Not enough gas, higher prices, factories close: Dire warning issued about gas supply

The Federal Government has been urged to consider intervention in energy markets, amid fears a gas shortage could lead to higher prices, according to a recent report by the consumer watchdog.

Key points:

• ACCC report projects biggest domestic gas supply shortfall since 2017
• The projected shortfall could put further pressure on prices
• Concerns arose that some manufacturers could be shut down

The Australian Competition and Consumer Commission (ACCC) has released an interim report on its investigation into gas supplies along the east coast.

It said that while Australia has “relatively abundant gas resources”, most of it is produced for export and large volumes are needed for the domestic market next year to avoid shortages.

“The outlook for 2023 is very worrying and is likely to put further pressure on prices, which could result in some commercial and industrial users being unable to operate,” the report said.

“This is a significant deterioration in conditions compared to what we projected for 2022 at the same time last year and presents a real risk to Australia’s energy security.”

It is recommended that the government consider intervening in the market, pulling what is known as a “gas trigger” to ensure there is sufficient supply.

The Gorgon Project in Western Australia has been supplying gas since 2017.(Chevron)

The ACCC has forecast a shortage of 56PJ next year, which is equivalent to about 10 percent of domestic demand, the biggest projected supply shortfall since 2017.

“It represents further [almost tenfold] deteriorating conditions relative to what was forecast for 2022 at the equivalent time of last year,” the report said.

The ACCC partially blames liquefied natural gas (LNG) exporters.

“LNG exporters are expected to contribute to the shortfall in 2023 by pulling 58 PJ more gas from the domestic market than they expect to supply to the market,” the report said.

This shortfall is expected to primarily affect New South Wales, Victoria, South Australia, Tasmania and the Australian Capital Territory, with less significant consequences for Queensland.

How to fix the problem?

To avoid gas shortages, the ACCC has urged LNG exporters to act immediately to increase domestic supply and recommended the government work closely with exporters to ensure they supply more to the domestic market.

“LNG producers need to divert most of their excess gas to the domestic market,” the report said.

It also recommends the federal government go a step further and initiate the first steps of the Australian Domestic Gas Safety Mechanism (ADGSM), better known as the ‘gas trigger’, and officially determine whether 2023 will be a shortage year.

Gas triggering is an emergency provision, allowing the Minister of Resources to intervene directly in the gas market and enforce export controls to ensure there is adequate supply for use in Australia.

Treasurer Jim Chalmers said the report highlighted “worrying” elements of the east coast gas market.(ABC News: Adam Kennedy)

The government has not made clear whether it will follow the recommendations but in a statement, Federal Treasurer Jim Chalmers said he was concerned about the findings.

“The ACCC’s latest gas investigation report highlights some worrying features of the east coast gas market,” he said.

“The government takes these findings very seriously and will immediately respond to the ACCC’s recommendations.

“I urge gas producers to do the right thing by Australians.”

The ACCC said other measures that could also help with supply issues include sourcing additional gas from the Northern Territory and pulling gas from storage.

Long-term plan

The government has an agreement with LNG exporters aimed at ensuring an affordable supply of gas to the domestic market, known as the Heads of Agreement.

But the deal expires next year, and the ACCC has recommended the government strengthen provisions covering reporting obligations.

Similar recommendations were also made for the strengthening of ADGSM.

The ACCC also points out that supply issues are resolved in the medium to long term through the expansion of the gas project in the Gippsland Basin, the southwest pipeline in Victoria and further progress at the LNG import terminal.

But the report notes a growing focus on other energy supplies, as Australia tries to reduce its emissions, and has acknowledged federal funding will help further support natural gas, carbon capture and storage, and hydrogen projects.

Load

#gas #higher #prices #factories #close #Dire #warning #issued #gas #supply