Australia watchdog warns of gas shortfall in 2022
Australia’s competition watchdog said on Aug. 17 that east coast LNG producers will need to step up their efforts to ensure the domestic market is adequately supplied or the region could face gas supply shortfalls by as soon as 2022.
As part of the most recent Heads of Agreement signed between the LNG producers and the Australian government in January, the exporters must offer uncontracted gas to the domestic market on internationally competitive terms before it is exported. They are required to provide material to the watchdog, the ACCC, to demonstrate their compliance.
“The initial material LNG producers provided to us did not adequately demonstrate compliance with the new Heads of Agreement and they will need to lift their game,” the ACCC’s chair Rod Sims said Aug. 17 in a press release.
“The initial responses from LNG producers were concerning given that in the near future Australia’s southern states may depend on their surplus gas. We expect to see better compliance from LNG exporters over the next 12 months,” he said.
The comments came as the ACCC released its latest gas report as part of a five-year old inquiry into the sector. The report says that there is a finely-balanced supply outlook for 2022 with the potential for a shortfall of 2 PJ across the whole east coast gas market, driven by a shortfall of up to 6 PJ in the southern states if producers export all of their surplus gas.
The ACCC says producers are forecast to produce 1,981 PJ in 2022, with a surplus of 101 PJ. “The LNG producers can, subject to the Heads of Agreement, elect to sell their surplus gas domestically or export it. If all their surplus gas was exported, there would be a 2 PJ domestic shortfall under current forecasts,” the report said.
Australia’s east coast gas market is connected to the Australia Pacific, Gladstone, and Queensland Curtis LNG export facilities, all based at the Port of Gladstone in Queensland.
“We are also concerned that there have been significantly fewer offers for gas supply being made in the domestic market recently,” Sims added.
The watchdog said there is a difficulty in securing offers beyond 2022 and reasoned that this may have been partially caused by uncertainty around the Gas Code of Conduct and the ACCC’s LNG netback series review
The ACCC said it observed price offers for supply in 2022 trend from A$6-$11/GJ at the start of 2020 to A$6-$8/GJ in the second half of the year.