Gas utility AGL has slammed the decision by the NSW government to restrict exploration for coal seam gas around residential areas, which could substantially restrict the company's activities in Sydney's south west.
The NSW cabinet yesterday decided to impose a two kilometre buffer between exploration areas and residential areas, in a bid to take the heat out of public unease over exploration for coal seam gas, with the move immediately sparking pressure from environmental groups for further restrictirons to be imposed.
AGL said the government's move will "add to the gas supply crisis that New South Wales is facing as existing supply contracts roll off between 2014 and 2017".
"This roll-off of contracts will coincide with very substantial increases in demand for gas as LNG export projects come on line in Gladstone. The absence of multiple new sources of supply in NSW will add to substantial upward pressure on gas and electricity prices in the state."
Along with its exploration south of Sydney, AGL has significant exploration acreage in the Hunter Valley, which it is hoping to tap to supply the Newcastle market in particular, where it is building a gas storage facility.
Newcastle pays some of the most expensive prices for gas in the country, since it is located at the end of the gas supply pipeline which extends from central Australia.
AGL said it relinquished prime agricultural land used by the wine industry from its exploration licence in the Hunter following community opposition.
"The Hunter remains a critical future source of gas for NSW," AGL said. "AGL will be seeking an urgent meeting with the Premier and Deputy Premier to clarify the details of this proposal."
Other gas explorers in NSW also expressed concern over the O'Farrell government's decision, with both Dart Energy and Metgasco seeking to meet with government officials to clarify the planned restrictions.
"The decision today will impact gas users and risk thousands of jobs, pushing industry out of NSW,” Dart's chief executive, Robbert de Weijer, said.
This proposal will add to the looming gas supply shortage that New South Wales is facing as existing supply contracts expire between 2014 and 2017, he said, hitting supply and pushing up the cost of gas.
Metgasco, which is operating in the north of NSW said it is seeking an urgent meeting with the government since the changes could significantly effect its exploration.
Dart is active around the Hunter Valley.