LNG imports to ease east Australia gas shortfall: Aemo

The proposed start-up of the 2mn t/yr Port Kembla Gas Terminal (PKGT) by 2023 is projected to push back a potential gas shortfall in east Australia to 2026 from a previous 2024 prediction. But if there is any delay to the planned LNG terminal a shortfall could emerge in Victoria state during the June-August 2023 winter, according to the latest outlook report for gas demand in east Australia from the Australian Energy Market Operator (Aemo).

The prospect of PKGT has improved supply capacity with a potential injection of up to 500TJ/d (13.35mn m³/d), said Aemo's group manager for forecasting Nicola Falcon. PKGT equates to around 10pc of the average daily gas supplies in east Australia last year and about a third of domestic gas consumption in the region in 2020.

"This development comes at a critical time, as existing Victorian production is declining faster than previously projected," Falcon said. Aemo's analysis in its 2021 Gas Statement of Opportunities (GSOO) shows that without PKGT the fall in flexible gas from existing fields would mean east Australia will need to rely heavily on storage, she said, and increasingly on constrained pipeline infrastructure to meet the needs of gas consumers, especially during high demand days in winter.

If PKGT and other approved gas supply projects are not delivered to schedule, gas shortfalls of up to 100TJ/d may occur in winter 2023 under extreme conditions, Aemo said.

As long as all committed and anticipated projects are developed, there will be enough supplies to cover extreme peak demand conditions and seasonal demand requirements until at least 2029. Without additional supply from projects currently uncertain, or fuel substitution to soften gas consumption, these supply gaps are projected to continue increasing from 2030 onwards, it said.

Australia's gas sector is on the cusp of transformation, with changes in consumption patterns forecast and alternate supply sources, including LNG import terminals, being developed, Aemo said. The is being driven by greenhouse gas (GHG) emissions reductions to achieve economy-wide net zero emissions, including from the gas sector, Aemo said.

Gas consumption in the next 20 years is uncertain, partly because of the policy response from the federal governments to reduce GHGs, as well as innovation in new energy technology and the cost of competitive sources to gas. The downside risks outweigh the likelihood of gas consumption growth under Aemo's central scenario case in the 2021 GSOO report.

Reduced consumption In the next five years is forecast from energy efficiency savings, fuel switching and falling gas-fired power generation, with increasing variable renewable energy generation entering east Australia's National Electricity Market, Aemo said. Industrial closures remain possible under extended weak economic conditions. While energy costs continue to be a key issue for large-scale gas users, reduced gas prices alone are unlikely to lead to significant increased gas consumption, particularly from industrial consumers, it said.

By Kevin Morrison