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Australia staring at a stark lack of gas supply beyond 2025

27 Mar 2020 9:39 AM | Sonia Harvey (Administrator)

AUSTRALIA’s energy market operator (AEMO) has released its annual Gas Statement of Opportunities report for 2020, warning that pipeline capacity and maturing gas fields could pose a significant risk unless further action is taken to ensure energy security.

The country remains hungry for energy despite being the top exporter of LNG, and today's AEMO Gas Statement of Opportunities report found Australia already has enough gas to satisfy demand until 2025, but only if LNG cargoes are redirected as needed.

The GSOO only looks at the eastern states and does not take in Western Australia, which accounts for two thirds of Australian LNG exports and is well supplied with gas thanks to its 15% domestic gas reservation policy. 

Current production from existing and committed gas developments should be adequate between 2023 and 2025, the report states. 

However, the glaring problem is the sheer level of gas exported from Australia as LNG.

AEMO warned unless industry curtailed its exports of LNG and redirected some of it to the domestic market, the east coast energy sector could face a lack of supply as demand continued to grow. 

More concerning, however, is that after 2025 existing and committed gas production and projects in southern Australia would not be enough to meet east coast demand. Supply will fall by roughly 35% after 2023, according to the report. 

It comes as BHP announces the end of its Minerva gas field which reached the end of its life last year. Production from Minerva ceased in September. 

Otway Basin production will also hit east coast supply, unless field development of plant modification projects proceed. 

Several other Gippsland fields are also projected to reach their end of life between mid-2023 and mid-2024. 

There is also an added concern that there will not be enough pipeline capacity to deliver gas to market from northern states. 

The lack of supply could be so bad that during winter 2024 there could be supply gaps of between 13 terajoules and 374 TJ even at peak day production, according to the ‘Central Scenario' of the report. 

AEMO warned both government and industry had a role to play going forward, and one option on the table is redirecting LNG cargoes destined for the international spot market to domestic ports. 

Plans have been flagged for four terminals; however, they are very much in the early stages of development but analysis from S&P Platts yesterday found  import terminal developers are confident to have one up and running by 2022, despite Victoria recently lifting its conventional exploration moratorium. It's believed by most analysts supply will dwindle before new resources can be commercialised.  

Last year South Korean developer EPIK appointed ANZ as its financial advisor for its Newcastle GasDock LNG project in New South Wales.

Australian Industrial Energy, backed by Andrwe Forrest, also plans one and won ‘critical infrastructure' approval for its NSW Port Kembla terminal in 2018. 

The peak body representing the oil and gas sector, the Australian Petroleum Production Exploration Association acknowledged the responsibility of the gas industry but said it was doing all it could. 

"APPEA members are taking all steps necessary to ensure the production and delivery of gas supplies continues," APPEA chief Andrew McConville said. 

"With exploration at record low levels, low oil prices and COVID-19 pandemic meaning both gas demand and gas supply face challenges, the analysis reinforces how vital it is for all governments to support developing new gas supplies as quickly and as cheaply as possible."

According to the AEMO report, supply in the major consumer states of Victoria and New South Wales over the next few years will all but evaporate as legacy gas fields decline. 

Queensland and the Northern Territory will enjoy sufficient supply due to their shale and coal seam gas resources. 

Source: Energy News  Bulletin

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