Esso Australia delivering more gas to Australians when they need it most

Commentary from Dylan Pugh, Chair ExxonMobil Australia, in The Australian on 7 June 2022

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Esso Australia delivering more gas to Australians when they need it most

Every day, Australians rely on Esso Australia’s supply of Gippsland gas.

As a major supplier to the domestic market, we understand the critical role natural gas plays in Australia’s economy. In addition to heating our homes and producing electricity, natural gas is a vital feedstock for the manufacture of countless products that support our way of life. All of our Gippsland gas goes to the domestic market and our people are working hard every day to deliver the energy Australia needs.

We also appreciate the pressures businesses are currently experiencing due to the war in Ukraine, together with cold weather, coal plant outages, and intermittent renewable power generation resulting in increased demand for gas fired power generation. The current situation highlights why natural gas is crucial for ongoing energy security, to support the growth of the economy and to maximise our international competitive advantage. As the Federal Treasurer commented, Australia is currently facing a “perfect storm” of challenges in the energy space and questions are being asked as to what can be done in the short term. 

The Esso Australia team has responded quickly to these unprecedented conditions and we are doing everything possible to help meet the current energy challenges in eastern Australia. The Gippsland basin has supplied natural gas to south east Australia for over fifty years and our team is working to deliver more gas to Australians when they need it most. This year we expect to deliver our highest annual gas production from the Gippsland Basin in the past five years, with every single molecule produced going to Australian homes and businesses.

We have been able to step up to meet Australia’s energy needs because we have continued to invest in bringing new gas supplies on line, and because our team of highly skilled people is dedicated to getting the most out of our available resources. What’s made this possible is detailed planning, incredible teamwork and significant capital investments in new developments, such as our $400 million West Barracouta development in the Gippsland Basin, likely to be the largest new source of domestic gas supply for the Australian market this decade.

Our investment decisions are based on long-term fundamentals and more investment from the industry can be brought on board – with the right policy settings.

Over the past few days we have seen headlines quoting extremely high spot prices. However as the ACCC confirmed in its latest Gas Inquiry Interim Report, 90% of commercial and industrial customers receive their gas on long-term contracts with many locking in prices less than $8/GJ for their 2022 gas rather than taking their chances on volatile spot markets. The majority of our Gippsland gas is supplied to customers under many competitive supply agreements that meet the needs of local manufacturers, and we’ve contracted over 70 petajoules of natural gas directly with industrial customers in the last three years alone. 

Natural gas will play a critical role in Australia’s future cleaner energy mix; replacing coal as a lower-emitting energy source, supporting manufacturing to create valuable products and enabling more renewables to be integrated into the grid.

Australia has the technical expertise, geology and infrastructure already in place to be a world leader in decarbonising natural gas and energy-intensive industries. Today ExxonMobil is the world leader in carbon capture and storage, with a capacity of 9 million metric tons per year - that’s equivalent to planting 150 million trees or taking 2 million passenger vehicles off the road. Esso Australia is undertaking early front-end engineering design (pre-FEED) studies to determine the potential for carbon capture in the Gippsland Basin and we are in active discussions with local industries which may be interested in accessing the hub to reduce emissions from their operations.

The energy challenges we are experiencing today in Australia and around the world highlight the importance of having multiple supply sources to ensure energy affordability and security. Esso Australia is proud of our role responding to these challenges by delivering gas to our customers when and where they need it. Australia will need diverse solutions if we want to maintain reliable access to the energy that powers jobs, keeps the lights and heaters on, and the hot water flowing.