Energy crisis: AGL knew about looming gas shortage
EMBATTLED energy giant AGL was warned of a potential major gas shortage years ago despite claiming it could not see the coming squeeze when it decided to sell $2 billion of gas overseas rather than to local buyers.
NSW
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EMBATTLED energy giant AGL was warned of a potential major gas shortage years ago despite claiming it could not see the coming squeeze when it decided to sell $2 billion of gas overseas rather than to local buyers.
But The Daily Telegraph can reveal senior figures at the company repeatedly warned there would be a massive shortfall starting almost two years before AGL struck its deal to export the gas.
AGL now faces accusations from Coalition MPs that it is deliberately keeping gas supply to the local market low to artificially inflate prices.
Despite NSW and Victoria facing a severe gas shortage, AGL has begun exporting 254 petajoules of liquefied natural gas (LNG) to overseas buyers under an agreement struck in December 2015.
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The exports began only a few months before the energy regulator warned the federal government there could be severe gas shortages of up to 108 petajoules next year.
AGL, already being urged to keep Liddell power station open past 2022 amid threats of rolling blackouts, last week defended the deal claiming things may have been different if it knew a major Victorian coal station would be mothballed.
“The transaction with (Queensland’s Gladstone Liquefied Natural Gas) was made prior to the announcement of Hazelwood’s closure, which significantly increased the demand for gas for power generation,” AGL senior manager of sustainable strategy Richard Clifton-Smith said on Friday. “If advanced notice of Hazelwood’s closure was provided, this would have impacted AGL’s decision to sell the gas.”
But AGL head of economic policy, Tim Nelson, was warning in December 2013 that there would not be enough gas to export and keep local businesses and homes supplied.
“It is clear that unless more gas is found and developed, there is unlikely to be enough for both domestic consumption and exports over the medium- to long-term,” he wrote.
Mr Nelson and AGL chief economist Paul Simshauser reiterated the warning in a note published in March 2014: “the issue facing policymakers is that even under ideal operating conditions, there is insufficient gas production, pipeline and storage capacity during the height of winter to meet system-wide peak gas demand.”
Liberal MP Craig Kelly said it was “another example of AGL speaking with a forked tongue”. But an AGL spokeswoman said “while AGL had forecast there could be a shortfall, we had adequate gas to meet the needs of our customers until ... Hazelwood closed suddenly” and there was less supply than expected from the Longford gas plant.