Australia No Longer Expects Gas Shortfall Before 2030

MELBOURNE, June 22 (Reuters) – Australia no longer faces a looming gas shortage, thanks to government pressure on exporters to divert the commodity into local markets and a reduced demand forecast for gas-fired power, according to estimates from the nation’s energy market operator.

“No supply gaps are forecast before 2030 under expected market conditions,” the Australian Energy Market Operator (AEMO) said on Friday in its annual outlook for gas.

That is starkly different from a year ago, when dire warnings from the body about potential shortfalls in eastern Australia from 2018 onward prompted the government to threaten to curb liquefied natural gas (LNG) exports.

The nation’s three east coast LNG plants, operated by Royal Dutch Shell, ConocoPhillips, and Santos, averted those curbs by promising to plug the expected deficit.

Their moves, combined with greater availability of LNG on the global market, the start-up of a new pipeline from the Northern Territory to Queensland, and growth in wind and solar power diminishing the need for gas-fired power, have eliminated the feared shortage, AEMO said.

“Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east coast market,” AEMO executive general manager David Swift said in a statement.

More than 4,000 megawatts of wind and solar power are due to start up in the next two years, which should ease demand for gas-fired power except when renewable generation is low, he said.

AEMO cut its gas consumption forecast for 2019 by 55 petajoules from its last estimate made in September, while increasing its gas production outlook from fields in the southern states by 16 PJ.

In September, it had predicted a supply gap of between 54 PJ and 107 PJ for 2018, or up to 17 percent of market demand.

An extra 8 PJ of gas has also been freed up for the local market as a global LNG glut has given overseas buyers more supply choice, AEMO said.

While producers told the market operator output would increase from southern gas fields, AEMO’s forecasts “still show that further exploration and development will be needed to meet demand from as early as 2022”, Swift said.

Production forecasts from gas producers show an increase in output of 144 PJ between 2019 and 2022, AEMO said, while flagging those new supplies will be more costly to produce than existing production.

The sharply changed view has not deterred groups considering importing LNG to southeastern Australia within the next two years, as they see the assumptions on future gas production as bullish and view LNG import terminals as much cheaper to install than developing new gas fields.

“For the sake of a new entrant and a compelling, certain product, I just think imports win, hands down,” said James Baulderstone, chief executive of Australian Industrial Energy, one of at least three groups considering importing LNG.

 

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