Don Fuller, Alice Springs News
Has the NT Government been taken to the cleaners by the gas industry or is the government simply incompetent? It seems clear that it has bought far too much gas at far too high a price.
The myriad of contracts without a clear linkage to demand and prevailing prices for export appears as an increasing financial – energy mess with taxpayers again, due to face the main hit.
In addition there is the substantial financial problems associated with having to buy emergency gas supplies over Blacktip gas. It is likely that the required subsidy to make NT gas prices competitive with the East Coast prices will put an additional hit of around $60m per annum on the over-stretched NT Budget.
This may have proved to be less of a problem if gas could actually be exported to Queensland.
However, Queensland currently, and for the foreseeable future, has an excess supply of gas.
While gas shortages are expected in the southern states due to restrictions on gas exploration and development, these states will depend on excess gas that can be exported to them via available pipelines from Queensland.
In addition, the Queensland pipeline will be at full capacity and unlikely to be able to provide sufficient amounts of gas to satisfy the demand of NSW and Victoria.
The pipeline will certainly not have the capacity to accept and on-sell gas from the NT for the southern states.
No pipelines are directly available from the NT to southern states to assist meet this excess demand.
On top of this we have the NT Government’s recent decision to underwrite $75m of the $180m loan for a new compression facility to bring gas to market from the Beetaloo Basin and place NT taxpayers at increasing risk.
This raises the question as to why this guarantee wasn’t sought from the North Australia Infrastructure Facility (NAIF) a body established by the Commonwealth Government to assist in the development of industry in the north of Australia with the energy a sector named as a key target.
NAIF can provide guarantees to approved projects as part of its function to “de-risk” investment in northern Australia. While NAIF financing primarily involves concessional loans, equity investments and grants, its range of financial assistance explicitly includes guarantees to encourage private sector involvement where commercial capital is otherwise insufficient.
If the NAIF was indeed approached to guarantee this project but declined to do so, it raises the important question as to why this decision was made. Was the guarantee regarded as too much of a risk for NAIF?
More fundamentally, given the indications of a substantial over-supply of gas to the NT because of inadequate government planning and haphazard implementation, it raises the question of whether this facility is in fact needed.
The latest NT Budget predicts net debt of $12.19 billion in 2025-26, with a net debt to revenue ratio of 121 per cent.
As reported by the ABC, the budget shows the government will have to borrow $265m to fund its day-to-day operations next financial year, and another $101m in 2026-27.
The NT will be paying interest of more than $2m a day by 2026-27.
By 2028-29, the net debt is forecast to hit almost $14 billion, with even higher interest repayments.
The NT now has, by far, the highest debt per-capita by far of any jurisdiction in Australia.
Although provided with on-going expert advice on the need to reduce public sector employment, it continues to expand and is the government’s single largest expenditure, at 41 per cent of overall operating expenses.
The Northern Territory is losing more people to interstate migration with the government unlikely to meet its population target of 300,000 people by 2030.
Plagued by high levels of crime, and with a declining economy, it is becoming increasingly difficult to attract skilled workers to the Territory.
On 4 February, 2025 the Treasurer in the new CLP government, announced that the Finocchiaro Government intended to scrap the debt ceiling and would continue to spend and incur debt.
This shows little understanding of the essential economic requirement that the private sector needs to be encouraged to expand, as pointed out by a number of independent experts, by a reduction in the size of the public sector with its associated red-tape and over-regulation and economic waste.
A private sector led economic development strategy is needed for the NT, not one led by increasing levels of public sector expenditure and business decisions made by inexperienced and naïve public servants and politicians.
Emphasis should be provided on building the private sector in the fields of tourism, agribusiness, energy, resources, communication and manufacturing.
It is likely that amateurish NT Government negotiated gas contracts are about to substantially add to the escalating debt problems of the Territory and the Territory budget and do little to promote the economic development of the Territory.
These serious and compounding problems could have been avoided had the NT government followed the advice of Andrew Liveris, Chair of the NT Reconstruction Committee.
As early as 2020, Liveris recommended the NT have a gas reservation policy.
Born in Darwin, Mr Liveris has had extensive, very high level experience in international business and commerce having been an economic and business adviser to US Presidents.
However, in typical fashion the NT “girls and boys from the bush” have always reckoned they know best and ignored high level, important advice, to the continuing serious detriment of the NT.
As pointed out by Mr Liveris, a competitive gas price is essential if additional manufacturing is to locate in the Territory. This is because of the importance of energy in the cost structure of most manufacturing plants.
Methane from natural gas is made into methanol and this is used to make four main products. These are ammonium nitrate, sodium cyanide, methanol and peroxide.
There are a wide range of important products made from such inputs and these include for example, building products, paints and resins, carpeting, adhesives, agricultural products, agents for the treatment of sewage and waste water, cleaning products, fertilisers, refrigerants, medical applications, agricultural and irrigation piping, glycol for antifreeze, and surface wetters for agricultural applications – and a number of others.
Greater natural gas production can therefore help build foundation industries and propel economic growth and exports from the Territory. It can be expected to create more jobs and reduce the cost of goods.
