Australia’s east coast was this week again warned of looming gas shortages, with a supply squeeze due in about 2025, according to The Australian Energy Market Operator (AEMO).
South Australia is likely to be the worst-hit state with supply falling faster than projected demand.
Meanwhile, major supply sources in Victoria’s offshore Gippsland Basin continue to fall and an LNG import plant which Viva Energy wants to develop in Geelong is facing more delays.
To combat supply issues, AEMO has warned that gas generators may be forced to burn diesel to keep the power grid running unless new sources of supply are developed.
AEMO said gas generators may have to run diesel until 2026. The last time this occurred was in 2022 when Russia invaded Ukraine.
“Running gas-powered generators on liquid fuels could provide temporary relief during periods of extremely high gas demand,” AEMO chief executive Daniel Westerman said.
However, critics say household costs would skyrocket and the move would hinder efforts to decrease carbon dioxide emissions.
Energy security at risk
Australia retains its position as the leading exporter of liquefied natural gas (LNG), primarily serving Asian markets.
However, the significant decline in offshore gas production from Victoria's Bass Strait, coupled with the hesitancy to explore new reserves due to state-imposed restrictions, has raised concerns regarding the nation's energy security.
The looming gas shortage has ignited discussions on whether the export-centric approach, especially from the three LNG facilities in Queensland's Gladstone, is compromising domestic energy needs.
Santos, a major player in the LNG industry, has dismissed the idea of redirecting gas from the international market to meet local demand, emphasising the importance of maintaining export commitments.
“It would leave a hole that I don’t think in the long term any of us could fill,” said Santos chief executive Kevin Gallagher.
“And if it is going to be filled, it is going to be filled by countries like Russia and the Middle East. I’m not sure that is the best long-term security … solution for a lot of those Asian economies.”
Federal Energy Minister Chris Bowen has backed his government’s plan to safeguard gas supplies.
“The Albanese Government is delivering policies to better manage projected supply issues, working with the states to expand AEMO’s powers to manage seasonal and localised gas supply shortfalls, including boosting domestic gas storage,” a Bowen spokeswoman said.
According to Westerman, supply protection requires more developments and projects as well as pipeline upgrades and new local volumes.
“While each individual investment could delay shortfalls for a number of years, a combination of these options will be needed to fully address gas supply issues,” Westerman said.
Gas industry executives are hoping for action from authorities that allows for new developments including Santos’s Narrabri gas project and the expansion plans of Senex Energy, which are awaiting regulatory approvals.
Westerman believes new sources of supply need to be delivered soon to have any hope of heading off the 2028 shortfall.
“From 2028, supply gaps will increase in size as Bass Strait production falls significantly,” Westerman said.