Alarm over possible gas shortages in Australia

In an interesting parallel with New Zealand, it seems Australia is also debating the sufficiency of its natural gas supply – with warnings of winter shortages coming from the Australian Energy Market Operator (AEMO) – despite Australia being a major exporter of gas.

Similarly with New Zealand, calls are being made for further investment in exploration and production to supplement diminishing current reserves.

Natural gas supplies more than 25 percent of Australia’s energy needs.

AEMO says either more exploration, drilling and development, or importing of gas, will be required to cover the domestic shortfall, despite production having quadrupled since 2000 and the huge quantities currently being exported from Queensland.

Ironically, Kevin Morrison from the Institute for Energy Economics and Financial Analysis says Eastern Australia “is awash with gas”.

“It’s just that we happen to send three quarters of it overseas.”

[In comparison, New Zealand converts around 45 percent of its natural gas to methanol, mainly for export.]

Much of Australia’s natural gas is exported to the likes of Japan and South Korea – and it wouldn’t be simple to stop this given that these countries have underwritten the development of the state’s gas production in many cases.

But even if it were willing to divert more gas south, the pipeline connecting Queensland to the southern states is very constrained and would require an enormously expensive expansion of the infrastructure according to ABC News.

And without a mandate requiring a share of the gas produced in Queensland to be reserved for domestic consumption - unlike that in place in Western Australia - coupled with the attractively higher prices commanded by exports, producers are neither obliged nor incentivised to supply the domestic market.

The head of AEMO, Daniel Westerman, has been explicitly calling for investment in new supply.

“Now, from 2027 onwards, we’re highlighting the need for investment in new sources of gas supply to overcome forecast annual shortfalls each year from then on.”

And it sounds like Federal Climate Change and Energy Minister Chris Bowen agrees, despite the need to decarbonise, saying gas is necessary for the energy transition because it backs up renewable energy.

“As we’ve said many, many times, as Australia transitions to renewable energy, gas will play a very important role in backing up that renewable energy as we undertake this most important transition.

“It’s very important that we have good, solid and stable supplies of gas.”

(Parts of this article were sourced from ABC News - the full article and interviews can be read here.)