By Nick Toscano
A pipeline has been rerouted in the Bass Strait to ramp up output from Victoria’s offshore gas fields as energy companies and regulators race to boost supplies in south-eastern Australia.
Following warnings of low gas reserves and soaring prices in Victoria, Tasmania and South Australia, the 50-year-old Gippsland Basin joint venture began raising production levels from 970 terajoules to nearly 1020 terajoules of gas a day earlier this month.
A gas rig at the West Barracouta wells in the Bass Strait.
The venture, owned by ExxonMobil local subsidiary Esso in partnership with Woodside Petroleum, said it had been working with the Australian Energy Market Operator (AEMO) and gas pipeline company Jemena on lifting its output. The Longford gas plants, near Sale in Gippsland, Victoria, are now on track to record their biggest yearly production for five years, coinciding with strong demand and high prices.
“By utilising one of our pipelines that would traditionally carry fuel offshore to bring additional gas onshore, we have been able to increase production rates,” Esso production manager Geoff Humphreys said.
Wholesale prices for gas – a fuel commonly used in heating, power generation and manufacturing – have been surging as a result of a burst of cold weather driving up heating demand, commodity prices spiking due to the war in Ukraine, and a series of unit outages at Australian coal-fired power stations.
AEMO has imposed rare price caps of $40 per gigajoule on the Sydney and Victorian wholesale gas markets after prices blew out last month and caused the collapse of gas company Weston Energy.
“AEMO is monitoring gas supplies and will continue to work with market participants and stakeholders to minimise the risk of supply shortfalls,” a spokesperson said.
The additional gas from the Bass Strait comes as Queensland’s big producers of liquefied natural gas temporarily tripled their combined contribution to the pipelines feeding South Australia, Victoria and NSW from 100 terajoules a day to 307 terajoules earlier this month.
Gas producers Santos and Beach Energy said last week they would spend tens of millions of dollars boosting production from South Australia’s Cooper Basin to target an additional 15 terajoules of gas a day by the end of the year.
Extra gas from the Bass Strait and elsewhere will have little immediate effect on prices but may help shore up supplies and put downward pressure on prices in the longer term.
Soaring domestic gas prices fuelled calls this month from manufacturing groups and trade unions for the Albanese government to restrict how much gas can be sent offshore. Victorian Energy Minister Lily D’Ambrosio said the real issue driving Australia’s current energy crisis was the absence of a domestic gas reserve, arguing too much gas was being exported.
“Let’s be frank about this – the whole country does not have a shortage of supply of gas,” D’Ambrosio said.
“It is nonsensical that a country that produces more than sufficient gas is actually struggling as we are now because too much of it is being sent overseas, and gas producers are making an absolute killing.”
Australia is the largest producer of liquefied natural gas, but most of it is produced in the nation’s north, far away from demand centres in the south-east, and is sold on long-term contracts to overseas buyers. About three times as much gas is shipped offshore than is consumed locally.
Victoria is Australia’s largest consumer of residential gas, with more than 2 million households and businesses using the fossil fuel for heaters, cooking and hot water.
While gas is in hot demand this winter, efforts are accelerating to reduce the use of fossil fuels to avert catastrophic levels of global warming.
The Andrews government is conducting public consultations for a Gas Substitution Roadmap that will outline plans to achieve Victoria’s emissions-reduction targets including using electrical appliances for heating rather than gas, improving energy efficiency and focusing on alternative fuels such as hydrogen or biogas.
The Bass Strait oil and gas fields have traditionally supplied up to half of Australia’s east-coast gas demand but have been in rapid decline. With a lack of new gas projects capable of replacing diminishing Bass Strait supplies, energy authorities are concerned about winter gas shortages emerging from as early as 2023 unless more is brought to market, while gas-reliant manufacturers in Victoria and NSW have seen their bills soar.
This year’s elevated production volumes may bring forward the Bass Strait gas fields’ depletion. Humphreys said Esso’s ability to ramp up production of Gippsland gas had been made possible by its ongoing investment in bringing more supplies online, including the $400 million West Barracouta project, one of south-eastern Australia’s largest undeveloped gas fields.
“We are currently progressing further investments, including the Kipper Compression project announced earlier this year, which will bring on much-needed additional supply,” he said.
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