PERTH (miningweekly.com) – A new report by the Australian Energy Market Operator (AEMO) has shown that while Australia had sufficient gas supply to meet demand until 2033, new supply was needed.

In its latest Gas Statement of Opportunities (GSOO), the AEMO has said the outlook for gas supplies has improved over the past year, but the risk of shortfalls remains if critical gas projects are not developed to ensure sufficient supply. 

Minister for Industry, Energy and Emissions Reduction Angus Taylor said the report reinforced the government’s action and investment into critical gas infrastructure, including the A$50.3-million announced in the federal budget towards seven priority gas infrastructure projects, as well as key carbon capture and storage infrastructure, to avoid potential shortfalls. This includes projects in Queensland, Victoria, New South Wales and the Northern Territory. 

The GSOO also notes gas generation is forecast to continue to have a critical role in providing stability to the National Electricity Market (NEM), supporting and firming Australia’s record levels of renewable energy generation to help meet the NEM’s energy needs into the future. 

Taylor said AEMO continues to forecast a very tight gas supply:demand balance, including the potential for supply shortfalls to occur as soon as winter 2023 in extreme weather conditions.

“Continued investment in Australia’s gas resources is essential to avoid the supply shortfalls and price volatility currently being experienced across Europe and Asia. Gas prices in Asia and Europe have increased by more than 300% over the past 12 months and are currently around 78% higher than our domestic gas prices. Australian workers, manufacturers and households cannot afford to have that situation here at home.

“AEMO is clear that gas generation, like our investment in the Hunter Power Project in Kurri Kurri, will continue to play a critical role in the electricity grid as a much-needed source of on-demand, reliable power to support and firm growing renewables.  

“We will continue to strongly back critical gas infrastructure projects to get local gas to where it is needed and at a competitive price to support gas users. 

Minister for Resources and Water Keith Pitt said AEMO’s report supports the previous findings of the Australian Consumer and Complaints Commission’s January 2022 Interim Report and the government’s National Gas Infrastructure Plan that more gas supplies need to be unlocked to ensure supplies. 

“This government remains committed to managing the risks to our domestic gas supply and is working to make sure we have plentiful supplies of affordable gas to keep Australians in jobs and support our industries and manufacturers,” Pitt said. 

“We will continue to invest in the development of gas projects in regional Australia to keep the lights on and support our industries and businesses.

“The role gas plays in these uncertain times is essential and Australia’s resources sector is not only helping to provide lower gas prices at home, but also providing stability across the globe.”

AEMO executive general manager system design Merryn York said gas had a critical role in the electricity market as coal generation retired, however, future gas use was expected to be impacted by consumers switching to electricity and alternative gaseous fuels.

“AEMO’s Draft 2022 Integrated System Plan shows that dispatchable firming capacity, such as gas, hydro and battery storage, will complement variable renewable generation as coal-fired generation leaves the market,” York said.

“Under AEMO’s scenarios, there is uncertainty about future demand for and supply of natural gas as the market identifies pathways to decarbonise and users look to alternative fuels, like hydrogen or electricity, for industrial processes, manufacturing, heating, and cooking,” she said.

The GSOO has forecast that gas supply was available under a range of scenarios to meet demand across the market until the 2030s, and noted that mechanisms were also in place to ensure domestic supply in the event of a shortfall.

Australian Petroleum Production and Exploration Association CEO Andrew McConville urged state and federal governments to make investment policy and regulatory settings more competitive to ensure ongoing energy security.

McConville said the sector was working hard to ensure the production and delivery of gas, including announcing over A$27-billion of investments in supply and decarbonisation last year and another A$400-million this month.

“Australia’s gas industry is essential to support Australia’s economic recovery and ensure energy security to households and businesses,” he said.

“But new supply for Australia will only come from new investment in exploration, development, construction and operation. At a time of growing international competition for capital, the industry needs policy certainty to make investments. In fact, the last wave of industry investment came at a time of greater regulatory stability.

“There is a massive economic opportunity for Australia to boost our economy and create thousands of new jobs with a new wave of investment – but the policy and regulatory settings have got to be right to facilitate that.

“The report by AEMO underscores that need. We look forward to working with state and federal governments to encourage more investment and bring more gas supply into the market, including in responding to any short-term challenges that might, under extreme circumstances, affect part of the market in 2023.”

McConville said the report showed that while a range of future scenarios were possible, natural gas remained a much-needed part of the future cleaner energy mix given its firming role for renewables, as a replacement for coal, as a feedstock for hydrogen and an ongoing source of heat and power for hard to replace uses in manufacturing.

“Gas, as a cleaner form of energy, is a reliable and stable fuel and demand shows it will be a key plank of our power mix for decades to come as we decarbonise and deliver our commitment to reduce greenhouse gas emissions to net zero by 2050,” he said.