The outlook for the east coast gas market is not positive according the Australian Competition and Consumer Commission (ACCC) which has issued a report in which it finds the market’s future to be “significantly worsened”.
Releasing its July 2022 Gas inquiry 2017–2025: Interim report, Chair of the ACCC, Gina Cass-Gottlieb said the report forecasted a shortfall of 56 petajoules (PJ), which is equivalent to about 10 per cent of domestic demand and the largest projected supply shortfall since 2017.
“At the same time last year, our Gas Inquiry interim report found 2022 could face a 2PJ shortfall,” Ms Cass-Gottlieb said.
“Our latest gas report finds that the outlook for the east coast gas market has significantly worsened,” she said.
“The outlook for 2023 is very concerning and is likely to place further upward pressure on prices.”
Ms Cass-Gottlieb said this presented a real risk to Australia’s energy security and the ACCC was recommending the Resources Minister initiate the first step of the Australian Domestic Gas Security Mechanism (ADGSM) – also known as the ‘Gas Trigger’ – which would limit the amount of gas that could be exported as liquefied natural gas (LNG).
The ACCC also strongly encouraged LNG exporters to immediately increase their supply into the market, with Ms Cass-Gottlieb saying the shortfall had been worsened by exporters purchasing more gas from domestic producers than they supplied to domestic customers.
She said LNG exporters were expected to withdraw 57.6 PJ more gas from the domestic market in 2023 than they would supply into it.
“The east coast of Australia is forecast to produce 1,981 petajoules of gas in 2023 of which 1,299 PJ, or 65.6 per cent, is forecast to be exported overseas under long term contracts,” Ms Cass-Gottlieb said.
She said LNG exporters were also expected to produce an excess of 167 PJ over what was required to meet their contractual commitments.
“Increasingly, LNG exporters have diverted most of their excess gas to overseas spot markets, with as much as 70 per cent of the excess volume going overseas in recent years,” she said.
“If LNG exporters were to provide all of their excess gas to overseas markets, the east coast gas market would be facing a supply shortfall 56 PJ.”
The shortfall is expected to mainly affect New South Wales, Victoria, South Australia, Tasmania and the Australian Capital Territory, with less significant consequences for Queensland.
The ACCC’s 135-page Interim Report can be accessed at this PS News link.
