Gas supply warning bells, diesel looming as a stopgap

New investment is urgently needed if Australian gas supply is to keep up with demand from homes, businesses and gas-powered electricity generation from 2028, a report warns. The Australian Energy Market Operator's latest gas market outlook for Australia’s east coast forecasts peak-day shortfalls as soon as winter 2025 and the potential for small seasonal supply gaps from 2026 in southern states. AEMO chief executive officer Daniel Westerman said gas production was forecast to fall faster than demand in the south, driven by declining production from Bass Strait. "While the report identifies the need to deliver new infrastructure by 2026, running gas-powered generators on liquid fuels could provide temporary relief during periods of extremely high gas demand," he said. “From 2028, supply gaps will increase in size as Bass Strait production falls significantly.” In the northern regions, where the majority of gas is produced for export, AEMO says investment is also needed from 2026 to meet both export and domestic demand. In the 2024 Gas Statement of Opportunities (GSOO), AEMO has assessed the impact of a number of currently proposed supply, transportation and storage options in reducing the risk of peak day shortfall and annual supply gaps. “For the first time, we've assessed a range of investment options that include pipeline upgrades, new domestic supply including renewable gases, and LNG import terminals,” Mr Westerman said. “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." Australian Energy Producers chief executive Samantha McCulloch said the warning bells were getting louder as report after report forecasted gas shortfalls and exposed the urgent need for new east coast gas supply. “How many warnings will it take before governments act to enable the urgent development of gas supplies?" she said. “The policy failure is underscored when diesel, a higher emitting and more expensive fuel, may be needed for electricity because governments have stifled new gas projects with approval delays and compounding interventions.” But Climate Solutions analyst Tom Quinn, the managing director of Springmount Advisory, said that if Australia was facing shortfalls, exports should be limited during shortfall periods in order to protect local industry and households. "We are one of the largest gas exporters in the world and it is ridiculous if we don't ensure enough is set aside for local users," he said. "The nation's security shouldn't be held hostage to the greed of gas exporters." Energy finance analyst Kevin Morrison from the Australian Gas Institute for Energy Economics and Financial Analysis said AEMO could be setting themselves up for another year of over-estimating demand. "AEMO makes no mention of the closure of the country’s largest gas-fired gas plant and its subsequent impact of reducing demand," he said. He said also there were several gas projects that were deferred or delayed that could still come onstream in the scenario of a shortfall in 2028, with Beach Energy’s Enterprise and Thylacine fields expected to get the go-ahead later this year. "Comet Ridge’s anticipated Mahalo and Mahalo North developments are also other potential domestic supply options, as is Senex’s Atlas and Roma North expansions as well as APLNG’s Ironbark development,” he said. The 2024 GSOO reaffirms the important role gas-powered electricity generation will play in reducing emissions and maintaining electricity reliability and security as the power system transitions from coal to intermittent renewable generation and an increase in electricity demand through the electrification of some gas use. “Flexible gas-powered electricity generation is an essential component of the energy mix into the future,” Mr Westerman said. “Gas, along with batteries and pumped hydro, will enable higher rates of renewables and support electricity reliability as Australia's coal-fired power stations retire.”

Gas supply warning bells, diesel looming as a stopgap

Industry Queensland

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