A new report published by the Australian Energy Market Operator (AEMO) has forecast a domestic gas supply dearth for Western Australia, as demand increases and the rate of exploration for new gas projects falls.
The report expects a 2.2% annual increase in domestic natural gas demand for the state between 2024-2033, while gas supply is projected to fall 0.9% on average over the same period.
At present, there is no gas or energy infrastructure connecting Western Australia to its eastern cousins, meaning WA will have to solve the oncoming energy dearth on its own.
Pipeline can’t address short-term needs
The AEMO is calling for greater investment in WA gas projects to meet its demand projects, especially as the state continues the energy transition. Other suggestions included using stored gas supply or diverting uncontracted LNG spot cargoes from the export market into the domestic market.
“The 2023 WA GSOO identifies an increasing need for investment in additional gas supply into the state's domestic market,” AEMO executive general manager WA & strategy Kate Ryan said.
“While there are many offshore and onshore undeveloped projects that could supply the WA domestic market, these projects are currently too speculative to include in the potential supply forecasts.”
The Federal Department of Climate Change, Energy, the Environment and Water produced a pre-feasibility study in 2018 assessing the case for a West–East gas pipeline.
“The study concludes that a pipeline connecting Western Australian gas to the east coast is a technically feasible option to increase gas supply to the eastern states but is not currently the best or most economical option for dealing with the supply issues facing the gas market in eastern Australia,” the conclusion reads.
While it’s possible the situation has changed in the intervening years, Australia remains a difficult country to build wide-reaching infrastructure in, due to the sheer size and inhospitable nature of the country.
Will more gas projects solve pricing fears?
While building more gas projects was the AEMO’s core suggestion to address the oncoming energy shortage in WA , and the resulting price spike, it may not be so simple.
In September this year, Wesfarmers (ASX:WES) took aim at gas heavyweight Woodside, accusing the energy company of not supplying enough gas to the local market compared to export markets.
Woodside responded that it was meeting its legal obligations, but WA miner South32 said producers were exploiting the lack of competition by forcing “unreasonable” terms on buyers.
"Many of the contract terms we have highlighted have the absurd result of placing the burden on the gas user who has very little ability to manage the risk," South32 energy and carbon manager Michael Brooks told the ABC.
"For example, gas quality. Gas users have no ability to control the gas quality at any time, no ability to stop gas flows and little ability to influence the gas specification."
WA domestic gas prices soared from just $2 a gigajoule in 2020 to more than $12 in 2023.
While the WA Government adjusted its domestic gas policy in August to mandate gas producers offer gas equivalent to 15% of exports available for WA consumers, it remains to be seen whether it will have a big enough effect to meet growing energy needs.
In the long-term, a greater emphasis on localised renewable energy and small, self-contained energy grids might offer a more long-term fix.
Western Australia is currently heavily reliant on gas, with a huge 54.5% of its energy needs met by the fossil fuel in 2021-2022 – dwarfed only by the Northern Territory’s 74.4% reliance.
In comparison, WA relied on only 2.3% renewable energy in that period.
With the global energy transition in full swing, it will take a concerted effort by government and industry to both address growing energy requirements and decarbonise the energy market.