Aussie east coast faces potential gas supply shortfalls by 2027, ACCC warns
Australia’s east coast gas market may experience gas supply shortfalls as early as 2027, a year earlier than previously expected, unless new sources of supply are made available, according to a report published on July 5 by the country’s competition watchdog.
The Australian Competition and Consumer Commission (ACCC) stated that the decision by the New South Wales government and Origin Energy to extend operations of the coal-fired Eraring power plant would improve the outlook for 2027 but would not alter the fundamental supply trajectory.
The forecast of earlier emerging risks is attributed to an increase in forecast gas consumption for power generation and a decrease in forecast supply due to delays in new gas projects and production problems in legacy gas fields, the ACCC explained.
The report found that the southern states are expected to rely on gas transported from Queensland for the foreseeable future unless new sources of supply are made available. From 2029, Queensland will also require new sources of supply.
However, the report does not incorporate all potential volumes of gas that may come online under the Gas Market Code exemptions framework. If all producers proceed with the projects identified in their conditional ministerial exemptions and the potential of those projects is realised, east coast shortfalls could be delayed until 2028.
In September 2023, the Gas Market Code came into full effect after a two-month transition period. The Gas Market Code aims to achieve its objectives through a combination of pricing requirements, greater transparency on available gas to the market, and the establishment of a more level playing field between buyers and sellers when negotiating wholesale gas supply agreements.
“With long-term export contracts for LNG producers due to expire from the mid-2030s, this presents a critical opportunity for policy considerations that promote efficient and more secure domestic gas supply as well as the export of gas,” said ACCC commissioner Anna Brakey.
In 2017, the Australian government directed the ACCC to conduct an inquiry into the supply of and demand for natural gas in Australia and to publish regular information on the supply and pricing of gas. The ACCC will conduct the inquiry until 2030 after the government extended it in 2019 and again in 2022.
Australian Energy Producers CEO McCulloch said the latest report warned governments must act urgently to fast-track new gas supply projects.
“Governments cannot continue to ignore the warnings. Without immediate government action to address the looming gas supply crisis, millions of Australians face higher energy prices and the real risk of blackouts,” McCulloch said.
“The ACCC report spells out the government actions needed to address long forecast shortfalls, including removing moratoria on new gas developments, speeding up approvals, and reducing the infrastructure, regulatory and capital barriers faced by producers," she added.
Australian Energy Producers believes that the introduction of price controls and the mandatory Gas Market Code delayed new supply projects and undermined the market certainty needed to support investment and address structural shortfalls.