The Australian Energy Market Operator (AEMO) has released its annual Gas Statement of Opportunities (GSOO) report, which it says reinforces the need for new investment in Australia’s central and east coast gas markets to address forecast supply shortfalls.
AEMO CEO Daniel Westerman said the report was consistent with previous calls for new investment in gas as supply from the gas fields in Bass Strait deplete. Production from the Longford Gas Plant, which has historically supplied two-thirds of the gas used in the East Coast Gas Market, will therefore reduce before retiring at the end of 2033.
“This year’s gas adequacy report again highlights the structural changes in the East Coast Gas Market, particularly that production is falling faster than demand in the southern states, reinforcing the need for investment in new gas supply,” Westerman said.
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In recent years, gas consumption has declined across most sectors, influenced by higher retail prices, mild winters, and increased electrification. This with changes in electricity generation outlooks has improved short-term gas availability. In the longer term, residential and commercial consumption is forecast to decline, while industrial consumption is expected to remain relatively stable.
The risk of peak-day shortfalls and seasonal supply gaps in the southern states is expected to arise from 2028, with annual supply gaps emerging from 2029, when production from existing, committed, and anticipated projects in the southern states is forecast to fall 32%, requiring new supply investments.
“Various industry-led solutions are being considered to address shortfall risks, beyond the advanced developments already included in the GSOO,” Westerman said.
“Investment could include new production, storage, transportation, and liquefied natural gas (LNG) regasification terminals, or a combination of these solutions.”
AEMO has assessed several potential future supply, storage, and transportation options to provide additional information on the impact each of these investments could have to delay forecast annual supply gaps and help mitigate the risk of peak-day shortfalls to varying degrees.
“Flexible gas-powered generation will remain the ultimate backstop in a high-renewable power system,” Westerman said.
“Gas, alongside batteries and pumped hydro, will enable higher renewable penetration and support reliability as coal-fired power stations retire.”
Joshua Runciman, lead gas analyst for the Institute for Energy Economics and Financial Analysis (IEEFA), said, “AEMO’s latest analysis clearly shows that government initiatives to accelerate household electrification can reduce gas consumption, and with it, the risks of supply gaps. Further government support for residential and commercial gas users would drive down demand even further, addressing supply concerns and freeing up gas for Australian industry, thereby ensuring we keep Australian manufacturing jobs in Australia.
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“Victoria’s gas consumption will fall rapidly if the Victorian Government implements proposed changes to its Gas Substitution Roadmap, which would likely materially reduce the likelihood of seasonal and short-lived peak day gas supply gaps, while also saving households money in the long run.
“AEMO’s forecasts of stable industrial demand are at odds with the ACCC’s most recent report, which highlights the risks of a hollowing out of industrial demand due to challenging market conditions. While AEMO continues to focus on new gas supply to meet demand, IEEFA analysis shows that further falls in residential and commercial gas consumption will go a long way to ensure gas is available at a reasonable price for Australia’s major gas using industries.”
“AEMO’s GSOO confirms that the majority of east coast gas is exported to international markets at the expense of domestic gas users, leading to higher prices and lower domestic consumption.”
