Australia's southeast runs risk of gas shortages amid production concerns
SYDNEY, March 21 (Reuters) - Australia's southeast faces the risk of gas shortages during next year's winter months as demand may exceed supply, the energy market operator said on Thursday, as it called for urgent new investment to prevent any potential shortfall.
Due to a steady fall in production from Bass Strait, which has historically supplied around two-thirds of southern Australia's gas, there is an increased chance of small seasonal supply gaps, the Australian Energy Market Operator (AEMO) said in its annual report on the gas industry.
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"While the report identifies the need to deliver new infrastructure by 2026, running gas-powered generators on liquid fuels could provide temporary relief during periods of extremely high gas demand," CEO Daniel Westerman said in a statement accompanying AEMO's closely watched outlook.
"From 2028, supply gaps will increase in size as Bass Strait production falls significantly," he said.
Operated by U.S. energy giant ExxonMobil XOM.N, the Bass Strait project consists of several gas fields in the Gippsland Basin off the coast of Victoria state. The project started operations in 1969 and some facilities have now ceased production as reserves deplete.
Gas consumption by households and businesses is forecast to fall, driven by increased electrification as the economy transitions to meet net zero emissions goals, but production could decline even faster, AEMO said.
Victoria has said it would ban natural gas connections to new homes from this year as part of its plans to reach net zero emissions by 2045, five years ahead of the federal government.
In northern Australia, where most gas is produced for export, investment is also needed from 2026 to meet both export and domestic demand, the AEMO report said.
Australia produces more gas than it needs to meet its domestic demands, but most supply is contracted for export.
Federal Energy Minister Chris Bowen acknowledged longer-term challenges remained but said the report confirmed government's "policies to secure affordable gas are working to mitigate projected supply shortfalls in coming years."
(Reporting by Renju Jose in Sydney; Editing by Lincoln Feast.)