Gas supply gap

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Does AGL accept AEMO’s projection in its June 2018 Gas Statement of Opportunities that there are no gas supply gaps forecast before 2030?

 

 

 

 

 

 

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Re: Gas supply gap

AGL Employee

Hi EmmyB,

 

There are mixed views reported in the media about whether gas is needed or not which has made some members of the community question the rationale for the project. This is understandable.

 

Early in 2018 the media reported Victoria would experience significant gas shortages within three years based on a gas forecast report from the Australian Energy Market Operator (AEMO) despite falling gas consumption in the state. AEMO told the media it was hoping the report would encourage a market response to help fill the gap but warned some intervention may be needed if the private sector does not come up with a solution.

 

In June 2018 AEMO Gas Statement of Opportunity, the AEMO stated ‘no supply gaps are forecast before 2030 under expected market conditions.’ But the AEMO’s executive general manager of planning and forecasting, David Swift still warned that the supply-demand balance in the Australian gas market was still very tight. "An increased need for gas-powered generation due to weather related or contingency events could still adversely impact this forecast and tighten the supply demand balance once again," Mr Swift said. But the report also said new gas reserves and additional gas supply infrastructure would need to be delivered to keep on top of the issue.

 

The latest AEMO 2019 Gas Statement of Opportunities (GSOO), released on 28 March 2019, said the east coast gas market faces tight supply from 2021 and shortfalls from winter 2024 if more is not done to replace rapidly declining output from Bass Strait and supplies from Queensland limited by pipeline capacity.

 

‘‘Southern Australia’s overall supply demand balance for 2021-2023 remains very finely balanced, reflecting the ever-tightening integration of Australia’s electricity and gas markets in the context of an evolving and dynamic energy system,’’ AEMO’s chief system design and engineering officer Alex Wonhas told the ‘Australian Financial Review’ when the report was published.

 

The report said:

 

“Supply from existing and committed gas developments is forecast to provide adequate supply to meet gas demands until 2023. However, risks remain that any weather-driven variances in consumption or electricity market activity that could increase gas demand, creating potential peak-day shortages as outlined in AEMO’s 2019 Victorian Gas Planning Report.”

 

In the short term the need for Gas Power Generation (GPG) would be a key factor:

 

“The key uncertainty that could have a material impact on gas supply adequacy in the short-term is the level of GPG demand. Demand for GPG in the NEM [National Electricity Market] is highly variable, and is influenced by weather conditions, the reliability of coal-fired generation and coal supplies, the timing of new generation and transmission development, and the retirement of ageing thermal generation.”

 

The report also supported the requirement for development of LNG import terminals and said:

 

“Continued interest in LNG import terminals, particularly in Victoria, New South Wales, and South Australia, would be expected to help relieve pressure on meeting southern gas demand during peak periods and assist in reducing pipeline constraints, but may do little to ease gas pricing pressures.”

 

The report also said within the next five years, domestic gas demand, particularly in the southern states, will be difficult to meet in its entirety without either:

  • Exploration and development of new southern resources, or
  • New gas supplies delivered via LNG import terminal, or
  • Major pipeline infrastructure expansions to deliver Queensland and Northern Territory gas southwards, or
  • A combination of all three.

It also supported a Victorian-based LNG import terminal and said “Without any upgrade to the existing pipeline infrastructure: An import terminal in Victoria, either Melbourne or Gippsland, has the biggest projected impact to reduce projected shortfalls. In addition to providing an additional unconstrained source of gas for Victoria, this terminal is projected to reduce pipeline and storage infrastructure congestion, enabling greater access to supply from northern fields.”

Re: Gas supply gap

Sparky

Still does not explain why gas from Queensland is exported overseas, and then AGL want to import it back? Why not take it by ship from Queensland to Victoria?

Why do they always say we need gas pipes?

Doesn't it mean that gas gets more expensive if you export it first and then import it back?

Re: Gas supply gap

AGL Employee

Hi sunflower,

 

Whilst it is a possibility that Australian gas will be exported to another country and then imported back through the proposed import terminal, this is highly unlikely as the associated costs of doing so would not be feasible.

 

A more economical option would be to purchase the gas directly from where it is extracted, as opposed to obtaining gas from a region that has a need to import it.

 

Most of the gas available worldwide is still produced from conventional sources, such as in Qatar and Africa, so this is also the most likely source of the gas that we would buy.

 

We agree, as you have pointed out, this proposal can act as a ‘virtual pipeline’ to connect gas-rich areas of the country, such as Western Australia, to areas of large demand, such as Victoria.

 

Thanks for your input.

Re: Gas supply gap

Sparky

What I probably should have asked is why do we need to buy gas from overseas when we can get it from an Australian source? Surely it is more cost effective and more environmentally friendly to get it locally than ship it from thousands of miles away?

Re: Gas supply gap

AGL Employee

Hi @sunflower,

 

You might find the answer to your question on this other thread, here.

 

Let me know if that helps answer your question.

 

Thanks,

Lachlan

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