Australia’s gas future at a crossroads, report says

Australia’s east coast gas market is facing some serious challenges over the next two decades, according to the Australian Energy Market Operator’s (AEMO) third annual National Gas Forecasting Report (NGFR) released today.

The report has highlighted some of the uncertainties and challenges complicating gas demand forecasts for eastern and south-eastern Australia’s interconnected gas markets over the next 20 years.

The gas forecasts continue to be dominated by gas demand to supply liquefied natural gas (LNG) exports, with Australia (including east and west coast LNG) projected to become the world’s second largest LNG exporter by 2018, and the major LNG supplier for East Asian markets.

AEMO chief operating officer Mike Cleary cautioned that these projections identify a range of major uncertainties facing the industry.

“With this outlook comes great challenges for policy-makers, infrastructure planners, and asset operators,” Mr Cleary said.

“As we continue to highlight in each of our forecasting and planning reports, the energy industry, the economy, and the consumer is transforming rapidly, requiring a re-thinking of the energy system and new solutions to manage the transition to new energy sources and technology.

“The domestic gas sector in eastern and south-eastern Australia is now linked to a more volatile world market for gas through our LNG export industry, and small supply chain disruptions can have large domestic impacts.”

Mr Cleary said that gas-powered generation (GPG) is expected to play an important role in the transition to a low-carbon future.

“GPG’s role will be important in balancing the gap between retirement of coal-powered generation and the implementation of new intermittent renewable energy sources in the absence of alternatives such as large-scale storage and demand management,” he said.

APPEA chief executive Dr Malcolm Roberts said the report was a timely warning for governments.

“AEMO has correctly described the east coast gas market as at a ‘crossroads’,” Dr Roberts said.

“To ensure we take the correct path, governments in eastern Australia must pull out all stops to encourage the investment needed to urgently address the gas supply challenges that are forecast to occur between 2018 and 2024.

“With the COAG Energy Council meeting next week, there has never been a more urgent need for positive action than there is right now.”

Dr Roberts said the information released by AEMO is also another sobering reminder that the east coast needs rapid development of new gas reserves to guarantee supply.

“APPEA has long argued that if we wish to achieve a more competitive market, put downward pressure on prices and ensure stable, adequate supply, we must bring more gas to market,” he said.