AEMO: Gas supply remains tight on east coast

Australia is still at risk of a domestic gas supply shortfall, according to an updated 2017 Gas Statement of Opportunities released by the Australia Energy Market Operator (AEMO) today.

The original report, released in March, revealed a projected decline in gas production could result in a shortfall of gas-powered electricity generation (GPG) impacting New South Wales, Victoria and South Australia from the summer of 2018-19.

The report lead to the federal government introducing an Australian Domestic Gas Security Mechanism, giving the government power to impose export controls on companies when there is a domestic shortfall.

AEMO’s new analysis includes information from east coast gas producers who have provided updated forecasts of their “best estimate of likely annual production”.

“Based on the most recent information from industry, together with AEMO’s forecast demand, gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, and there remains a risk of a supply shortfall,” AEMO managing director and chief executive officer Audrey Zibelman said.

“In real terms and based on no further response to today’s information, the projected shortfall risk for 2018 is between 54 petajoules (PJs) to 107 PJs, and in 2019 between 48 PJs to 102 PJs.

“To put this into context, total projected demand for domestic gas is expected to be approximately 642PJs in 2018, and 598PJs in 2019.

“Projections of aggregated gas production and LNG gas demand vary, based on market conditions and contracting, indicating a dynamic situation that can change rapidly and warrants continued close attention and monitoring.

“The results of AEMO’s recent analysis and the ever-tighter integration of the electricity and gas markets, together with the increasingly dynamic character of Australia’s energy system, suggest there is a need to look at reforms to improve predictability and stability in energy markets to the benefit of consumers.”

AEMO’s most recent analysis follows considerable engagement and consultation with Australia’s gas industry.

“We commend the gas industry for its supportive and collaborative approach throughout our ongoing consultations to date,” Ms Zibelman said.

“AEMO recommends that the Commonwealth continue to engage with industry on the findings of this analysis and notes that gas production and LNG gas demand are very dynamic and vary based on market conditions and contracting.”

The updated report was requested by former Federal Minister for Resources and Northern Australia in July.