PERTH (miningweekly.com) – The Australian Petroleum Production & Exploration Association (Appea) said on Monday that the Australian Energy Market Operator’s ‘2015 Gas Statement of Opportunities (GSOO)’ report highlighted the need for more investment in gas projects.

The GSOO report, which was published on Monday, forecasts no short-term gas supply gaps for any eastern or south-eastern gas markets to 2019, while Queensland will experience supply gaps in the medium to long term.

Lower-than-forecast consumption levels, most notably in the industrial sector within Queensland and New South Wales, combined with upgrades to gas market infrastructure, have alleviated short-term supply gaps that were initially forecast in the previous GSOO update in mid-2014.

However, Appea pointed to the GSOO forecast of a 17% decline in New South Wales’ gas consumption in 2019, stressing that the report highlighted the need to put downward pressure on prices.

“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 New South Wales and Victoria rather than hampered by moratoriums and excessive regulation,” Appea said.

The organisation pointed out that New South Wales, in particular, relied on other states for 95% of its supply when it had more cost-effective alternatives to meet gas demand. 

“Already this financial year, New South Wales households are dealing with price rises of more than 10% on the average bill while potentially 500 years’ worth of natural gas remains trapped underground.

“The cost of gas must remain affordable as further reductions in demand would not only reduce the state’s economic output but employment in the manufacturing sector,” Appea said.

Last month, the Productivity Commission found that removing regulatory burdens that restrict exploration and production of natural gas, particularly in Victoria and New South Wales, 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 released last week found that tightening supply in Australia’s gas market is exacerbated by barriers to new onshore gas production.

Appea noted that keeping in mind that gas projects took years to reach commercial production, planning for the state’s long-term energy needs remained paramount.

Meanwhile, Appea on Monday also welcomed the Australian Competition and Consumer Commission’s (ACCC’s) decision to launch a 12-month inquiry into the competitiveness of wholesale gas prices in eastern and southern Australia.

“The ACCC will be considering competition levels on the East Coast upstream gas market - the producer, processor, pipeline, and wholesale levels of the market. The inquiry does not cover retail,” ACCC chairperson Rod Sims said.

Appea acting CEO Paul Fennelly said that the industry would participate constructively and was keen to demonstrate there was adequate competition to allow the market to operate effectively.

“Importantly, the inquiry also provides an opportunity to focus – as the Productivity Commission did in its recent research – removing the regulatory handbrake that is effectively blocking the industry’s development in New South Wales and Victoria.

“This would not only allow the market to work more efficiently and effectively, it would also bring on more gas supply and put downward pressure on prices.”

Fennelly said that the inquiry would also allow the commission to rigorously test unsubstantiated claims that "there is no gas available at any price".

This inquiry is due to report to the government by April 2016.