The east coast of Australia is facing a looming gas shortage crisis. Just last week, the Australian state of Victoria churned through 13% of its yearly gas budget in the space of just seventy two hours.
The culprit?: breakdowns of aging coal infrastructure, and not enough renewable generation. Making matters worse, a key gas plant also had an engineering hiccup that reduced supply. (Apparently, nobody has thought to provide backup gas capacity.)
In the space of just three days, it was obvious that Australia’s second-most populated state could run out of gas in less than a month. In the modern world of 2025, no less, in Australia – one of the world’s most advanced economies.
By my calculations, assuming the same demand conditions, the state would have used up 91% of its yearly gas budget in three weeks.
PEP-11 a victim of political concerns?
While this was going on, there was a small publicly-listed energy player preparing its Scott-Morrison-era case against the Federal government: BPH Energy (ASX:BPH), the leading entity behind the PEP-11 gas exploration block offshore NSW.
PEP-11 is, lo and behold, an east-coast-based gas project that could – you guessed it – supply gas to the east coast.
This whole debacle started when Scott Morrison, sensing a massive contemporaneous decline in popularity, installed himself as Energy Minister and ultimately revoked approval from the PEP-11 project, based on what appeared to be a whim of his own.
The irony here, of course, is that were the government to allow its development, PEP-11 would help solve the exact problem the entire state of Victoria was facing when it churned through 13% of its yearly gas budget in three days.
BPH Energy chief David Breeze, is, in a word, perplexed.
A no-brainer fix ignored
“If you look at Victoria, 40% of the East Coast gas requirements are currently met by the offshore fields in Victoria that will halve their production by 2027 … you have a significant problem in terms of our supply gap going forward, right up and down the eastern coast,” David Breeze told HotCopper.
“Gas fields in Queensland of course are largely committed to LNG export contracts, however, even if you were to convert those gas fields into a [source of] supply to the southern states, there isn’t enough pipeline capacity during winter to get that gas to customers.”
While you might need to bring renewables advocates kicking and screaming to the point, it’s well known that to phase-out coal, you need gas – Victoria’s experience last week proves that. So too do lessons from Europe.
Renewables not there yet
“Renewables in Spain was about 78% of total inputs into [national grid] capacity, but the minute that you have any disruption into the system, then in fact you really need that base load capacity,” Breeze elaborated, pointing to the fact gas needs to be there when renewables fail. And, when aging coal plants do the same.
“The chief executive of AEMO put forward in a speech at the beginning of May that in fact it’s critical we get gas as backup, even if you have those systems running on what’s called just rotating power, or a spinning grid,” Breeze added.
“If you look at what occurred in New South Wales in November of last year, in the first of the warm days, you actually had the premier of NSW going online and asking people to turn off their pool pumps and washing machines because there was insufficient generation capacity.”
It’s that simple.
The story could change in decades ahead with new advancements in tech, yes, but we aren’t there yet. Not unless we want to see the nation descend into a pattern of South Africa style forced blackouts to balance the grid.
Disclaimer: HotCopper had a commercial relationship with BPH Energy at the time this article was crafted and published.
Jonathon Davidson
The Market Online, Australia
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