Port Kembla LNG imports stave off east Aus supply gap: AEMO
The launch of the 2mn metric ton/year Port Kembla LNG terminal before the winter of 2023 will stave off a gas supply shortfall in east Australia until 2026, the Australian Energy Market Operator (AEMO) reported on March 29, after previously predicting shortages would emerge in 2024.
The A$250mn (US$175mn) Port Kembla terminal in New South Wales should provide up to 500 TJ/d of gas supply. Its developer Australian Industrial Energy is expected to take a final investment decision on the venture this year.
"This development comes at a critical time, as existing Victorian production is declining faster than previously projected," AEMO said in its report. "Our annual analysis shows that without the Port Kembla Gas Terminal, the decline in flexible gas from existing fields would mean we need to rely heavily on storage, and increasingly on constrained pipeline infrastructure to meet the needs of gas consumers, especially during high demand days in winter."
If Port Kembla and other planned supply projects falter, east Australia could be contending with a shortfall of up to 100 TJ/d in the winter of 2023 if weather conditions are extreme, AEMO warned. But if all committed and anticipated plans are realised, there will be enough supply to last until at least 2029, the operator said. Additional investments will be needed to avoid the supply gap widening over the 2030s.
Australia's gas sector is on the cusp of transformation, AEMO said, with consumption patterns projected to change and alternative supply sources emerging. These changes are driven by efforts to reduce greenhouse gas emissions, in order to achieve economy-wide emissions neutrality.
The operator noted that the outlook for gas consumption over the next two decades was uncertain, due to federal government policies on emissions, innovations in new energy technologies and unpredictability about the cost of energy sources that compete with gas. Under AEMO's central scenario, though, gas demand is more likely to decline than to grow.
Energy efficiency savings, fuel switching and reduced gas-fired power generation will weigh down on consumption levels over the next five years, together with increased renewable energy production, according to the report. Low gas prices alone are unlikely to be enough to support significant growth in demand, AEMO said.