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Watchdog warns of gas shortage and points finger at LNG projects

Business

Australia’s east coast could run short of gas next year after a report found the position “precarious’’ and questioned whether Queensland’s LNG projects were following a supply deal struck with the Federal Government.

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The Australian Competition and Consumer Commission said a supply shortfall in Australia’s east coast gas market was “increasingly likely, especially in the southern states’’.

Its latest report on the issue revealed a finely balanced supply outlook for 2022 and that a shortfall of 2 petajoules could arise across the entire east coast gas market next year, driven by a shortfall of up to 6 PJ in the southern states, if LNG producers export all of their surplus gas.

This forecast is dependent upon demand from gas powered generators decreasing to record lows, and a material volume of gas from currently undeveloped reserves being supplied.

Under the deal struck with the LNG projects, they must offer uncontracted gas to the domestic market on internationally competitive terms before it is exported, and provide relevant material to the ACCC to demonstrate their compliance.

“The initial material LNG producers provided to us did not adequately demonstrate compliance with the new heads of agreement and they will need to lift their game,” Mr Sims said.

“The initial responses from LNG producers were concerning given that in the near future Australia’s southern states may depend on their surplus. “We are also concerned that there have been significantly fewer offers for gas supply being made in the domestic market recently.

“The ACCC has recommended throughout this inquiry that more needs to be done by governments and industry to ensure sufficient gas is brought to market to avoid a shortfall in the future.’’ 

The ACCC has also warned that it would examine competition in markets for the exploration, production and processing of gas for the east coast, including the factors affecting when gas is brought to market. 

The ACCC said commercial and industrial gas users were concerned prices would rise in response to supply uncertainties and were most concerned about future supply uncertainty. 

For the southern states, demand is forecast to be 6 PJ greater than forecast gas production and withdrawals from storage in 2022. 

In previous years, potential shortfalls in the southern states were largely met by flows from Queensland, however, Queensland producers were currently forecasting to supply only just enough gas into the domestic Queensland market to meet forecast demand.

“Unless more gas is supplied into the domestic market by Queensland producers there may not be enough gas to meet any shortfall that could arise in southern states.’’

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