The Northern Territory's Power and Water Corporation has been forced to buy gas from LNG export facilities in Darwin Harbour to ensure it can continue to run its power plants.
The corporation revealed in NT estimates on Thursday that its regular gas supplier had "not met delivery obligations".
"Power and Water has at times used pre-existing alternate gas supply arrangements with other local producers, including LNG facilities, to ensure ongoing electricity supply to Territorians," a statement reads.
The government corporation had a long-term supply agreement with Italian energy company ENI to take gas from the Blacktip field, south west of Darwin.
The 25-year, $5.5 billion dollar deal had been seen as a stable agreement, which allowed the NT to be shielded from the electricity price hikes being experienced on the east coast.
But Power and Water Corporation chief executive Djuna Pollard told estimates that its supply of gas from ENI had been interrupted.
"We have been made aware by ENI that they have been facing some gas supply challenges over the course of the 2021/22 financial year," she said.
She said the corporation was working with ENI to resolve the issues.
The cost of buying gas elsewhere was similar to the amount paid for ENI's gas, according to corporation.
"The reduction in gas supply will not impact Territory homes or residents," the corporation's statement reads.
Problems at Blacktip
Gas from ENI's Blacktip gas field is processed at the Yelcherr gas plant near Wadeye, before being piped into the Bonaparte Gas Pipeline.
The plant experienced serious supply issues in May.
The plant produced a maximum of 40 per cent of its capacity during an eight-day period and on some days produced no gas at all, according to data from the Australian Energy Market Operator.
Yelcherr gas plant's output had dropped from about 110 terajoules per day to 60 terajoules per day over the past three years.
The Blacktip field started production in 2009 and had an estimated production life of 25 years.
ENI had not responded to a request for comment.
Supply issues hit bottom line
The corporation bought more gas than it needed under the ENI supply agreement and sold the excess gas.
Incitec Pivot signed a 10-year agreement in 2015 to buy gas from the corporation to supply its Phosphate Hill fertiliser plant south of Mt Isa.
The issues with ENI's supply impacted the corporation's ability to sell its leftover gas.
"The gas revenue and the margin from our gas business contributes greatly to our bottom line," Ms Pollard said.
The corporation had a projected net debt of $1.3 billion next financial year.
It is considering legal action over ENI's supply agreement.
"We are in the early stages of [legal proceedings] … we will be taking appropriate action as we are required to do as a commercial entity," Ms Pollard said.
