Australia gas supply crunch pushed out to 2030, market operator says

By Helen Clark

PERTH, March 26 (Reuters) - Expectations of a long-feared gas shortage on Australia's east coast have been pushed out by a year to 2030, due to coal power extensions, declining consumption and fast battery uptake, the country's energy market operator said on Thursday.

“Practical action is making a difference. More renewables, more batteries and sensible gas policy are improving energy security and putting Australia in a stronger position,” Minister for Climate Change and Energy Chris Bowen said in a statement.

In December the federal government told Queensland liquefied natural gas exporters to reserve up to 25% of their gas for domestic use from 2027, citing tight supply.

The state is home to three LNG export consortia led by Santos STO.AX, Shell SHEL.L and ConocoPhillips COP.N. They have been blamed by large-scale gas users and the competition watchdog for taking gas from the domestic market, and the government is expected to finalise a gas policy addressing those concerns later this year.

“Existing, committed and anticipated production from Queensland is projected to increase due to improved forecast supplies from liquefied natural gas (LNG) producers,” the report from the Australian Energy Market Operator (AEMO) said on Thursday.

It noted a new pipeline being built by APA Group APA.AX to send gas from Queensland south as new projects come online. APA and industry group Australian Energy Producers welcomed the report but the latter said governments must continue to encourage new supply and not impose new, potentially onerous taxes.

“While the gas supply outlook has slightly improved, it remains important that committed and anticipated gas production, storage and pipeline projects are completed on time,” AEMO executive general manager of system design Nicola Falcon said.

Gas use for power fell to a two-decade low, according to an earlier report, but in some states is still used for heating and big industry.

Soaring gas prices in Europe and Asia since the beginning of the U.S.-Israeli war with Iran, which has disrupted gas supplies, have not hit Australian east coast domestic gas prices. The market operator did not model any events from the Middle East in its outlook.

AEMO cautioned that should some appraisal and exploration underway not come online its current supply outlook could be revised down.