Australia has sufficient gas supplies for 2024 but it is precarious, says the ACCC
Australia has sufficient gas to meet domestic demand throughout 2024 but it will be tight and weather dependent.
Australia’s east coast has sufficient supplies to meet its domestic demand throughout 2024 but it will be precarious and the grid will be reliant on favourable weather to prevent price spikes, the competition regulator has concluded.
Australia is one of the world’s largest exporters of LNG, but gas supplies to the east coast are dwindling and developers are struggling to secure approvals for new projects amid heightened social pressure.
The outlook from the Australian Consumer and Competition Commission illustrates the parlous state of Australia’s east coast gas market. Shortfalls during 2024 would add upward pressures on the bills of households and businesses, and potentially would interrupt the operations of major manufacturers.
The figures from the ACCC highlight how extremely tight supplies will be over the next 18 months.
The ACCC said it expected a 27 petajoule (PJ) east coast gas surplus for next year if the LNG producers export all their currently uncontracted gas.
It predicted a 90 PJ surplus if the LNG producers export only their currently anticipated spot sales.
The ACCC said this surplus would need to be piped across the east coast as southern states were expected to experience a shortfall. Considerable transport and storage capacity would be required to deliver Queensland’s surplus gas to those states, it warned.
ACCC commissioner Anna Brakey cautioned that the outlook would eventually be entirely dependent on the weather.
“Weather and electricity market conditions have a strong influence on the amount of gas-fired generation we need in the energy mix, so the demand outlook remains somewhat uncertain,” Ms Brakey said.
“While the overall east coast is projected to have surplus gas next year, it is imperative that gas flows from Queensland to the southern states, and that there is enough storage for it.”
Energy industry sources said the report failed to recognise the structural problems facing the east coast.
For the surplus to materialise, NSW and Victoria would need to fill the gas storage during the summer months when domestic demand is lower. NSW and Victoria can therefore not afford any disruptions to supply. But Australia’s east coast has been beset in recent months by regular interruptions of gas supplies.
The tight market could be aided by a recent expansion by APA Group of its east coast gas pipelines, but industry sources said the market would be tight.
Even if the southern states can replenish their stores of gas, industry sources said NSW and Victoria would be precariously placed and a similar event to what was seen in 2022 could happen again.
During winter 2022, a spate of coal-fired power stations experienced outages, placing an onerous strain on gas to prevent blackouts. As a result, Australian gas supplies were run down at an extreme pace and NSW and Victoria were unable to see a significant increase in supplies from Queensland – as pipelines were already running at near capacity.
The crisis was a key driver as to why households and businesses would see power bills increase by at least 20 per cent from July 1.
The country’s electricity generators have increased spending on maintenance to ensure reliability, which in turn would lessen the load on gas generators during high demand periods such as cold days.
Still, pressure on Australia’s east coast gas market is only expected to be exacerbated as supplies from traditional sources slow.
ExxonMobil – one of Australia’s largest producers of domestic gas – this year said its Gippsland Basin joint venture, which historically supplies more than 70 per cent of southeast Australia’s domestic gas demand, was rapidly dwindling.
ExxonMobil said the number of producing wells had shrunk from 122 in 2010 to 68, and would drop to 36 by winter 2024.
The structural deficit leaves Australia’s east coast facing an uncertain future. New developments have been curtailed in NSW and Victoria, while new pipelines would be needed to unlock potential supplies in Queensland and the Northern Territory.
The recent moves by the government to cap gas prices has also chilled work on new developments, although concessions from Labor may spur some developers to resume work.
New state government policies could also dampen domestic demand. Victoria and the ACT are pushing aggressively to wean households from gas by offering cheap finance to Australians considering shifting to electricity.
Still, gas is predominantly consumed by manufacturers, and while many want to switch to renewable energy, few will be able to do so and demand is likely to continue to be elevated, at least in the near future.
To ease the shortfall, billionaire Andrew Forrest has proposed a gas import terminal in NSW, but has been given only a lukewarm response from the industry.
The impending shortfall in gas supplies could renew interest in Mr Forrest’s Port Kembla LNG import terminal business as generators struggle to source alternative supplies.