Natural gas shortages for decades to come in Southeastern Australia
Source: AEM0 2024 Gas Statement of Opportunities
The 2024 Gas Statement of Opportunities (GSOO) published by the Australian Energy Market Operator (AEMO) forecasts that the most populous southern regions of Australia (New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania) are on track to experience increasingly large gas shortages from as soon as 2026 to beyond 2043 with the demand-supply differential becoming greater indicating a definite need for more gas supply.
The 2024 GSOO makes the following very important observations:
New investment is urgently needed if gas supply from 2028 is to keep up with demand ………
Potential small seasonal supply gaps are forecast from 2026, ahead of annual supply gaps that will require new sources of supply from 2028.
Risks of shortfalls are also forecast from 2025 on some days …………
In northern Australia, more investment in currently uncertain supply will be required from 2026 to meet LNG export and domestic supply requirements.
As Australia transitions to a net zero emissions future, gas will continue to be used by Australian households, businesses and industry, and support the reliability and security of the electricity sector.
While household and business gas consumption levels are forecast to decline over the period to 2043, this is anticipated to be outpaced by reductions in domestic gas supply.
The AEMO forecast for the supply of gas for LNG from eastern Australia is not much more encouraging
Not only is the eastern Australian domestic market supply-demand differential alarming, the forecast fall in gas available for LNG export is going to threaten existing LNG supply contracts to long standing buyers such as Korea, China and Japan potentially causing serious regional energy security concerns.
Source: AEM0 2024 Gas Statement of Opportunities
The ACCC is issuing the same warning
The December 2023 Australian Competition and Consumer Commission (ACCC) report entitled Gas Inquiry 2017-2030 Interim update on east coast gas market states:
Gas is expected to play an important role in supporting Australia’s transition to renewables and will continue to be a critical part of the energy mix on the east coast.
While the overall east coast is expected to have sufficient gas to meet customer demand until 2028, the southern states is a different story. The southern markets are expected to dip into a shortfall in 2024, and remain in a finely balanced surplus until 2027, where there is expected to be a sharp decline in gas supply.
Beyond 2029 Queensland will not be able to make up the gas supply shortfall of the southern states in eastern Australia.
Over the longer-term, meeting the needs of gas users through the energy transition on the east coast will require the development of new gas supply sources.
The ACCC’s outlook for availability of gas for LNG export from Queensland is also alarming. The report states:
“Over the past five years, LNG producers have produced excess gas and sold it into the domestic market, as well as international markets. The gas sold into the domestic markets have helped avert domestic gas shortfalls, including most recently in 2022. …….. However, the latest information suggests that the LNG producers now expect to only have excess uncontracted gas available until 2026.”
“While we would expect the continual development of new production, the quantity of additional gas to be produced from existing supply sources is unlikely to replace the need to develop new sources of production. This is clear given that LNG producers are currently not expecting to produce or purchase sufficient volumes of gas to meet their long-term contractual commitments.”
So why is there an impending gas shortage?
AEMO forecasts an impending southeastern Australia gas shortage from 2026
Petroleum exploration of Australia has shown us that the country is gas prone. There is a greater likelihood of finding gas than of finding oil.
When compared with other countries in the developed world, Australia is under-explored in terms of petroleum exploration. The density of exploration wells in Australia, apart from where commercial discoveries have been made, such as for example the North West Shelf and the Cooper Basin, are sparsely drilled. Like the old saying “The harder I work, the luckier I get” in the petroleum business “The more wells I drill, (in new areas) the more gas I find”. Unfortunately, for a variety of reasons, petroleum exploration drilling has plummeted by 90% since 2009 nearly a decade and a half ago, according to the Australian Bureau of Statistics (ABS)..
The current debate in Australia regarding the allocation of a currently known about gas between east coast domestic needs and export has an underlying, unstated premise - that the amount of gas in Australia, especially in eastern Australia, is restricted to the gas reserves we have already identified. This unsound premise is directing public discussion, and shaping government policy, in unhelpful ways. Barely a handful of exploration wells have been drilled offshore where historically the biggest gas discoveries have been made.