Origin has signed an agreement to buy 41 petajoules (PJ) of gas from Australia Pacific LNG (APLNG) to help meet domestic demand.
The gas sales agreement, which will run for a period of 14 months starting in November, will cover around two-thirds of the gas supply shortfall forecast for 2018.
It boosts Australia Pacific LNG’s domestic contracted gas supply for next year to more than 186PJ, or almost 30 per cent of the market’s demand.
Origin energy supply and operations executive general manager Greg Jarvis said the agreement follows Origin’s recent commitment to bring on more supply to help meet the needs of the domestic market.
“Our east coast portfolio needed more gas to allow Origin to meet demand from large customers who rely on gas for their businesses, and also to fuel peaking power stations which are crucial to security of electricity supply – particularly as we head into the summer period,” Mr Jarvis said.
“East coast LNG producers including Australia Pacific LNG have committed to divert more gas to the domestic market to avoid any potential gas shortfall, and this agreement shows Origin’s determination to be part of the solution to get more gas to Australian customers.
“We have also consistently stated that increasing gas supply to the domestic market is a critical action to help bring down gas prices for customers.
“We will continue to look for additional ways to improve security of gas for customers that rely on it up and down the east coast of Australia.”
A joint statement from Deputy Prime Minister Barnaby Joyce and Energy Minister Josh Frydenberg said the announcement was a “direct result” of the agreement the Prime Minister struck with gas producers earlier this month.
“The additional gas will help cover the forecast shortfall in domestic gas supplies of up to 107PJ in 2018 and 102PJ in 2019 identified by the Australian Energy Market Operator (AEMO),” the statement said.
“The deal with the gas producers meant the government did not need to pull the trigger on the Australian Domestic Gas Security Mechanism for 2018, which would have imposed export restrictions.
“Since the Coalition government’s intervention we have seen more gas supplied to the domestic market and the spot price drop from as high as $14-16/GJ earlier this year to around $6-8/GJ today.
“More affordable gas is important as gas-fired generators are setting the prices of electricity more than they have in the past as coal-fired generators exit the system.”
APPEA chief executive Dr Malcolm Roberts said the deal was further proof Australia’s east coast LNG industry is committed to supplying gas to the domestic market.
“The LNG projects gave a commitment that there would not be a gas shortfall on the east coast in 2018 and they are delivering,” Dr Roberts said.
“Queensland’s gas industry is producing enough gas to meet its export commitments and supply the domestic market.
“Further south, the failure of New South Wales and Victoria to develop their own gas supply means customers in those states are paying a premium for their gas.”
Origin is a major supplier of gas to the domestic market and signed more than 760 agreements with large customers last year.
Earlier this year, Origin also announced it would supply gas to South Australia’s Pelican Point power station to bring another 240MW of generation capacity back into service.