Buyers sign gas deals with Senex, but stalled project still in doubt

Steel giant BlueScope and manufacturer Visy have struck deals to buy gas from Senex’s stalled $1 billion Atlas project in Queensland despite ongoing uncertainty over whether it will ever proceed to development following the introduction of new regulations governing the industry.

Investments in two domestic gas projects – Senex’s Atlas expansion in southern Queensland and a Cooper Energy project in Victoria’s offshore Otway Basin – were put on hold last year when the Albanese government imposed temporary price caps to tame soaring electricity and gas prices, and began drafting a new mandatory code of conduct for gas producers.

Senex has signed up more gas customers to its stalled $1b Atlas expansion project in Queensland.
Senex has signed up more gas customers to its stalled $1b Atlas expansion project in Queensland.

Following months of friction between the government and the gas industry over the final terms of the code, gas producers are relieved that the clampdown was ultimately not as severe as initially feared.

The rules, which came into effect on July 11, exempt smaller producers who sell all their gas domestically from ongoing price caps. They also did not include a controversial proposal for gas contracts to be struck at prices reflecting a specified “reasonable” rate of return.

While Senex is still to decide whether it will green-light the investment in the Atlas expansion, the company this week signed 10-year deals with BlueScope and Visy to supply them with 20 petajoules of gas each from the Atlas expansion project from 2026.

Senex, which is owned by Korean steel group Posco and mining billionaire Gina Rinehart’s Hancock Energy, remains in talks with the government over the impacts of the code. On Tuesday, the gas producer said the deals with BlueScope and Visy remain subject to “certain conditions”.

“Senex will work with government to satisfy the conditions as soon as possible,” it said.

Announcing the agreement with BlueScope, Senex chief executive Ian Davies said gas was an essential fuel in manufacturing processes, particularly those requiring high industrial heat loads. He added that gas-fired power plants would also play a role in the clean energy transition by backing up renewable energy when the wind isn’t blowing and the sun isn’t shining.


“Natural gas will continue to play a vital role in Australian industry in both replacing more carbon-intensive forms of energy and providing a reliable source of energy as intermittent renewables and new technologies mature and work at scale,” Davies said.

Tania Archibald, BlueScope’s head of Australian steel products, said the gas supply agreement was important for BlueScope’s manufacturing operations.

“A secure and reliable supply of natural gas to our operations is important to BlueScope and a decade-long gas deal with Senex assists in meeting this objective,” she said.

Although the world must urgently reduce its use of fossil fuels to avert the worsening climate crisis, millions of homes and businesses across south-eastern Australia are still reliant on gas for cooking, heating, hot water and manufacturing processes – and face the threat of shortfalls emerging later this decade.

The Australian Energy Market Operator is warning gas users in Victoria, NSW and South Australia are facing yearly gas supply deficits from 2027 unless more supplies are made available.

Australia is one of the world’s largest producers of gas, but massive volumes of production from Queensland’s gas fields are locked into long-term export contracts to LNG buyers, while several gas fields that have supplied southern markets from the Bass Strait for decades are entering rapid decline without new projects to replace them.

Conservation groups, including Environment Victoria, insist the forecasts leave ample time for governments to enact strategies to slash gas demand, such as switching gas heaters to electric and banning new residential gas connections, rather than lifting supplies of harmful fossil fuels that emit carbon dioxide into the atmosphere and contribute to the worsening climate crisis. However, with more than 2 million gas-connected homes and businesses in Victoria alone, there are concerns that time is running out.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

Most Viewed in Business

Source: Thanks