PERTH (miningweekly.com) – The latest Gas Statement of Opportunities (GSOO) by the Australian Energy Market Operator (AEMO) has found that market intervention, new supply and lower demand have avoided a potential energy shortfall.
The AEMO in late 2017, warned of a substantial shortfall in gas for the east coast of Australia, by 2018.
“The 2018 GSOO outlines a number of rapid responses made by industry and government based on our concerns raised around forecast shortfalls in the 2017 GSOO update and the 2018 Victorian gas planning report,” said executive GM for planning and forecasting at the AEMO, David Swift.
“Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east-coast market,” said Swift.
He noted that with over 4 000 MW of wind and solar coming on line in the next two years, AEMO forecasts show that gas-powered generation (GPG) demand could be even lower than the projections in the 2017 GSOO, as the role of GPG transitions to focus more on meeting demand when renewable generation is low.
“However, an increased need for GPG due to weather related or contingency events could still adversely impact this forecast, and tighten the supply demand balance once again,” said Swift.
The report also reflects the connection between Australia’s domestic and international gas markets, as minor changes in liquefied natural gas (LNG) exports provide additional supply to the east coast.
“The international oversupply of LNG capacity and the emerging spot Asia-Pacific LNG market means that international buyers are forecast to source less gas from Australian LNG producers in the short term,” Swift said.
“Coupled with the current supply conditions on the east coast, this will mean that LNG producers will be able to provide up to 8 PJ more than previously expected to the domestic market, which is a minor, but favourable addition to the east coast’s dynamic supply demand balance.”
The forecast reduction in LNG exports has also coincided with a seven petajoule net increase of east-coast domestic production and a new Northern Gas Pipeline, which will be able to supply up to 90 TJ of gas a day to Mount Isa from December 2018.
Federal Energy Minister Josh Frydenberg has welcomed the AEMO report, which forecasts no gas supply gaps in the most likely scenario for the domestic gas market out to 2030.
The Minister pointed out that both AEMO and the Australian Competition and Consumer Commission have noted that the institution of the Australian Domestic Gas Security Mechanism and the October 2017 heads of agreement (HoA) signed between the Prime Minister and LNG exporters has ensured gas is available to Australian domestic consumers.
The HoA will remain in place for 2019.
“The government is delivering on its promise to gas consumers to ensure gas supply and to bring down its price. The increase in the domestic gas supply has also helped to drive a 30% decrease in the wholesale price of electricity,” Frydenburg noted.
“Longer term, with AEMO forecasting declines in existing reserves, it is clear that new gas reserves and resources need to be explored and developed.
“This is why the government continues to call on states and territories to remove blanket bans and moratoria on conventional and unconventional gas exploration which numerous inquiries have shown can be undertaken safely, responsibly and sustainably.”
The Australian Petroleum Production and Exploration Association (Appea) has applauded the oil and gas industry’s move to bring more gas into the domestic market, with CEO Dr Malcolm Roberts noting that there have been a significant number of new gas supply agreements announced in 2017 and 2018 providing gas to domestic customers.
“The gas industry has announced billions of dollars in new investment in 2018 and beyond, to bring more gas into the market, supporting both domestic gas consumption and the gas export projects that are underpinning much of Australia’s economic growth.
“In the past year we have seen significant announcements from Arrow Energy, Shell Australia, Senex, Cooper Energy, Strike Energy, GLNG, Australia Pacific LNG, Origin Energy and Santos to bring on new supply in various parts of eastern Australia,” Roberts said.
“Together with the revised demand and supply outlooks developed by AEMO, they mean the industry has met in full the commitments provided to the government in 2017.”
Looking forward, the GSOO noted that further action by both industry and governments could bring even more gas into the east coast domestic gas market.
“This means there is no room for complacency, with the GSOO finding that meeting demand over the period to 2030 will still require ongoing industry investment in commercialising existing reserves and resources and finding new sources of supply,” Roberts said.
“With exploration at historically low levels, this analysis reinforces how vital it is for all governments to support developing new gas supplies as quickly and as cheaply as possible.
“This requires a focus on removing red and green tape and regulatory burdens to developing new supply in New South Wales and urgently removing the bans and moratoriums in Victoria. These remain important barriers to increasing energy security and placing downward pressure on prices.”