Mixed reactions to AEMO’s 2015 Gas Statement of Opportunities

The Australian Energy Market Operator (AEMO) 2015 Gas Statement of Opportunities (GSOO) released on 13 April highlights the need to develop more gas to put downward pressure on prices, according to the Australian Petroleum Production & Exploration Association (APPEA).

The report forecast a 17 per cent decline in 2019 for industrial, residential and commercial gas consumption.

APPEA said that while it remains clear eastern and south-eastern Australia’s natural gas supply and demand is adjusting to a dynamic and transitioning market, new gas resources must be developed to alleviate pricing pressures for residential, industrial and commercial customers.

“With demand declining for a number of reasons, including upgrades to gas market infrastructure and storage, now is the time to ensure exploration and development of natural gas is fostered in NSW and Victoria rather than hampered by moratoriums and excessive regulation,” APPEA said.

“NSW, in particular, relies on other states for 95 per cent of its supply when it has far more cost-effective alternatives to meet gas demand much closer to where it’s needed most. 

Last month, the Productivity Commission found that removing regulatory burdens that restrict exploration and production of natural gas, particularly in Victoria and NSW, would not only allow the market to work more efficiently and effectively, but would also bring on more gas supply.

In addition, the Australian Government’s Energy White Paper (read more about it here) released last week found that tightening supply in Australia’s gas market is exacerbated by barriers to new onshore gas production.

“Keeping in mind that gas projects take years to reach commercial production, planning for the state’s long-term energy needs remains paramount. Projects in NSW currently in the early stages of development could meet up to 65 per cent of the state’s domestic gas demand,” APPEA added.

At a recent conference, the aluminium industry said 6,000 jobs depend on gas to fire Australia’s Alumina smelters and Manufacturing Australia has highlighted the danger of losing more than 80,000 jobs if there is not sufficient gas brought to the domestic market.

The Australian Pipelines and Gas Association (APGA) also acknowledged that AEMO is no longer forecasting a gas supply shortfall for Australia’s eastern markets. However, APGA Chief Executive Cheryl Cartwright said the association was concerned that this change was caused primarily by a reduction in the demand for gas.

“A reduction in industrial and commercial demand for gas, particularly in New South Wales, must be of real concern to policymakers,” Ms Cartwright said.

“It seems this winding back of the manufacturing sector is the result, in part at least, of higher prices for gas or a tightness in supply. Australia’s industrial sector continues to highlight the difficulties in accessing long-term contracts for gas.

“At a recent conference, the aluminium industry said 6,000 jobs depend on gas to fire Australia’s Alumina smelters and Manufacturing Australia has highlighted the danger of losing more than 80,000 jobs if there is not sufficient gas brought to the domestic market.”

That aside, Ms Cartwright said it was pleasing that the AEMO report also highlights the improved efficiency of and services provided by the gas transmission sector, with the investment in infrastructure to allow bi-direction flows, increase connectivity and expand pipelines throughout the east coast market.

“Natural gas is a low-emission fuel. Australia has abundant reserves. We should be making the most of this valuable resource.”

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