Thursday, 25 May 2017

Australia's national gas shortage mirage

It is a case of now you see it now you don’t, courtesy of a rapacious gas industry and the governments which blindly support it............


Australian Petroleum Production & Exploration Association (APPEA) , media release, 28 February 2017:

Australia urgently needs more gas supply and more gas suppliers to head off a supply shortfall forecast for 2019.
APPEA Chief Executive Dr Malcolm Roberts said the report released today by AiGroup shows customers will pay a heavy price for government bans on developing new gas supply.
“Gas is no different to any other commodity – you restrict supply, you push up prices,” Dr Roberts said.
“We have the bizarre situation of State governments banning new gas projects and then complaining about higher gas prices.
“The Australian Competition and Consumer Commission, the Productivity Commission and a host of independent commentators all agree that stifling supply can only lead to higher prices.
“Yesterday, the ABS released data showing gas exploration is at its lowest level since 2005.
“Today, the AWU is calling for the Commonwealth to force Australian gas producers to tear up their contracts.  We need billions in investment to unlock new gas supplies but the AWU’s approach would kill investment overnight.
“There is no shortage of gas which can be developed to supply all of our local and export customers.
“Just as our agricultural industries have the capacity to supply export and domestic markets, so does Australia’s east coast gas industry.  Our LNG exporters are also the major suppliers to the domestic market.
“People concerned by the impact of higher gas prices on local customers should be arguing for the removal of unnecessary restrictions on developing new resources, not more heavy-handed regulation.
“The AiGroup report simply reinforces what APPEA has been saying for years – that gas customers will pay higher-than-necessary prices if restrictions on developing new gas projects continue.
Dr Roberts said it was ironic the AWU’s call for intervention to renegotiate export contracts came on the same day that domestically‑focused Cooper Energy and the APA Group announced a $605 million investment in developing the Sole Project to supply east coast gas market.
“Changes that increase the cost of exploration and production in Australia will place future investment – like that required for projects such as Sole – at risk,” he said.


We find that although a “gas-price crisis” exists in eastern-Australia, a gas-supply shortfall is very unlikely to occur. Our review finds that the size of AEMO’s forecast shortfall is very small, amounting to no more than around 0.2% of annual supply.
In addition, only eleven days after announcing its supply-gap concerns, AEMO essentially closed the gap when it published, on its website, updated (lower) electricity-demand forecasts that therefore lead to less demand for electricity generated by burning gas. [University of Melbourne, Australian-German Climate and Energy College, Tim Forcey and Dylan McConnell, 2017, A short-lived gas shortfall]

However, it is also important to note that the total gas supply in Eastern Australia has expanded rapidly in recent years, and the key domestic issue is more to do with the gas price that is now dictated by linkages to international trade, than the supply.
In addition the combination of falling renewable and storage costs means alternative options for the electricity sector will be cheaper than developing relatively expensive unconventional gas resources such as coal seam gas. [University of Melbourne, Australian-German Climate and Energy College, Dylan McConnell, 2017, IS THE AUSTRALIAN GAS SHORTFALL A MYTH?]

The Guardian, 18 May 2017:

A predicted shortage of gas for electricity generation in Australia from 2018 will not eventuate, and the recent surge in domestic prices will not be mitigated by opening up new coal seam gas fields, according to a new report.

In March, the Australian Energy Market Operator (Aemo) predicted that without national reform, Australia would face gas shortages, which would drive power outages, in 2018 and 2019.

“If we do nothing, we’re going to see shortfalls in gas, we’re going to see shortfalls in electricity,” Aemo’s chief operating officer, Mike Cleary, told the ABC at the time.

Despite being described by some as “major”, the actual shortfall of electricity from the gas shortage amounted to the equivalent of less than 24 hours over a 13-year period, according to the new report by Tim Forcey and Dylan McConnell at Melbourne University’s Australian-German climate and energy college.

In any case, less than two weeks after Aemo predicted the shortfall, it published an updated forecast of how much electricity would be needed in the period. It downgraded the previous forecast and completely wiped out the predicted shortage.

The Melbourne University report, which was commissioned by the Wilderness Society and Lock the Gate, also noted that later in March Shell announced it was proceeding with its “Project Ruby” that involved 161 gas wells in Queensland, and also would have closed the shortage, if it were real.

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