Approve new gas developments now or sleep walk into disaster energy industry warns
New gas fields must be urgently approved to avoid disaster, energy producers demand as Victoria moved to blame the looming crisis on exports and developers.
Australia must urgently approve new gas developments if it to avoid a catastrophic impact to the economy, as Victoria — one of the states on course to be hit the hardest — has insisted the looming crisis is because there are insufficient supplies to be found.
The Australian Energy Market Operator on Wednesday warned gas generators may need to run off diesel during periods of high demand as soon as 2025 — an alert that Samantha McCulloch, chief executive of the Australian Energy Producers, said must be urgently heeded to.
“The warning bells are getting louder as report after report forecasts gas shortfalls and exposes the urgent need for new east coast gas supply,” Ms McCulloch said.
“How many warnings will it take before governments act to enable the urgent development of gas supplies? The policy failure is underscored when diesel, a higher emitting and more expensive fuel, may be needed for electricity because governments have stifled new gas projects with approval delays and compounding interventions.”
The decline in Australia’s domestic gas supplies comes as offshore gas from Victoria’s Bass Strait — the traditional bedrock of the country’s supplies — rapidly depletes.
Several developments could begin construction but works are on pause while they wait for regulatory approvals.
Santos’s Narrabri gas project and the expansion plans of Senex Energy, backed by Gina Rinehart and South Korean steel giant POSCO, remain sidelined awaiting regulatory approvals that have dragged on for months.
A shortfall will cause substantial harm to Australia’s $2.5 trillion economy and stoke concerns about energy security.
While the impact would be felt across the entire country, Victoria would likely be hampered the most. Victoria is Australia’s most gas dependent state, with homes and businesses reliant on the fuel. Victoria’s use of gas markedly increases during winter as demand for heating rises, but the state’s heavy manufacturing sector is also a major user.
Victoria’s energy Minister Lily D’Ambrosio moved to point the finger of blame at others, insisting the problem is the fault of Queensland’s LNG industry and a failure of gas companies to find new supplies — suggestions that drew the ire of the country’s energy industry.
“Gas companies in Queensland are putting their export profits ahead of domestic supplies. That has been the case now for a number of years. In fact, Queensland exports so much that it continues to rely on Victorian gas to meet its own domestic needs,” Ms D’Ambrosio said.
“Exploration for new suppliers has been largely unsuccessful. There has been some new gas but nowhere near enough to meet the demand.”
Gas industry sources said the comments were an attempt to distract from the roots of the problems: a reluctance of states and territories to support new gas.
“The Victorian government continues to ignore repeated warnings from independent authorities, putting its economic and energy security at risk,” Ms McCulloch said.
Victoria has a moratorium on fracking and coal seam gas exploration, despite having untapped resources, and it imposed strict new emission policies that will force the closure of coal power stations by 2035.
By closing coal power stations, Victoria’s reliance on gas is expected to increase. Gas is used as a peaker, with gas power stations fired up quickly and designed to run when there is insufficient electricity generation. Once coal — which acts as baseload generator — is retired, Victoria will be overwhelmingly powered by renewable energy but during periods when the sun is not shining or the wind is not blowing sufficiently to meet electricity demand then gas shapes as the only viable solution to meet the shortfall.
Victoria insists it is taking meaningful action by moving to reduce demand for gas. Australia’s second most populous state has the largest resident demand for gas in the country and the state Labor government has moved to ban all new gas connections.
Analysts said the move will make a marginal benefit, however, as electricity generation demand grows and major commercial and industrial users are unable to switch away from gas.
With issues mounting, energy industry executives have said the only viable solution now is an LNG import terminal, where Australia’s east coast ships in cargoes of gas during the winter months.
Squadron Energy’s chief executive Rob Wheals said there is no excuse for having to turn to diesel.
“Squadron Energy’s Port Kembla Energy Terminal can help meet the needs of the forecast gas shortfall in Australia’s eastern states. There is no need to burn dirty, dear, diesel. It’s expensive and pollutive,” Mr Wheals said.
“Today we can announce that the Terminal’s construction is 90 per cent complete and that the pipeline connecting the terminal to the Eastern Gas Pipeline has been completed.”
Viva Energy – which owns and operates the Geelong oil refinery – is proposing developing a LNG import terminal but its plans were hampered when the Victorian government asked for more detail on the project’s environmental impact.
Viva chief business development and sustainability officer Lachlan Pfeiffer said has nearly finalised the studies and will then seek public consultation before then seeking government sign-off by the end of the year.
“I think that they realise that there’s not the capacity to pipe this stuff down from Queensland even If you could divert that gas which goes overseas. It would take decades and billions of dollars and billions of dollars to build or upgrade new pipelines from Queensland to Victoria,” Mr Pfeiffer said.
“It’s becoming more apparent that we need to solve this gas shortfall position, which is all about gas depletion of the Gippsland basin. We think we’ve got the best solution for that, which is an import terminal.”
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