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Australia Could Divert LNG Exports To Avoid A Domestic Supply Crunch In Winter

Exporters of LNG from Australia may have to offer more gas to the domestic east coast market to mitigate a potential supply risk in winter 2023, the Australian Energy Market Operator (AEMO) said on Thursday.

The regulator’s gas adequacy report found that gas supply in Australia has improved for the 2023 winter in the southern hemisphere, but supply risks, under certain conditions, this winter remain in the southern states New South Wales, the Australian Capital Territory, Victoria, South Australia, and Tasmania.

“The risk of gas shortfalls each year from winter 2023 to 2026 in all southern jurisdictions remains under extreme weather conditions and periods of high gas-powered electricity generation, with those risks further exacerbated if gas storage levels are insufficient,” AEMO chief executive Daniel Westerman said.

“Existing instruments, such as the heads of agreement with LNG exporters, which includes the Gas Supply Guarantee, to offer additional gas into the east coast domestic market in 2023 will help in managing supply adequacy,” he added. 

Despite generally falling natural gas consumption in Australia, investments will be needed in the near term to ensure operational solutions from 2027, Westerman noted.

AEMO’s warnings of possible shortfalls in gas supply prompted the Australian Petroleum Production & Exploration Association (APPEA) on Thursday to call for federal and state governments to outline their plan to bring on new gas supply.

“AEMO makes it clear that the root cause of gas market shortfalls is inadequate supply and infrastructure. Ongoing market intervention and price regulation, permitting delays, and state-based barriers to new gas development are exacerbating the risk of shortfalls,” APPEA Chief Executive Samantha McCulloch said.

“We need a clear strategy from governments to promote new supply to avoid shortfalls and put downward pressure on prices rather than ad hoc interventions that do the opposite and undermine investment confidence.”

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Earlier this week, Australian Minister for Climate Change and Energy, Chris Bowen, said that natural gas should continue to play a key role in energy supply in the country.

By Tsvetana Paraskova for Oilprice.com

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