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Bearish Bets On Diesel Tell A Worrying Story

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Negative sentiment is growing in…

Gas Deficit Threatens Australia With Power Shortages

Malcolm Turnbull

Australia is facing power shortages next year, resulting from a deficit of natural gas, and Prime Minister MalcolmTurnbull is blaming state governments for causing the situation by curbing gas exploration activity in the country.

On a continent filled with gas we are paying around three times for gas as another firm would in the United States,” Turnbull said, adding that he will convene an urgent meeting with gas company heads supplying the east coast, to discuss options for avoiding the crisis. At the moment, Australian gas is cheaper for Japan than for Australia, despite additional shipping costs of $2.78 (A$3.70) per gigajoule.

Onshore drilling for natural gas is restricted in Australia, but the country is the world’s second-largest exporter of liquefied natural gas extracted from offshore deposits.

Turnbull’s comments come after the country’s Energy Market Operator warned that the grid needs more gas-powered generation capacity in order to stave off shortages. The PM has noted earlier that climate change models used to estimate the costs of switching to gas from coal have gravely underestimated gas prices and the availability of the commodity for domestic consumption.

One local energy analyst also believes that looming power shortages are the result of bad politics. In fact, Bruce Robertson from the Australian Institute for Energy Economics and Financial Analysis calls the idea of power shortages an “absurdity.”

Related: Australia’s 100% Renewable Energy Grid

However, unlike Turnbull, Robertson lays most of the blame with gas companies, which, he said, were “sitting on permits, not developing them and restricting supply so they can make a lot of money.

The analyst them blamed both state governments and Canberra for not developing an adequate energy policy for the country, leaving the door open for such “absurd” events, despite warnings that focusing on exports and neglecting domestic supply could have adverse effects on the country.

By Irina Slav for Oilprice.com

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  • ben on March 09 2017 said:
    Could you please clarify the statement "onshore drilling for gas is banned in Australia"? Because drilling is still happening in the Cooper Basin, and that's about as "onshore" as you can get.

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