AEMO predicts gas shortfall for Victoria

gas prices, ALP, pipeline, Blue Energy

A report by the Australian Energy Market Operator (AEMO) released today has highlighted the need for more gas supply in Victoria in order to avoid a projected shortfall in 2022, equivalent to almost 400,000 homes.

The Victorian Gas Planning Report found, in 2022, there would be a 19 petajoule (PJ) shortfall in Victoria.

One petajoule is equivalent to the average consumption of a regional centre such as Warrnambool.

“With average consumption of 50 gigajoules a year, Victorians use more gas for cooking, heating and hot water than households in any other state across Australia,” Federal Minister for Energy Josh Frydenberg said.

“Due to Hazelwood’s closure and the need to support intermittent renewables, Victoria in 2017 saw a 500 per cent increase in the amount of gas used to generate electricity on the year prior.”

AEMO found declining production in Gippsland (a reduction of 38 per cent by 2022) and Port Campbell (a reduction of 68 per cent by 2022) were the main drivers in total Victorian production falling from 435PJ in 2017 to only 187PJ in 2022.

“Given Victoria’s high reliance on gas for households, industry and power generation, Victorians should be concerned by the forecast decline in their state’s domestic production and support moves to unlock Victoria’s 40 years’ worth of gas resources,” Mr Frydenberg said.

“With the Australian Competition and Consumer Commission (ACCC) saying Victorians pay an additional $2-4 per gigajoule for gas to be transported from Queensland, the state can hardly afford this situation.

“The AEMO report adds weight to the need for Victoria and other states to remove their bans and moratoriums on gas exploration and development, whether onshore or offshore.”

APPEA chief executive Dr Malcolm Roberts said the report acts as another warning for Victoria.

“Victoria has benefitted from record production over the last two years from the offshore Gippsland Basin but, as offshore production falls back, the state will face tighter market conditions,” Dr Roberts said.

“As other official reports and the industry itself have been warning for many years, Victoria needs more local gas production – offshore and onshore.

“Today’s report highlights the urgent need to remove the moratoriums and bans that have killed onshore gas development in the state.

“Victoria now has the most expensive wholesale gas in the market and costs will only rise if the state is forced to use more gas from interstate sources.”

The AEMO report follows an announcement from the Federal Minister for Resources and Northern Australia, Senator the Hon Matt Canavan, of $24 million in grants to accelerate the development of four onshore gas projects.

The projects will bring forward the delivery of gas into the east coast market.

The four projects – from Armour Energy, Westside Corporation, Beach Energy and Tri-Star Fairfields – will supply an extra 12.4PJ of new gas to the east coast market by 30 June 2020 and an extra 27.6PJ across five years.

“Time is running out for Victoria to avert a supply shortfall,” Dr Roberts said.