Recent pipeline investments committed to by APA: What does it mean?

APA’s investment in the East Coast Gas Market (ECGM)

In February, APA Group announced a five-year plan to expand the East Coast Gas Grid (ECGG). The aim is to increase gas transport capacity from north to south by a target of 24% and develop new storage facilities in southern markets. This will help meet the demand for gas on the ECGM^[1]. This plan builds on APA's investments over the last four years in Stages 1 and 2 of the grid expansion, which have already boosted APA's grid capacity by around 25%.

APA has committed around $75 million for this expansion over the next two years. This includes $40 million for two immediate grid improvements that have reached Final Investment Decision (FID). Another $35 million will fund the initial work for Stages 3, 4, and 5 of the Plan. These stages will focus on developing new expansion and storage projects over the medium term.

Stage 3 will focus on the proposed Bulloo Interlink. This is a new 380km, 28-inch pipeline connecting the SWQP to the MSP. It also includes two new compressors on the MSP. APA says this project would gradually increase MSP capacity from 590 TJ/d to 700 TJ/d. SWQP capacity would also rise from 512 TJ/d to 605 TJ/d, and capacity between Young and Melbourne would increase from 190 TJ/d to 229 TJ/d.

Stage 4 involves building the new Riverina Storage Pipeline in New South Wales, along with new compression and pipeline infrastructure. This pipeline is designed to store 200-500 TJ of gas. The idea is to use this stored gas to supply the Uranquinty Power Station or meet other nearby demand in New South Wales or Victoria.

The rationale for APA’s investment

For several years, the Australian Energy Market Operator (AEMO) has warned about potential gas shortfalls in the ECGM. Forecasts have indicated that supply might not be enough to meet actual demand, especially in the southern states, which face the greatest risk.

These warnings have highlighted the need for investment in gas supply and the capacity to deliver it. APA's east coast pipeline network is crucial for moving gas from northern to southern states. Recently, this network has sometimes struggled to keep up with demand, showing the need for investment to ensure key pipelines can transport enough gas. APA has responded by investing to increase capacity, and this announcement details their further commitments.

APA states its plan aims to ensure enough capacity for domestic gas to reach southern markets. This would help avoid the shortfalls predicted by AEMO and the ACCC. They mention that:

“More than 90% of the east coast’s identified gas reserves are located in the north of Australia, including over 31,000 petajoules in the Surat and Bowen basins. The Northern Territory Government estimates that there are over 200,000 petajoules of gas in place in the Beetaloo, which can be unlocked and moved south to meet projected demand.”

“These investments will help the Australian economy avoid the disastrous option of importing higher cost, higher emissions LNG, which will undermine domestic energy security and expose Australia’s energy market to global supply chains and prices.”

Therefore, APA believes that expanding pipelines will make more northern gas available and avoid the need for other supply sources, like LNG imports.

What this might mean for the ECGM

The ECGM is still in a delicate situation, with balancing supply and demand remaining a challenge for the industry. However, an important update from the Australian Energy Market Operator's 2025 Gas Statement of Opportunities report suggests the risk of a shortfall has lessened slightly compared to their 2024 view. Shortfalls are now not expected until potentially 2028, rather than as early as 2026^[2]. Changes in both market demand and supply forecasts mean current supplies should meet predicted demand until 2028.

AEMO's report highlights APA's pipeline expansions, among other supply and infrastructure projects. The increased capacity of APA's grid is expected to help meet demand over the next few years. We believe APA's ongoing investment in the east coast grid is definitely needed to support the ECGM in the near future.

However, our demand projections still indicate that even with APA's increased pipeline capacity and other investments like extra storage, the ECGM will likely need LNG imports to meet future demand. The challenge of meeting demand is expected to grow significantly from the early 2030s. At the same time, key suppliers (like Longford) are predicted to provide much lower volumes. These two factors together create a serious challenge for the ECGM. Our assessment suggests that LNG imports will be increasingly necessary from 2030 onwards to meet demand, especially during seasonal peaks. Regardless of APA's commitments, LNG imports will be needed.

Therefore, even with investments in upstream supply and infrastructure by companies like APA and others, the long-term outlook for needing LNG imports doesn't change. These import terminals will still need to be built if the market, particularly demand, follows our expected trends. The market has a long way to go before available supplies can consistently meet long-term demand expectations.

[1] APA media release, 25 February 2025. Available at https://www.apa.com.au/news/asx-and-media-releases/apas-east-coast-gas-expansion-plan

[2] AEMO, 2025 Gas Statement of Opportunities Report. Available at: https://aemo.com.au/-/media/files/gas/national_planning_and_forecasting/gsoo/2025/2025-gas-statement-of-opportunities.pdf?la=en