Australia needs a ‘plan B’ to secure gas for the eastern seaboard, says EnergyQuest

Australia needs a ‘plan B’ to head off a looming gas shortfall because the market appears unable to bolster supplies, industry group EnergyQuest says.

Australia must develop a so-called plan B to head off a looming gas shortfall because the hope that the market will be able to bolster supplies is not working, a widely watched industry group has concluded.

The Australian Energy Market Operator in March said a gas shortfall could emerge as soon as next year and, although mitigating steps could be taken, a deep, structural deficit would be present in 2028.

Shortfalls of gas will heighten the threat of unreliable electricity supplies, while heavy industries that rely on the fuel source and cannot switch to renewable sources could be shuttered, analysts say.

The various warnings have stoked alarm among Australia’s energy industry and the federal and state governments, and numerous potential solutions have been mooted. But consultancy EnergyQuest said Australia must now settle on a solution as it could not afford to waste more time.

“It is now clear that whatever we have been doing has not addressed the looming 2028 shortfall. But now we have less than four years to find the answer,” EnergyQuest said.

“Plan A of letting the market work its way through, or waiting for the market and governments to realise they really need more gas has failed and we have run out of time.”

EnergyQuest said Australia would likely have to use a combination of responses to mitigate the country’s traditional supplies running dry.

Australia’s gas industry has said bolstering eastern seaboard supplies was the most logical response to a steep drop-off in offshore gas from Victoria’s Bass Strait.

Underscoring the dwindling supplies, EnergyQuest said production in the three months ended March 30 fell. East coast production decreased by 6.8PJ to 71.9 PJ, led lower by the Gippsland Basin where production decreased by 24.8 per cent from the previous three months.

EnergyQuest said production from the eastern seaboard’s traditional supplier was now down 67 per cent in the past 18 months.

Many new developments continue to struggle to secure regulatory licences, while potential new sources are opposed by some pockets of the community.

To offset the pressure some critics, such as the Greens, have said Australia’s LNG exports should be curtailed.

Australia is one of the world’s largest LNG exporters, supplying the energy needs of key regional allies such as Japan and South Korea which would be left scrambling if supplies were curbed.

Australia’s LNG industry has said the eastern seaboard infrastructure would be unable to cope with transporting gas south from Queensland, and curtailing energy into Asia would undermine regional security.

Still, soaring LNG exports have provided fodder for critics. EnergyQuest said Australia’s LNG industry has started 2024 strongly with a record March quarter production of 21.2 million tonnes, beating the previous best result of 20.5 Mt in Q1 2023.

The record was achieved despite steadily declining shipments from the North West Shelf and Darwin LNG, which is settling into a two-year stretch of zero exports until Barossa is brought online towards the end of next year.

While controversial, Australia’s eastern states could also find itself a LNG importer. Several developments are pushing proposals to import LNG into either NSW, Victoria or SA which could then be transported around to the eastern states.

While it would overcome supply concerns, critics insist importing gas will be significantly more expensive than current supplies.

Higher prices would be problematic to Australia’s eastern seaboard even if households were not gas users. Gas is increasingly playing a backstop role to the electricity grid of eastern states, with so-called gas peakers fired up to dispatch electricity when there is insufficient renewable generation.

Australian households have been hit by sustained price increases in recent years.

Originally published as Australia needs a ‘plan B’ to secure gas for the eastern seaboard, says EnergyQuest