Incitec Pivot signs natural gas supply deal

Fertiliser and explosives maker Incitec Pivot has signed a natural gas supply deal with onshore gas junior Central Petroleum, in an effort to avoid high gas prices.

AAP reports that Central Petroleum is developing a massive onshore area in the Northern Territory containing oil and gas. Under the non-binding deal Central Petroleum will supply 15 petajoules of gas per annum to Incitec Pivot.

As The Australian reports, Incetec is following the lead of its competitor in the explosives market Orica. Both are seeking to avoid the expected jump in gas prices that will accompany the increase in natural gas exports.

The issue has caused significant disquiet within industry, with some have calling for government intervention to reserve gas supplies for local use.

In order to move its gas, Central Petroleum requires an 800km, $1.2 billion pipeline linking the Northern Territory to the east coast. The concept has received the support of the Council of Australian Governments.

However, while pipeline operator APA has expressed interest in building the pipeline, no funding has been secured.

Incitec chief executive James Fazzino said he wants to see more gas suppliers but added that it is difficult for them to enter the market dominated by four companies – Origin Energy, Santos, AGL and QGC.

"If the Australian east coast gas market is to function effectively, it needs supply competition which it doesn't have at the moment," Fazzino said.

"We see the development of new players in the emerging space as the key to unlocking the gas issue … to households for heating, industrial users and even gas exporters who can purchase surplus production."

Earlier this week, Incitec posted a net profit decrease of 33 per cent for the year to September 30.

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