Every major gas producing country has a form of gas reservation policy to protect local industry and the domestic and household users of energy.
Within Australia, Western Australia has a domestic reservation policy that has been operating successfully for a number of years.
Western Australia is now the strongest performing economy in Australia.
Against this background it is very difficult to understand why previous Territory Governments dismissed the idea of a gas reservation policy, claiming “it would make the Territory less attractive to investors”.
This seems to be an argument favouring the relatively small number of large gas producers that have been described by some commentators as a “cartel gouging consumers”.
Such a policy has acted to significantly undermine Territory economic development and the diversification of the economy. It results in far higher energy prices to both Territory industry as well as households.
This is particularly the case given a 5 per cent domestic reservation on INPEX would meet all the NT’s gas needs – without even factoring in demand reduction from renewable energy or domestic supply from Central Petroleum.
There are obvious and substantial problems with the manner in which expertise is organized by the NT government in a range of areas.
However, this is nowhere clearer than within the critical areas of Territory energy and how to proceed with economic development.
The previous Lawler Labor Government entered a nine-year agreement with Tamboran Resources in April 2024 to supply Beetaloo Basin gas from the second half of 2026.
The government claimed this agreement was necessary to supply the electricity grid following a decline in gas produced by ENI’s Blacktip field in the Joseph Bonaparte Gulf.
According to external analysts the deal is a “terrible outcome” for NT taxpayers that will cost billions over the next decade.
The NT Government (NTG) has argued that the agreement with Tamboran is also designed to play a major role in enabling the exploitation of fracked gas from the Beetaloo.
While the NTG has not made the cost of the deal public, the Federal Government’s Future Gas Strategy suggests the current cost of gas from Blacktip is likely to be $14/GJ.
This price would likely be the minimum for gas sourced from the Beetaloo Basin, due to the undeveloped nature of Beetaloo, the need for new pipelines and the distance from Darwin.
It is important to note that this price is likely, once transportation is included, to be well above the current price of gas on the East Coast which has been regarded as a strong potential market for NT gas excess to domestic residential and industry use.
The increased availability of gas in 2025, together with lower international prices, have led to a softening of domestic prices on the East Coast.
If the NTG was to try and sell gas not required for NT purposes to the East Coast, this will likely be undertaken at a significant loss to the government and taxpayers, as wholesale gas prices on the East Coast are lower than the likely off-take price the NT Government has struck for Beetaloo gas.
Exporting gas to east coast markets will attract gas transportation cost of around $7/GJ. This suggests NT gas prices need to be around $7to $7.5/GJ to be sustainable.
Higher gas prices will drive investment to other states – for example, WA which has gas prices below $10.00/GJ.
Whilst the gas prices contracted are reported to be “market prices”, they are likely to be much higher than comparable gas prices in WA and Queensland, with less flexible conditions involving long-term commitments, such as 10 years, which will increase the cost of energy for projects in the NT and make the NT far less attractive for business investment.
The gas contracts negotiated with the main producers, Empire, Central Petroleum and Tamboran are all “100 per cent take-or-pay contracts”. Under these take or pay contracts the buyers undertake to pay for a fixed annual quantity of gas whether or not they decide to take delivery of the gas.
This will result in the NT government having to buy more gas than required at certain times.
When all the supply contracts initiate, the gas supply is likely to be surplus to NT demand and will have to be exported to east coast markets at a loss (gas price plus transportation costs will exceed $15/GJ).
To highlight the risk exposure if surplus gas ranges between 10 PetJoule (PJ) and 20 PJ per annum, losses could range between $10m to $100m per year.
In addition, the NT pipeline system will require augmentation to transport that amount of surplus gas, further increasing the fixed costs associated with gas distribution.
To the extent this gas is used for NT power generation, the NT Government will be forced to subsidise the additional cost of power generation or pass the cost increases on to customers such as residences and businesses.
The NT Government will incur further losses if it is required to take gas before pipeline upgrades have been completed.
When the new NTG gas purchase contracts initiate within the next two years, together with Power and Water (PWC) existing gas purchase contracts, costs for gas purchases could increase from around $200m to $500m per year in 2025 dollars.
The Gas Statement of Opportunity report calculates the NT requires 18 PJ for electricity and 6 PJ for industry, or a total of 24 PJs.
It has been estimated that the contracts with Empire, Tamboran and Central Petroleum will supply over 34 PJs of gas.
In the meantime, Blacktip is currently forecast to produce at least 6PJ a year and potentially far more in the future as new wells are being drilled.
Negotiations are also underway with Santos, to contract gas from its Bayu-Undan field which will increase supply further.
This indicates a total supply over 40 PJs a year, which is well in excess of NT requirements, particularly if negotiations proceed with Santos.
Dr Don Fuller holds a first class Honours degree and PhD in economics from the University of Adelaide. He has worked as senior public servant in the Territory and as Professor of Governance and Head of the Schools of Law and Business at Charles Darwin University. He grew up in Darwin and attended Darwin High School.
This article appeared on Alice Springs News on 5 October 2025 where it is open for comment.
