Hilton Grugeon evokes 'hydrogen future' as Santos buys Hunter Gas Pipeline, reigniting gas controversy over climate change

Santos has also positioned the pipeline as hydrogen compatible infrastructure but in the years before hydrogen becomes a commercially feasible mainstream fuel source the pipeline would also be able to provide a reliable supply of gas to the equally controversial Kurri Kurri gas generator proposed by the federally owned Snowy Hydro.

Mr Grugeon and his partner Garbis Simonian declined to put a sale price on the gas line, which is yet to be built but which has approval to run from Wullumbimba just over the Queensland border south to the Hunter.

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In a statement to the stock exchange, Santos said it had bought Hunter Gas Pipeline Pty Ltd, which owned the approved underground gas pipeline route.

Santos said the route passed close to the company's Narrabri Gas Project. It said the pipeline would be designed to transport hydrogen as "customer demand evolves during the energy transition".

Santos said its goal was to work with infrastructure developers and owners to build the pipeline and "deliver much-needed gas to east coast domestic markets in the shortest time frame possible".

The Hunter Gas Pipeline has been an environmental controversy from the time of its proposal and environmental groups are scrambling this afternoon to react to the news.

Prominent environmental group Lock The Gate said Santos had bought into "a fight it can't possibly win", with "with hundreds of landowners along the pipeline route organised and ready to defend their businesses and the region's high quality soils".

"The only solution to volatile gas markets and profiteering gas giants is to switch to renewables now," Lock The Gate national co-ordinator Carmel Flint said.

"More gasfields will damage land and water and won't do anything about high gas prices which are caused by cartel-like behaviour by gas companies, including Santos."

Bruce Robertson from the clean energy lobby Institute for Energy Economics and Financial Analysis (IEFFA) said the Santos purchase made the construction of the pipeline more likely than it was under its previous owners, who probably lacked the financial wherewithal to build it.

As the Newcastle Herald has reported, one of Mr Simonian's businesses, Weston Aluminium, has suffered problems in recent times, including a major fire at its processing plant in Weston in November last year.

The plant suffered a metal spill last month.

Mr Robertson said that at the same time, environmental opposition to the project was extremely strong in the Hunter, and Santos would not be able to build it without getting present opponents "onside".

He said the main thing for Santos was its Narrabri gas field but the pipeline would also allow more gas to be supplied to the Kurri turbines, which were otherwise limited by a shortage of gas supply.

Mr Simonian agreed, saying connection to the Hunter Gas Pipeline would allow the Kurri plant to generate electricity for longer periods of time.

Mr Robertson also referred to the recent ACCC report on the Australian gas market, which he said showed the gas industry operating as a price-fixing cartel, meaning that that Santos's Narrabri project connected to markets by the Hunter Gas Pipeline would not help bring domestic gas prices down.

"We have seen gas supply triple since 2014 and prices have gone from $3 and $4 a megajoule to $55," Mr Robertson said.

Santos' clean fuels president Brett Woods said pipeline would provide a pathway to deliver gas from the Narrabri Gas Project to the domestic market, although it would need a short connection to the main pipeline, and this was being planned.

"At a time when the ACCC is forecasting domestic gas shortfalls, our Narrabri project, which is 100 per cent committed to the domestic market, will inject new supply into southern domestic markets and put downward pressure on gas prices for NSW businesses, manufacturers and families," Mr Woods said.

"It will make more gas available to cover peak demand periods, especially in circumstances where gas power generators are called on unexpectedly to replace wind, solar and coal outages, as we have seen this winter.

"Acquiring the Hunter Gas Pipeline route is an important step for the Narrabri project, with appraisal drilling planned later this year, pending various native title and environmental management plan approvals.

"Once fully operational, Narrabri has the potential to deliver more than half NSW's gas demand, creating a more secure, local and affordable supply for businesses, manufacturers and families."

Santos said the Hunter pipeline once built would provide a second route to southern markets for Queensland gas and adding competition to the domestic market.

It would remove occasional supply constraints in existing pipelines, which happened when demand for Queensland gas was highest in southern markets.

Santos said Queensland was the main source of new gas for the entire east coast, and the Hunter pipeline would be "vital to secure southern supplies over time".

"The route of the underground pipeline was specifically chosen to ensure minimum impact on communities, landholders and the environment, but there is room to make further improvements as needed," Mr Woods said.

"There are also off-take points at several regional towns along the route to Newcastle, providing a new opportunity for gas supply to power generators, manufacturers, businesses and households in the Hunter region.

"The cheapest gas supply will always be the gas on your doorstep because that reduces transport, storage and other handling costs. We will work in partnership with landholders and the local councils that represent communities the pipeline will traverse, to deliver new gas supply to domestic markets and maximise social and economic benefits of both the Narrabri Gas Project and the Hunter Gas Pipeline."

Subject to some remaining government approvals construction could start in early 2024.

The Herald is seeking comment from other environmental groups including Lock The Gate, a vocal opponent of the pipeline.

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