“Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east-coast market.”
While the forecast, just five months after AEMO warned of a 2022 Victorian gas shortage because of rapidly falling gas production, will be welcomed by the federal government in an election year, it will be seen by some as too good to be true.
This is because it relies on a certain amount of sun and wind in the right places, takes into account production from gas resources that have not been proven they can be economically produced, and counts on a short-term global oversupply of LNG at a time when prices are strengthening.
AEMO’s optimism about the gas balance extends for more than a decade. “No supply gaps are forecast before 2030 under expected market conditions,” it said.
AEMO said 4000MW of renewable energy supply was being added to the east coast grid in the next two years, meaning gas-fired power’s role would be reduced to providing power when there was less available sun and wind.
“An increased need for GPG (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.
Last year’s forecasts of a potential gas supply shortfall came as $70 billion of LNG plants and gasfields started exporting more gas from Gladstone than they themselves produced. Since the Prime Minister’s intervention, producers have agreed to supply any shortfall and have been sending more gas south.
“Detailed interviews with large industrial users reveal that large industrial consumers have increased confidence in gas availability, due, in part, to the ACCC review into the gas markets, and the introduction of the (Australian Domestic Gas Security Mechanism) and the LNG agreement with the potential for diversion of LNG gas from exports to the domestic market,” AEMO said.
Wholesale contract prices have jumped from traditional levels of $3 to $4 a gigajoule to $8 to $10 because of increased demand from LNG, higher development costs at new gas fields and state and Territory restrictions on onshore gas production.
The report may raise questions over the economics of three planned east coast LNG import terminals, although it is not predicting gas prices to fall. The higher prices and rapidly declining Bass Strait production have led AGL Energy, Andrew Forrest and ExxonMobil to consider docking three separate floating LNG import terminals at jetties in NSW and Victoria to provide more supply.
But in a test for the import plans, gas supply predictions now show Victorian, South Australian and NSW gas supply growing.
“Total production forecasts provided by gas producers show an overall projected increase in annual field output of 144 petajoules between 2019 and 2022,” AEMO said.
LKO Price at posting:
0.3¢ Sentiment: Hold Disclosure: Held
(20min delay)
