ACCC says Australia has sufficient gas to meet local demand and grow exports
Australia has more gas on hand than previously expected, the ACCC has found, easing the threat of domestic shortages and allowing larger exports.
Australia has sufficient gas supply to meet its domestic needs and to grow LNG exports by 9 per cent until early 2024, according to the country’s competition watchdog.
The Australian Competition and Consumer Commission’s latest gas inquiry report, to be released on Wednesday, shows gas supplies in the first quarter of 2024 will be 5.9 petajoules higher than forecast in June and 13 per cent higher than what was produced a year earlier.
Export demand in the first quarter of 2024 will be 8.2PJ higher than the June forecast or 9 per cent higher than actual LNG exports a year earlier, with the increase worth an extra $2bn for gas producers.
Even if all uncontracted gas was exported, there would still be an overall east coast surplus of 1.4PJ in the first quarter of next year.
The report will be seized on by the Albanese government as evidence that its tough approach to the industry has borne fruit, though the improved supply picture has benefited significantly from favourable weather.
Labor last year introduced a mandatory code of conduct and an emergency cap on gas and coal prices in a bid to contain increases to power bills.
Jim Chalmers said the ACCC report validated its decision while acknowledging Australia’s economy would rely on resources “long into the future”.
“Our Energy Price Relief Plan is deliberately designed to deliver better, fairer prices for Australian consumers at the same time as we honour our trusted role as an energy supplier and it’s really pleasing to see more evidence that it is working as we intended,” the Treasurer said.
“We know that Australians are under the pump and for many, energy prices are a real concern – that‘s why we’ve taken decisive action to take the sting out of power prices – relief that the Coalition voted against.”
While the findings will ensure Resources Minister Madeleine King refrains from triggering legislation that curtails overseas shipments, the country’s energy executives are likely to worry that it will quell efforts to stimulate more gas production.
Ms King has the authority to exercise the so-called Australian Domestic Gas Security Mechanism - which restricts LNG exports if there is insufficient local supplies.
“This latest advice from the ACCC shows the gas outlook for 2024 is improving thanks to the sustained effort of government and industry to ensure there is sufficient gas supply at reasonable prices to meet domestic demand,” Ms King said.
Energy companies have struggled to win regulatory and local support for new gas developments and easing improvement in the supply outlook may dampen the urgency of authorities to address a looming shortage.
Exxonmobil’s Gippsland Basin joint venture, which historically supplies more than 70 per cent of southeast Australia’s domestic gas demand, is rapidly dwindling, and industry sources said favourable weather conditions could quickly erode any surplus.
Australia uses much of its gas during winter when cold conditions trigger increased demand for heating.
Australia experienced a benign winter and gas storage was near brimmed while ExxonMobil, the dominant supplier of gas to the country’s east coast, did not need to produce as expected and will as a result have more gas on hand.
ACCC warns east coast gas supply shortfall ‘possible’
But Australia faces an El Nino weather system that is expected to bring hot conditions to Australia’s east coast that increases demand for cooling and authorities worry about the capacity of the country’s ageing coal generators to keep up.
If Australia experiences a spate of coal outages, gas generators - which typically only run during an evening peak - would need to run near round the clock, quickly denting any surplus.
Still, the ACCC’s expectation of a surplus will be cheered by major gas producers such as Shell and Origin Energy, which had worried that its lucrative exports could be restricted if evidence emerged that the country had insufficient domestic supplies.
