The electricity supply for Darwin and Katherine is relying on emergency gas deals struck with LNG exporters, but neither the gas companies nor the Northern Territory government will reveal the cost to taxpayers or comment on the severity of the situation. 

Power and Water Corporation (PWC) has a long-term supply agreement with the Italian-owned Eni to take gas from its Blacktip gas field in the Joseph Bonaparte Gulf, south-west of Darwin. 

However, over the past 18 months, gas supply from the field has reduced so much that PWC has had to rely on emergency agreements to take gas from the two LNG export plants in Darwin Harbour to keep generators running.

Eni has been trying to fix the supply issue at Blacktip by drilling a new well and overhauling an existing well.

An offshore jack-up drill rig called the Valaris 107 completed the work at Blacktip from November to May costing Eni about $120,000 a day, according to a report published by the rig's owner.

However, the drill rig's activity does not appear to have fully fixed Blacktip's supply issues and it has now left the gas field.

Gas production forecasts still reduced

Eni has forecast the field to produce 55 terajoules of gas per day, according to data from the Australian Energy Market Operator.

If this forecast production continues, it will come to just over 20 petajoules per year.

The latest statistics available show that in 2020-21, the NT used 43 petajoules of gas for electricity supply, according to data published by the federal Department of Industry, Science and Energy. 

A PWC spokesperson said the corporation "continues to work with Eni on gas supply matters from the Blacktip field".

"Power and Water has a number of contingency arrangements in place with offshore and onshore suppliers that are used as required to ensure ongoing electricity supply to Territorians," the spokesperson said.

"These gas supply and trading arrangements are commercial-in-confidence."

Essential Services Minister Selena Uibo's office referred ABC Rural to PWC's statement and made no further comment.

Eni has not responded to several requests for comment.

Supply issues to continue until at least 2028

PWC has a contract to supply excess gas not used for electricity generation to Incitec Pivot's Phosphate Hill mine in north-west Queensland.

On Tuesday, Incitec Pivot announced it had been told by PWC that "based on newly acquired interim data" from Eni, there was "an unexpected potential reduction in the gas reserves available from the Blacktip gas field".

Incitec Pivot said the gas shortfalls were expected to be ongoing until the end of its supply agreement in mid-2028.

The company estimated the impact of the shortfall in gas could cost it up to $90 million by the end of the financial year.

"Incitec Pivot has a dedicated gas team assessing its commercial and legal options in relation to the reserves shortfall notice and future supply," Incitec Pivot's ASX announcement said.

Eni's $5.5 billion supply contract with PWC is set to end in 2034.

How much is this costing taxpayers?

ABC Rural has estimated PWC has been buying top-up gas via its emergency supply agreements with Santos and Inpex regularly since at least the 2020/21 financial year.

Neither PWC, the minister, Inpex, or Santos would reveal how much the emergency gas is costing taxpayers, all citing commercial-in-confidence agreements.

ABC Rural understands the gas supply agreement PWC signed with Eni in 2009 locked in a price that was much lower than current gas spot prices.

Industry sources have told ABC Rural it is unlikely Inpex and Santos are selling PWC emergency gas at the same price as Eni's Blacktip gas.

Santos in negotiations to contract gas supply

Last month, Santos said it was in negotiations with the NT government to contract gas from its Bayu-Undan field in a deal outside its emergency supply agreement.

Gas from the field, 500 kilometres north-west of Darwin, has been piped to the Darwin LNG plant and sent for export since 2004, but it is now reaching its end-of-life.

The field was expected to end production in late 2022 but has continued to supply more gas than expected.

In May, Santos chief executive Kevin Gallagher said Bayu-Undan was still producing "at a reasonable rate".

"It will get to a point, though, where it gets below the point where it makes sense to run an LNG plant," Mr Gallagher said.

"So, we're looking at whether we can produce at a lower rate — even though the LNG plant would be shut down — to produce gas into the domestic market, which could then come east as well as to northern Australia."

In March, a gas company operating in the Beetaloo Basin said it was looking at the potential to sell some of its first gas from the developing gas field to the Northern Territory market to increase supply.