Gas Production Efforts Stabilize Australia’s Energy Supply Crisis

The Australian Petroleum Production and Exploration Association (APPEA) has lauded the Australian gas industry for rescuing the country from the brink of an energy supply abyss. This followed the release of the Australian Energy Market Operator’s (AEMO) finding that gas production efforts had stabilized energy demand in the previously fragile eastern states.

An AEMO statement said any concerns about domestic supply shortfalls had been erased until at least 2030 because of significant new gas supply agreements in 2017 and 2018. Last year, Australia’s predicated gas shortages forced Prime Minister Malcolm Turnbull to intervene and trigger the Australian Domestic Gas Security Mechanism, which gave Canberra sweeping powers to force LNG exporters to divert gas supplies to Australia should the situation become critical.

APPEA Chief Executive Malcom Roberts said any fears of this sovereign risk scenario now emerging had been alleviated as a result of billions of dollars in new investments in 2018 and beyond to stimulate “more gas to market, supporting both domestic gas consumption and the gas export projects that are underpinning much of Australia’s economic growth.”

“In the past year we have seen significant announcements from Arrow Energy, Shell Australia, Senex, Cooper Energy, Strike Energy, GLNG, Australia Pacific LNG, Origin Energy and Santos to bring on new supply in various parts of eastern Australia,” Roberts said. “Together with the revised demand and supply outlooks developed by AEMO, they mean the industry has met in full the commitments provided to the Government in 2017.”

However, Roberts warned against complacency with exploration still at historically low levels, saying AMEO had warned that meeting ongoing gas demand to 2030 was still reliant on investment in existing reserves and developing new supply as cheaply as possible.

“This requires a focus on removing red and green tape and regulatory burdens to developing new supply in New South Wales and urgently removing the bans and moratoriums in Victoria. These remain important barriers to increasing energy security and placing downward pressure on prices,” Roberts said.

AEMO’s finding came a few days after it was revealed that the three Queensland coal seam-to-LNG plants on Curtis Island—APLNG, GLNG and QCLNG, operated by Origin-ConocoPhillips, Santos and BG Group, respectively—peaked at 600 terajoules per day in May.

Energy consulting firm EnergyEdge said supply stimulus flowed from a new $60 million, 50 km pipeline coming online from APLNG to the Wallumbilla gas hub.

The APA constructed pipeline has a capacity of 300 terajoules per day, representing about 10% of winter gas demand, and was able to boost supplies despite energy advisory firm EnergyQuest’s assertion that APLNG exports had dipped to 80% in May – down from 95% in the previous month.

EnergyQuest said total Australian LNG exports for May were lower at 4.7 million tonnes compared to 5.4 million tonnes in April, mostly as a result of scheduled maintenance. Export revenue for May was $2.06 billion from $2.14 billion in April.

Australia’s west coast LNG projects shipped 3.2 million tonnes in May, compared to 3.6 million tonnes in April, while east coast LNG cargoes dipped from 1.68 million tonnes in April to 1.57 million tonnes in May.

Queensland short-term domestic gas prices rose from April to May, averaging $5.84/GJ from $5.52 at Wallumbilla and $5.67/GJ from $5.14 in Brisbane. Domestic gas prices in Sydney were also up during the same period from $5.79/GJ to $6.18. In Adelaide gas rose from $5.47/GJ to $5.79 from April to May and in Victoria from $5.45/GJ to $6.11.