ACCC Predicts Adequate Gas Supply to Meet Demand on Australia's East Coast by 2024
ACCC Predicts Adequate Gas Supply to Meet Demand on Australia's East Coast by 2024

ACCC Predicts Adequate Gas Supply to Meet Demand on Australia's East Coast by 2024

  • 04-Jul-2023 12:47 PM
  • Journalist: Sasha Fernandes

Australia: According to the ACCC's interim gas inquiry report from June 2023, the Australian east coast gas market is expected to have enough supply to meet overall demand in 2024. However, the report notes that the outlook for the winter of 2023 and 2024 is closely balanced, with southern states potentially dependent on a gas surplus in Queensland.

The report estimates a 27 PJ east coast gas surplus for the following year on the off chance that LNG makers send out all their presently uncontracted gas. In contrast, it predicts a 90 PJ surplus if the LNG producers export only their currently anticipated spot sales.

In 2024, the eastern states are expected to have an adequate supply of gas to meet their demand. However, the southern states may experience a shortage and will require significant transport and storage capacity to receive gas from Queensland. The reduced demand for gas-fired electricity generation is the main contributor to the improved supply and demand outlook. Despite this positive development, the uncertain demand outlook due to changing weather and electricity market conditions remains a factor. It is crucial that there is enough storage and gas flows from Queensland to the southern states to ensure sufficient supply even with surplus gas in the overall east coast.

According to a recent report, the winter months will pose significant challenges for gas markets due to the tight supply-demand outlook during the third quarters of 2023 and 2024. Whether there will be sufficient gas available during this period will depend on additional commitments from liquefied Natural gas producers through contracts or time swaps. However, unexpected events such as last year's floods could further worsen the quarterly outlook, warned the ACCC. Despite the gas industry fulfilling its commitment, the southern states are increasingly dependent on Queensland for substantial volumes of gas to prevent shortfalls.

The latest report from the ACCC has brought to light the issue of inadequate gas production in New South Wales and Victoria. These states have a large user base for gas consumption, but their regulatory policies and bans on new supplies are hindering the investment prospects in this sector. Due to these restrictions, millions of households in these areas are paying an additional $2/GJ for gas imports from Queensland. The report suggests that the best way to resolve this issue is to introduce new gas supplies near the consumer, as proximity leads to lower costs and a more stable supply. To this end, the Santos Narrabri gas project has been identified as a crucial element in addressing this shortfall. This project has the potential to fulfil almost half the Natural gas demands of homes and businesses in New South Wales, and therefore, its development should be prioritized as a matter of urgency.

In addition to the gas production concerns, the ACCC has noted that there is still a prevailing sense of regulatory ambiguity that is impacting the market and contractual agreements. Specifically, there is a lack of clarity around how the Mandatory Code of Conduct will operate, which is set to come into effect in the early part of July. This Code transfers the responsibility of matching the market's demand and supply to the government, who will negotiate contracts with gas producers on a bilateral basis. The effectiveness of this new system in bringing on board the required new gas supplies and meeting the demands while averting expected shortages remains to be seen.

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