Snowy gas-fired power station ordered as crisis escalates

When gas levels in storage drop too low, pressures may drop below the optimal range, air bubbles may form and customers may not receive their gas in a steady stream or at the right pressure for their plant and equipment.

AEMO had to intervene to order two gas-fired power plants to limit operations which it said was “in line with previous communications issued for Iona storage depletion threats to system security events”.

Snowy Hydro declined to comment.

AEMO said the directive would remain in effect until the threat to the security of the system expires or market participants indicate that it can be a source of gas to meet electricity demand, potentially through October 1.

A spokesman for AGL Energy, which operates gas-fired power plants in Victoria and South Australia, said it was monitoring the situation closely.

“We note that AEMO has not imposed any withdrawal restrictions from Iona’s storage facilities,” he said.

“We believe that there is unlikely to be a significant impact on our gas-powered generator at this time, but we continue to monitor the situation closely.”

However, there are no gas volumes targeted to be supplied by the three Queensland LNG exporters, an AEMO spokesperson said, describing the current situation as a “little surveillance phase”.

“Queensland producers are committed to increasing supply to the southern state. We’ll start looking at that flow over the coming days, and then, combined with other steps being taken to manage Iona’s storage levels, hopefully see a stabilization of that facility’s storage levels,” he said.

‘Could become more and more common’

Credit Suisse energy analyst Saul Kavonic said the extraordinary action taken by AEMO to direct Queensland LNG exporters to send more gas to the domestic market “could become increasingly common” and may need to force gas diverted from exports.

“At a time like this, southern markets may need to see maximum flows coming south from Queensland, in our view,” Kavonic said. He estimates AEMO could seek flows of up to 100-200 terajoules per day towards the south.

He said data on gas flows appeared to indicate that Shell’s WCLNG plant did most of the “heavy lifting”, with APLNG also contributing, but GLNG perhaps oddly enough, continued to pull gas north for export.

However, a source close to GLNG said that the venture, with partner deals that include Korea Gas Corp and Petronas, also releases gas for the domestic market, helped by swapping with other producers and borrowing gas against future LNG supply commitments.

Josh Stabler, managing director of advisory Energy Edge, estimates the potential for additional south Queensland gas flows may be lower, around 50 TJ/day, but “with a few days without additional physical capacity”.

‘It’s not about stopping gas offshore’

AEMO chief executive Daniel Westerman does not expect the blackout despite the worsening energy crisis in the eastern state. Eamon Gallagher

Speaking at a business conference in Melbourne, AEMO chief executive Daniel Westerman rejected suggestions the new gas restrictions introduced on Tuesday would have a negative impact on LNG exports.

“This allows us to have better visibility and collaboration in getting the gas southward from Queensland and into the southeastern state,” he said.

“It’s not about prices, it’s not about stopping the supply of gas going offshore, it’s about creating a transparent process to ensure we balance supply and demand in the southern states and get the flow right out of Queensland.”

The so-called Gas Supply Guarantee which prioritizes gas for power generation was also triggered last month.

Mr Westerman said the process last time, “worked out pretty well”.

“Early days [now] but the cooperation we have so far has been pretty good,” he said, adding AEMO did not believe the limited gas pipeline capacity between Queensland and the southern states would be a problem, contrary to some industry concerns.

Market operators ‘need more powerful tools’

Victorian Energy Minister Lily D’Ambrosio used the conference to call for tougher powers for AEMO to halt gas shortages, saying the gas market was currently “non-functioning” and had a “very damaging impact on consumers”.

“I would say that market operators actually need to have more powerful tools in their toolbox to be able to ensure that facilities, like Iona, are not at risk,” said Ms D’Ambrosio.

“This is not an unacceptable situation for a country that produces more than enough gas to meet our domestic needs, given the level of volatility and uncertainty that Australia has, it’s a sign the market is not working.”

The minister said the fact that 70 per cent of Australia’s gas was exported was “the root cause of this problem”, calling for the market to change to “working in the interest of consumers”.

But David Maxwell, chief executive of Melbourne-based gas producer Cooper Energy, said most of Queensland’s coal seam gas would not have been developed had it not been for the LNG market.

“The challenges we face could be even worse if we didn’t have the LNG industry, because we wouldn’t have that critical infrastructure, the economies of scale that have reduced costs,” Maxwell said.

“I would remind people that the previous savior for gas to eastern Australia was gas from Papua New Guinea.”

The crisis won’t go away

He said Cooper supplied as much gas as possible. Beach Energy CEO Morne Engelbrecht said his company is doing the same, and further investments are being planned to bring in more gas in the future.

“[The crisis] won’t go away”, said Engelbrecht after Beach posted its best quarterly earnings in more than three years. “Energy security is what is needed right now and how do you get it by getting more gas into the market. Obviously you need to reduce emissions at the same time.”

Mr Westerman, meanwhile, dismissed suggestions that the strategic capacity draw of power generation had contributed to the crisis, instead blaming “many different factors”.

“The days leading up to the market suspension, so much unplanned coal coming out of the system – there was an unplanned 3000 megawatts coming out of the system – really had an impact,” he said, referring to the National Electricity suspension for nine days last month. Market wholesale system.

“And of course there’s high demand, there’s high prices, there’s little things like planned outages, so it was the perfect storm.”

But he said he “obviously didn’t” expect a blackout, even though gas storage levels were “alarmingly lower than in previous years”.

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