The liquefied natural gas industry in Queensland, Australia, is in the firing line again over domestic gas supplies with the country’s fair trade watchdog stating it must divert gas to the domestic market to avoid supply shortfalls in eastern Australia.
The Australian Competition & Consumer Commission (ACCC) said it was forecasting the east coast of Australia could face a shortfall of 56 petajoules (53 billion cubic feet) in 2023.
“The outlook for the east coast gas market has significantly worsened. To protect energy security on the east coast we are recommending the resources minister initiate the first step of the Australian Domestic Gas Security Mechanism (ADGSM),” ACCC chair Gina Cass-Gottlieb said.
“We are also strongly encouraging LNG exporters to immediately increase their supply into the market.”
Gas gets the blame
The gas industry has been in the firing line, perhaps unfairly, since an electricity supply crisis started in June in the eastern states.
The problem was created by outages at coal-fired power electricity facilities and the inability for renewables to fill the gap.
Spot gas prices and electricity prices in eastern Australia increased dramatically and the three LNG projects in Queensland immediately came under pressure to divert gas volumes to the domestic gas market instead of exporting the gas.
The LNG projects are Gladstone LNG (operators Santos and Petronas), Queensland Curtis LNG (operator Shell) and Australia Pacific LNG (operators ConocoPhillips and Origin).
The ACCC on Monday said it was concerned about the LNG exporters and associates having influence over almost 90% of the proven and probable gas reserves in the east coast in 2021.
In response to that and other concerns, the federal government said it will review and renegotiate the ADGSM and a heads of agreement with LNG exporters.
It is understood these two mechanisms apply to eastern Australia, not Western Australia.
Cass-Gottlieb said: “Both mechanisms are critical to ensuring adequate supply to the domestic market in 2023 and future years.”
Gas industry response
In response, Australia’s gas industry said it will ensure domestic gas supply next year, reassuring its customers that the industry is responding “as has always been the case” to ensure energy security.
“The ACCC report shows 167 PJ of uncontracted gas is available for supply into the domestic market next year. This is more than enough gas to ensure that no shortfall occurs,” said the Australian Petroleum Production & Exploration Association (APPEA).
APPEA added there “had never been an actual shortfall and the ACCC had found 11 consecutive surpluses previously”.
“We very much understand our obligation to Australians and the importance they place on gas in running their homes and businesses and that will be honoured,” APPEA said.
As for the review of the ADGSM mechanism, APPEA said: “As we have done throughout winter when coal and renewable generation failed, the gas industry is working to get the gas to where it needs to be and customers can be assured supply will be adequate next year so they can continue uninterrupted.”
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