Scott Morrison steps on the gas to save supply

Scott Morrison will back new storage, pipeline and import terminal projects in next week’s budget to avoid dire gas supply projections.

Energy Minister Angus Taylor will release the gas plan on Friday and commit more than $58m to fast-track key gas projects in Victoria and NSW. Picture: John Feder

Scott Morrison will back new storage, pipeline and import terminal projects in next week’s budget to protect Australia’s manufacturing sector from an economic crash and avoid dire gas supply projections over the next decade.

The government’s interim nat­ional gas infrastructure plan, which says Victoria would be hardest hit by daily shortfalls from 2024, lists four projects as “critical infrastructure priorities” for the storage and supply of gas across southern Australia.

The Prime Minister’s gas-fired recovery strategy — aiming to deliver cheap, reliable, low-emissions energy — will be bolstered with new funding for gas infrastructure projects taking the announced energy budget spend to almost $1.3bn.

Energy Minister Angus Taylor will release the gas plan on Friday and commit more than $58m to fast-track key gas projects in Victoria and NSW, including the proposed Port Kembla import terminal. The other projects are gas storage facilities at Golden Beach and Iona, and expansion of Victoria’s South West Pipeline.

In its interim report, which will be finalised by the end of the year, the Department of Energy and Resources said “supplies of gas to the domestic east coast market are forecast to fall short of residential, commercial and industrial demand” within three years.

The predicted shortfall, exacerbated by Victorian government moratoria on onshore gas exploration and production, could come by 2023 if investment in critical infrastructure is delayed. If the projects proceed, the shortfall could be delayed until 2026.

“In 2024, the annual shortfall is forecast to be 10PJ and will grow rapidly to 53PJ in 2025 and 167PJ in 2026. Continued gas powered generation demand in line with the historical average from 2018-20 will result in an additional 50PJ shortfall each year,” the gas plan said. “Daily shortfalls are forecast to emerge across the southern states from 2024 and will hit Victoria hardest. If the market relies solely on projected increases to northern production from ­existing fields, daily shortfalls are expected to occur in over 75 per cent of winter days in 2026.”

Gas prices are also set to lift further as a squeeze on new sources of gas volumes crunches the market and as southern market prices become increasingly linked to Asian LNG markets.

Manufacturers including Incitec Pivot, Orica and Qenos are concerned they may have to cut investment or even close plants, complaining they are unable to find gas on a contracted basis for less than $8 to $10 a gigajoule, more than double historic levels.

Increased government support will focus on sourcing extra supplies from the Narrabri gas fields and basins in Queensland and Northern Territory, and accelerating the development of the Wallumbilla Gas Supply Hub.

Mr Taylor said the government was aiming to deliver extra supply at the “right price” and support new gas projects to counter the gas shortfall. “Gas is a critical enabler of Australia’s economy and helps to support our manufacturing sector that employs over 900,000 Australians,” he said.

Mr Taylor said the government would “not sit back and allow the shortfall to eventuate … The risk to the economy is too great. Without action to address supply, industry and households will be faced with higher prices, disruptions in supply and unplanned outages.”

With China a large buyer of iron ore and coal, Resources Minister Keith Pitt on Friday will launch a $20m global resources strategy to diversify export markets and build trade shock resilience. “The strategy will help boost investment in regional Australia by exploring new markets for our commodities and critical minerals in the Indo-Pacific, Europe and North America,” Mr Pitt said.