W Australian Gas Market sees Looming Tightness

The Western Australian domestic gas market looks well supplied until 2020, but new wholesale contracts will be needed to prevent a tightening of supply beyond this period, the Australian Energy Market Operator (AEMO) said December 14.

“Our base case scenario forecasts have highlighted a tightening of the market from around 2021-2023 as supply contracts begin to expire and some existing domestic gas facilities face reserve depletion,” AEMO’s CEO Audrey Zibelman said.

The operator’s base scenario in its Gas Statement of Opportunities (GSOO) report shows supply of 1,271 TJ/day and demand of 1,051 TJ/day in 2018 and then that tightening by 2022 to supply of 1,100 TJ/day and demand of 1,062 TJ/day. The low potential supply scenario shows a shortfall of as much as 155 TJ/day may eventuate by 2021.

The report also notes “the important role” of Western Australia’s domestic gas policy, which ensures 15% of total LNG production is reserved for domestic use. “While Western Australia’s domestic gas policy ensures gas availability for domestic consumption in the long term, the commercial terms of supply are left to the market to negotiate, which includes price and timing,” Zibelman said. “This means there is some uncertainty around the timing of gas reserved from LNG projects supplying the domestic gas market in the medium term,” she said.

Industry body, the Australian Petroleum Production and Exploration Association (Appea), said the AEMO findings highlight the need for government policies to encourage exploration, given new gas projects could take up to five years to be developed.

Appea’s chief operating officer for Western Australia, Steadman Ellis, said it showed that banning shale gas puts at risk the state’s future energy security. “Exploration of shale gas has stopped in WA due to the existing moratorium on hydraulic fracturing. If the government was to impose a permanent ban the impact on future gas supply could be significant,” Ellis said. “The GSOO estimates there could be 295,864 PJ of shale and tight gas in the west – double the state’s conventional gas resources,” he said, calling for the state’s current scientific inquiry into hydraulic fracturing to be completed without delay.

“The draft final report of the Northern Territory’s independent fracking inquiry has just concluded that any risks can be safely managed by effective regulation,” he said. “We expect the current WA inquiry – the fourteenth review of fracking in Australia – to reach the same conclusion,” he added.