Tamboran Resources (ASX:TBN) and Daly Waters Energy have entered into binding agreements with APA Group (ASX:APA), Australia’s largest gas pipeline operator, to develop the Sturt Plateau Pipeline (SPP). The pipeline will support the proposed natural gas Shenandoah South Pilot Project, in which Tamboran and Daly Waters Energy are joint venture partners.
The 37km pipeline will connect the proposed Sturt Plateau Compression Facility to the APA-owned Amadeus Gas Pipeline, the key delivery point for gas volumes under a Gas Sales Agreement with the Northern Territory Government.
Tamboran and Daly Waters have committed to contract all foundation capacity on the SPP from the start of operations until at least 2041.
APA will build, own, and operate the pipeline, which is expected to begin construction in the second half of 2025, with operations commencing in the first half of 2026.
Tamboran Managing Director and CEO Joel Riddle said: “With natural gas serving as the largest source of electricity generation in the Northern Territory, Tamboran is proud to play a critical leading role in ensuring a reliable energy supply for Territorians – keeping the lights on and air conditioners running.”
Energy Regulator rejects proposal
In a separate announcement, APA has reported on its high-voltage Basslink underwater cable, which connects Tasmania’s electricity grid to Victoria.
Currently, the cable is classified under a Market Network Service Provider (MNSP) framework. This means that APA submits bids for transmission capacity to the Australian Energy Market Operator (AEMO) at various intervals. The AEMO collects bids from all providers, stacks them from lowest to highest, and prioritises cheaper supply first to meet demand. The highest-accepted bid determines the spot market price for an interval, and this is paid to all successful bidders.
APA was seeking to have this classification changed, and to instead operate the Basslink interconnector under a Transmission Network Service Provider (TNSP) framework. TNSPs are essentially monopolies under the oversight of the Australian Energy Regulator (AER). The AER pre-determines revenue based on building, maintenance and operation costs, plus a reasonable return on investment, and this amount is paid regardless of daily fluctuations in demand. In effect, TNSPs are guaranteed a stable, predictable income stream.
However, the AER has issued a draft decision not to change the regulatory classification of Basslink.
APA CEO Adam Watson commented: “If today’s draft decision… is confirmed as final, APA will seek to maximise the value of the asset, in the best interest of APA’s investors, by progressing our plans to trade Basslink capacity in the spot market, in line with market rules, once the Hydro Tasmania contract expires on 30 June 2025. We will be able to leverage the existing systems and capabilities in place across APA.”
Further consultation with stakeholders, including APA, is expected before the AER makes its final decision.
Shares in APA Group closed 1.51% lower yesterday at $7.18.
Shares in Tamboran Resources closed 3.85% higher at $0.14.