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Murray River Communities Gas Feasibility Study

Key findings

The Stage 1 Study identified three potential connection points for a new transmission main to supply the study area: Mildura, Echuca and Bendigo. However, it found that only the Bendigo gas network has the available capacity to supply the Study area without significant additional network enhancement costs.

In examining the Bendigo connection, three Bendigo options were explored against the study objectives of maximising potential connections and future growth in the study area:

  1. Bendigo Express (a direct pipeline from Bendigo),
  2. Bendigo East, and
  3. Bendigo West.

Estimated loads based on current demand and development for each of the Bendigo East and West options equate to approximately 50% of estimated current gas demand in the Study area, with Swan Hill alone representing 33% of all estimated gas demand.

The Study found that current gas demand in the Murray River region is primarily residential. Residential demand is considered to be expensive to supply because the dominant use is heating, which is spread across just a few months of the year – from late April to September. As such, significant capacity in the pipe must be reserved to service the load when it peaks on a cold day, relative to total throughput during the year. This demand profile, coupled with large distances, a relatively low population density and the current limited industrial demand in the region impacted adversely on project economics.

As such the Study found that the cost of building any of the three transmission main options to supply natural gas to the Study area cannot be fully recovered from the currently identified loads. The option that best met the study objectives and required the lowest unit charge is the Bendigo East (with a 100mm transmission pipeline) option. This option involves a transmission pipeline extending north of Bendigo to Swan Hill and servicing the towns of Gunbower, Leitchville, Cohuna, Kerang, Tresco, Lake Boga and Murray Downs to maximise the potential load.

GHD estimate that a minimum capital investment of $67.7 million[1] is required to supply natural gas to the communities under the Bendigo East 100mm option. This amount consists of $35.4 million to construct the 201km transmission main and $32.3 million to build the supply main and in town networks to reticulate gas to the eight communities supplied under this option.

To supply natural gas to the eight communities identified under the Bendigo East 100mm option at a price equivalent to that paid by gas users in Mildura, GHD estimate that a capital subsidy of approximately $39 million is required. This $39 million shortfall consists of $26 million for the transmission main, and an additional $13 million for the distribution and in-town reticulation.

To avoid a situation where future growth and investment opportunities in the Study area are limited by supply capacity, a larger capacity main (150mm) would be highly desirable. GHD estimate that the additional upfront capital cost for a 150mm pipeline is estimated to add around $18 million to the project (resulting in approximately $85.7 million total capital investment). This in turn would increase the subsidy required to around $57 million.

Compressed Natural Gas (CNG)

Following the findings of Stage 1 of the Feasibility Study, the Victorian Government included Murray River communities in an $85 million Request for Tender (RFT) for supply of natural gas using alternative delivery solutions, including compressed natural gas (CNG) and/or liquefied natural gas (LNG).

The RFT included $30 million for the supply of natural gas to Murray River communities (including $15 million in Commonwealth funding).

Following the conclusion of the RFT process, on 30 September 2014 the Government announced that the Victorian Government had reached agreement with Brookfield Infrastructure Group (Australia) to deliver natural gas to Swan Hill, Robinvale, Kerang and Nathalia using a CNG delivery solution.

[1] Prices are as at June 2012.

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