By Mike Foley and Nick Toscano
Australia is likely to become a gas importer despite being a major global exporter of the fossil fuel, with experts declaring time has run out to develop new sources of supply to avert crippling shortages.
Homes and businesses in Victoria and NSW have been put on high alert for gas shortfalls this winter and the Australian Energy Market Operator last month warned the east coast gas market could be in yearly deficits by 2028 unless new supply came online.
Andrew Forrest’s Port Kembla LNG import terminal project could kick off gas imports to Australia for the first time.
Experts now say the only feasible solution is for the southern states to build one or more import terminals so gas can be shipped in from Queensland, Western Australia or overseas.
“We’ve run out of time,” Rick Wilkinson, the chief executive of Australian energy consultancy EnergyQuest, said.
While Australia is one of the top exporters of liquefied gas, massive volumes of production from Queensland’s gas fields are locked into long-term export contracts to LNG buyers in Japan, Korea and China, and gas produced in WA cannot be transported to the eastern states.
The southern states’ gas shortfall is driven by dwindling supply from fields in Bass Strait, which have historically provided up to two-thirds of their demand.
State governments have rolled out schemes to drive down gas usage, ban gas hook-ups in new homes and encourage people to switch to electric appliances. But the market operator said gas use was not falling fast enough to avoid shortfalls.
A new gas field cannot be built in time and the existing pipeline from Queensland’s vast gas fields is already running at capacity amid elevated demand for heating and power this winter.
Wilkinson said an LNG import terminal was the best option in terms of supply and price. Gas bound for export is super-chilled, poured into ships and sent overseas.
“A single LNG import terminal can supply more gas than the entire Queensland-to-southern pipeline, which is already stretched to capacity during peak demand,” Wilkinson said.
“In terms of price forecast, you’re looking at the likelihood of access to cargoes that would be at a competitive price point for domestic buyers.”
Mining billionaire Andrew Forrest’s privately owned Squadron Energy is building what could become Australia’s first LNG import terminal in Port Kembla on the NSW South Coast.
Another option is Viva Energy’s proposal to begin importing LNG at the site of the Geelong oil refinery in Victoria. The first gas was initially planned to arrive by this winter, but a final investment decision on the project has since been delayed due to a drawn-out environmental approval process and requests from the state government for more information on its potential local impacts.
However, environmental groups oppose gas imports. They argue governments have ample time to speed up switching households from gas to electric appliances. Meanwhile, local gas producers say more should be done to tap new supplies around the country to boost energy security.
“Utilising our resources and utilising storage can hopefully get us to the point where it diminishes the requirement or excludes the requirement for import terminals,” Brett Woods, the chief executive of gas producer Beach Energy, said.
Woods also warned importing gas could increase local prices for manufacturers that relied on gas for energy or as a feedstock by lifting their exposure to the volatile global commodity market, putting local jobs at risk.
He is calling for governments to focus on opening new gas fields and building more storage facilities ahead of imports.
“I think the challenge with any import terminal is that the price of the international gas that comes into our market will re-base the energy prices on the east coast to a higher level.”
Squadron Energy chief executive Rob Wheals said on Tuesday its Port Kembla terminal was 96 per cent complete. However, it has yet to sign supply deals with local buyers needed to start importing gas.
“Construction of Squadron Energy’s Port Kembla energy terminal is nearing completion and offers a clear solution to the gas supply challenges we are already facing, all while avoiding the need for new gas fields, which would lock in carbon emissions for the long term,” Wheals said.
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