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King takes her finger off ADGSM trigger

Image shows an LNG plant

Photo by Bloomberg

4th April 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – An interim report by the Australian Competition and Consumer Commission (ACCC) has shown that a gas shortfall in 2023 is now less likely, as the supply outlook has improved, making it unlikely that the government will trigger gas export controls under the Australian Domestic Gas Security Mechanism (ADGSM)

The report found that there should be sufficient gas supply in the East Coast gas market against forecast demand if liquefied natural gas (LNG) producers contract another 3 PJ of gas in 2023. This represents an improvement of 27 PJ since the previous forecast in January.

“The available data shows that the outlook for the east coast gas market has improved and the market is not expected to face a material shortfall in 2023,” ACCC chairperson Gina Cass-Gottlieb said.

“If LNG producers commit an extra 3 PJ of gas to the domestic market, in addition to amounts already contracted, a shortfall will likely be avoided, but we remain concerned about adequacy of gas supply in the winter months.”

The ACCC noted that the improved outlook since the previous report was due to an increase in the forecast gas production, and the LNG producers committing some additional sales to the domestic market.

The ACCC’s first seasonal forecast is more mixed within the year, with an 11 PJ domestic gas shortfall expected over winter, including a 26 PJ shortfall in the southern states of Victoria and South Australia. Additional gas will be required from Queensland producers.

However, in the fourth quarter, a surplus of 18 PJ is expected across the east coast gas market.

“East Coast LNG producers are expected to have uncontracted gas in each of the quarters of 2023 that could be used to prevent any shortfalls. However, they have firmly committed 45 PJ of their previously uncontracted gas to LNG spot cargoes or additional sales, leaving less uncontracted gas,” Cass-Gottlieb said.

“If gas supply is brought forward, for example through gas swaps, or if LNG producers commit further gas to the domestic market, supply should be sufficient to meet demand in the third quarter of 2023.”

“We encourage producers to consider this information and amend their plans to ensure domestic demand will be met each quarter,” Cass-Gottlieb added.

“Some caution is recommended in relation to these revised forecasts. A risk remains that lower-than-expected gas supply, including from the Northern Territory or the Gippsland basin, or higher than expected domestic demand, such as for gas-powered generation could lead to lower available gas supply.”

Federal Resources Minister Madeleine King on Tuesday said that the gas supply issues were halted by action taken by the federal government, including a Heads of Agreement struck with LNG producers in September 2022, which ensured an additional 157 PJ of gas was made available to the domestic market before being contracted for export. 

The ACCC data is one of the key inputs to the consideration to not commence the notification period for the newly reformed ADGSM for the upcoming quarter, King said.

“The government understands that reliable energy supply and affordable energy prices are top of mind for Australian families and Australian businesses,” King said.

“This is why we also took action with the Energy Price Relief package to take the sting out of energy price rises. I continue to work with the resources sector to ensure it delivers the energy and minerals needed for our own security and clean energy transformation, as well as the energy security of our trading partners.”

She noted that gas had a key role to play, as a flexible source of energy, providing peaking power today and continuing to provide firming and back-up power and to smooth the transition to renewables, while guaranteeing energy security both for Australia and for its partners in the region.

In the longer term, to improve the way the gas market operates, the government will implement a mandatory code of conduct for gas companies to ensure access to gas at reasonable terms and prices, King added.

Meanwhile, the Australian Petroleum Production & Exploration Association has welcomed the removal of the ADGSM threat, with CEO Samantha McCulloch saying the industry continues to fulfil its long-held commitment to supply the domestic market.

“The industry has worked constructively with authorities to ensure supply, including through the latest Heads of Agreement put in place in September 2022, and the ACCC is now comfortable there will not be a material shortfall this year.

“We stepped up as an industry last winter to keep the lights on for millions of homes and businesses when other east coast energy sources faltered, and the industry will continue to ensure domestic supply,” McCulloch said.

She noted, however, that the ACCC update further highlighted the longer-term gas supply deficits in southern states.

“The report again demonstrates why we need new gas supply investment to meet demand and put downward pressure on prices, in particular in southern states” she said.

“There is a need for the Commonwealth and Victorian and New South Wales state governments in particular to outline a clear strategy to promote investment in new gas supply.”

Edited by Creamer Media Reporter

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