "short-term opportunity … to support the Northern Territory government to ameliorate forecast gas shortfalls by bringing our pilot project online quickly".
The largest user of gas in the Northern Territory is the government-owned Power and Water Corporation (PWC), which is responsible for electricity supply.
Over the past 12 months, issues in the gas field which supplies PWC have forced it to repeatedly buy back-up gas from the LNG exporters in Darwin Harbour, Inpex and Santos.
Mr Underwood said Empire Energy's first gas production in the Beetaloo — which he hoped would commence in late 2024 — would initially be focused on local markets.
"By bringing in the Beetaloo, in a pilot phase at least, that provides more gas supply into local markets, thereby putting downward pressure on prices, but also providing a greater diversification of supply, which is really important for energy security," he said.
In late 2022, the NT government made changes to the Petroleum Act, allowing gas companies to sell fracked gas during an "appraisal phase", when they were assessing the viability of a reserve.
Empire Energy has also signed a memorandum of understanding (MOU) with PWC relating to potential gas supply from the Beetaloo Basin.
"The principal focus of that MOU is to get gas into the pipeline, so a pipeline connection would need to be approved and built," Mr Underwood said.
"That MOU does also entail the potential sale of gas to PWC, but there is no firm obligation to do so.
"We have had conversations with them [PWC] about potential sale of gas, but we are also speaking to a number of other parties that are looking for gas supply in the years ahead."
PWC did not respond to questions from ABC Rural about its MOU with Empire Energy.
Blacktip gas supply problems continue
In 2006, PWC signed a 25-year, $5.5 billion deal to buy gas from ENI's Blacktip field in the Joseph Bonaparte Gulf, south west of Darwin.
The deal was designed to give the corporation a long-term, stable gas supply, shielding Northern Territory consumers from price fluctuations in their power bills.
However, in the past 12 months, output from the gas field has reduced dramatically.
Supply from Blacktip has declined so much that PWC has had to regularly resort to its "emergency gas supply agreement" with the LNG exporters.
Neither PWC nor the Minister for Essential Services Selena Uibo would confirm to ABC Rural how often PWC has had to buy gas from the LNG exporters to make up for the Blacktip shortfall.
ABC Rural has estimated that since January 2022, PWC has had to daily top up — and on a small number of days buy all — its gas supply via the emergency agreement.
A spokesperson for PWC said it "has a number of contingency arrangements in place with other offshore and onshore suppliers that are being used as required to ensure ongoing electricity supply to territorians".
ENI is understood to have drilled a new gas well in the Blacktip field, which it hopes to bring online next month.
The company has not responded to several requests for comment.
How much is the emergency gas costing?
PWC would not reveal how much the gas from Inpex and Santos was costing taxpayers, citing commercial-in-confidence agreements.
However, several industry sources with knowledge of the Northern Territory energy market have told ABC Rural the emergency gas could be costing the government a significant amount.
ABC Rural has been told it was unlikely that Inpex and Santos were charging PWC a similar amount to what it has been paying under ENI's long-term Blacktip contract, an agreement signed 17 years ago.
PWC's 2022-23 statement of corporate intent (SCI) said it was "continuously managing risks to ensure power and water gas customers are supplied".
"This has required the business to access alternate and more costly supply arrangements when compared to prior 2021-22 projections," the SCI reads.
The SCI also shows the supply issues from Blacktip have prevented PWC from on-selling excess gas to a customer in Queensland, costing it millions.
"An overall drop in revenue by $23.4 million [3 per cent] is primarily driven by a reduction in gas supply volumes from the Blacktip gas field," the SCI said.
"Power and Water notes that should gas supply constraints currently being experienced persist, the potential for an onerous gas contract increases."
The emergency supply agreement with Santos was due to end in 2022, as Santos's Bayu-Undan gas field reached its end-of-life.
A report tabled in parliament by Territory Generation — the government entity which runs the NT's power stations — said Santos had been the supplier of gas under the PWC emergency gas agreement, but it had been testing Inpex gas to see if it was suitable for power generation.
"Inpex gas from the Ichthys field is export quality, which means it has been stripped of inert gases and has approximately 17 per cent more energy content," the report said.
"We carried out crucial trials at Channel Island and Weddell power stations to test if our machinery could handle the transition to higher energy gas and back again.
"Both trials were deemed successful."
In August last year, PWC commenced legal action in the WA Supreme Court against ENI Australia, over gas supply issues.
