Natural gas shortages for decades to come in Southeastern Australia
Projected annual adequacy in southern regions with existing, commited and anticipated developments, 2023-42 (PJ)
Source: AEM0 2023 Gas Statement of Opportunities
The 2023 Gas Statement of Opportunities 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 2042 with the demand-supply differential becoming greater indicating a definite need for more gas supply.
Not only is the supply-demand differential alarming, the magnitude of export LNG to be diverted to the southern regions is going to threaten existing LNG supply contracts to long standing buyers such as Korea and Japan potentially causing serious regional energy security concerns.
And the Australian Competition and Consumer Commission (ACCC) is issuing the same warning.
In its Gas Inquiry 2017-2030 Interim Report released in January 2023, the ACCC states” The shortfall projected for the southern states in 2023 is likely to persist over the longer term, with projected shortfalls in the period from 2024 to 2034. The magnitude of the shortfall in the southern states will increase over time, and by 2034, is projected to be as large as 300 PJ using AEMO's Progressive Change demand scenario. Avoiding future shortfalls will require the development of new supply and infrastructure.”
The ACCC goes on to say “Although the need for investment in new sources of supply and associated infrastructure is clear, only a limited number of relatively small domestic supply projects that could come online between 2023 and 2027 have been approved for development.”
So why is there an impending gas shortage?
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.