Demand for Australian gas could increase 30 per cent by 2050

New modelling indicates gas is the key transition fuel for Australia achieving its net zero targets, and that demand could increase by 30 per cent by mid century

Australian Energy Producers chief executive Samantha McCulloch. Picture: Tom Huntley

New modelling on the role of gas shows substantial domestic production will still be required by mid-century, regardless of which pathway Australia takes to achieve its net zero by 2050 target.

The EY modelling commissioned by Australian Energy Producers – the nation’s peak oil and gas group – has suggested that demand for Australian gas could increase by 30 per cent on current levels by 2050 in a scenario where the rollout of renewables is more limited.

The findings in the EY report, promoting gas as a “safety net” underpinning Australia’s clean energy transition, are being released to coincide with the close of submissions on Monday for the government’s future gas strategy consultation paper.

The gas strategy, announced in the May budget, aims to set out a medium and long-term plan for gas production and consumption, with EY saying it was an opportunity to chart a “smooth transition to net zero while maintaining energy system reliability and costs.”

Resources Minister Madeleine King in October said decreasing gas supply faster than demand would lead to “shortages, supply disruptions and high prices”, while also “worsening poverty and inequality” in a key defence of the fuel source’s role in underpinning the nation’s clean energy transition.

Resources Minister Madeleine King. Picture: NCA NewsWire/Naomi Jellicoe

The EY report being released on Monday also highlights that looming gas supply shortfalls, relative to total east coast domestic and LNG demand, could be between 100 and 130 PJ a year from 2033 – a development that poses risks to domestic consumers, large industrial gas users and energy security.

“There are risks that under_investment in new gas capacity, especially as mature reserves reach end of life, could narrow energy options available to the country and increase the economic costs of achieving net zero,” it found.

Examining about 350 net zero pathways from around the world, EY urged Australia to prepare for multiple gas production scenarios and concluded gas would play a “major role in the global net zero transition.” It found gas development would be influenced by Australia’s position as a global gas market supplier and how energy and climate technologies evolved in the next three decades.

It said “a failure to balance transformation of the energy system could pose a threat to Australia’s economy, climate commit­ments and competitiveness.”

The EY report canvassed three scenarios for potential gas demand in the next 30 years we transition to net zero, consistent with the goal of limiting climate change to below 2C.

They ranged from demand for gas rising by 30 per cent on current levels by 2050 (assuming a limited rollout of renew­ables at only 10 times current levels), to gas demand falling to 56 per cent of current production levels (assuming a renewables rollout equal to 20 times current levels).

A middle option saw demand for Australian gas increasing to 2040 before decreasing to 86 per cent of current levels by 2050 (assuming renewables grow to 13 times current levels).

AEP chief executive Samantha McCulloch said Australia needed to “plan for both strong domestic and international demand for gas to secure associated emissions reduction and economic opportunities … The study shows gas is a safety net for Australia’s energy transition, providing affordable and reliable energy for households and businesses”.

“As well as keeping the lights on across Australia and the ­region, the Australian gas industry delivered over $16bn of government revenues last financial year and spent another $45bn with Australian businesses,” Ms McCulloch said.