The Australian Energy Market Operator (AEMO) has predicted that the country should not experience a natural gas supply shortfall before 2030 under expected market conditions.
The operator pointed to an improved supply picture, an easing in demand as well as government efforts to ringfence production for domestic consumers. Australia’s LNG exports ramp-up has caused concern over the availability of supply for eastern and southeastern markets as well as prices, which have doubled over the last three years.
In its 2018 Gas Statement of Opportunities (GSOO), which was released last week, AEMO said: “The eastern and southeastern Australian gas market had been irrevocably changed by LNG exports and the subsequent coupling of the Australian gas market to international markets.”
AEMO said producers had indicated that up to 42 PJ (1.09 bcm) of undeveloped reserves were anticipated to come online by 2019 to meet demand, with first gas from contingent resources to be produced by 2021.
It said: “In 2019, up to 37 PJ [963.8 mcm] more gas supply is projected to be available, if needed, to accommodate weather or event-driven variations in Neutral Scenario consumption forecasts.”
Under its “Strong” demand scenario, however, AEMO said 112 PJ (2.92 bcm) of additional LNG demand was forecast and that increased Queensland coal-bed methane (CBM) production would be needed.
It said the supply situation in eastern and southeastern Australia would also be enhanced by “connection to the Northern Territory gas fields through the Northern Gas Pipeline (NGP) to be completed by the end of the year”. The NGP will supply 90 TJ (2.34 mcm) per day of gas to the link at Mount Isa in Queensland.
The GSOO also pointed to a slight reduction in feedstock demand from the East Coast’s three gas export terminals, helping lift AEMO’s forecast for domestic supply levels in 2019 by 8 PJ (208.39 mcm).
Looking beyond 2019, AEMO said the supply outlook had improved thanks to rising levels of renewable power generation, which would offset demand for gas-fired power generation, as well as government efforts to prevent domestic supplies being channelled to Asia-Pacific markets.
According to AEMO, more than 4,000 MW of new solar and wind generation is slated to come online in the next two years. This should reduce gas and coal-fired power generation’s market share. “With these new developments, electricity market modelling indicates [gas-fired power] demand could be less than half of observed 2017 levels by 2020.”
In 2017, the government introduced the Australian Domestic Gas Security Mechanism (ADGSM), allowing the federal resources minister to determine whether export restrictions should be imposed to avoid any potential shortfall in domestic supply.
While Canberra opted not to apply export controls in 2018, AEMO noted that the government had reached a heads of agreement (HoA) with the East Coast LNG operators which saw producers commit to meeting domestic supply requirements in 2018 and 2019.
The market operator said that after 2030 Australia would need more gas delivery infrastructure to supply southern customers.