Australia Secures More Natural Gas Supply for its Domestic Market

Australia has secured two supply deals for its domestic market to power east coast gas-fired stations, the government said on Monday, hoping to ease some of the concerns about the domestic supply of gas and the reliability of the energy system.

Australia plans to retire a lot of its coal fleet by 2033 and to bet on renewable energy, but it faces power shortages if it rushes the energy transition, analysts and the Australian Energy Market Operator (AEMO) have warned.   

Despite being a major LNG exporter, Australia has faced gas supply issues on its east coast and in 2022, it introduced a price cap on natural gas for the domestic market. The cap was intended to mitigate the effects of the international tightening of gas supplies in 2022 that led to spiking prices.

The New South Wales government said last year that a recent electricity reliability check-up has found there would be reliability challenges for NSW in the next couple of years.

AEMO’s most recent reliability report showed that a central scenario in the analysis found increased reliability risk.

“Over the 10-year outlook, we continue to forecast reliability gaps, which are mostly due to the expectation that 62 percent of today’s coal fleet will retire by 2033,” AEMO CEO Daniel Westerman said.

The Australian government announced today that more than 260 petajoules (PJ) of gas will be made available between now and 2033 through two new enforceable supply commitments with Esso and Woodside, under the so-called Gas Code of Conduct exemptions framework.

“This would be sufficient to power east-coast gas-fired power stations for around two and a half years,” the government said.

Chris Bowen, Australia’s Minister for Climate Change and Energy, commented,

“We know that gas is critical to supporting a lower-cost, more renewable grid as aging coal exits, and to support Australian manufacturing – which is why we’ve delivered this code to shore up energy reliability and affordability after a decade of chaos.” 

By Charles Kennedy for Oilprice.com

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