New gas projects approved, but supply buffer shrinks

John KehoeEconomics editor

Sep 27, 2024 – 5.23pm

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The Albanese government has approved two small gas projects off the coast of Victoria, as the ACCC warned on Friday that a domestic supply buffer has shrunk as more gas is shipped overseas.

The competition watchdog’s latest gas inquiry report said the projected gas surplus on the east coast had shrunk for the first quarter of next year, raising the possibility of Queensland LNG exporters needing to divert more uncontracted gas to the domestic market.

An existing drilling rig of Beach Energy’s in the Otway Basin, off Victoria’s coast.

The gas supply surplus in the east coast market is forecast to be between 12 and 27 petajoules in the first three months of 2025, down from the predicted surplus of 26 to 35 petajoules outlined in June.

“It is important that there is sufficient supply to meet demand throughout the year,” Australian Competition and Consumer Commission commissioner Anna Brakey said.

“Predicted shortfalls from 2027 highlight the need for additional gas supply.”

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New gas production licences

Climate and Energy Minister Chris Bowen said this week Australia already faced a projected cumulative gas shortfall in total national production of 3300 petajoules to 2035.

Federal Resources Minister Madeleine King announced on Friday that she had granted two new gas production licences for Beach Energy over the Artisan and La Bella fields offshore of Victoria, near existing projects.

“These production licences will produce gas for domestic use only – directly assisting Victoria and NSW to put downward pressure on prices,” she said.

“As Australia makes the transition to renewable energy, we need to ensure stable gas supply to the market.

“We need to keep downward pressure on prices, shore up energy security and keep the lights on as we move to net zero.”

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Labor has come under attack from the Greens for promoting gas as a transition fuel to achieve net zero carbon emissions by 2050.

Beach has told investors that plans to develop the Artisan field were more advanced than La Bella, which is a longer-term development option.

“The awarding of the production licences is a positive step forward in the potential delivery of much-needed natural gas supplies which will be critical to providing ongoing energy security for homes, businesses and industries along Australia’s east coast,” a Beach spokesman said.

“Beach will continue to progress internal and external assessment of potential activities within the Otway Basin.”

‘Panicked move’

Australian Energy Producers chief executive Samantha McCulloch said a separate decision by global exploration company TGS to quit searching for new gas in Victoria’s Otway Basin was a major blow to the state’s energy security and would compound looming gas shortfalls in eastern Australia.

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“Victoria is facing gas supply shortfalls from 2027 and already came close to running out of gas during peak periods this winter,” Ms McCulloch said.

The federal government’s granting of two production licences to Beach Energy was a welcome step to boost domestic energy security, but more supply would be needed, she said.

“The Greens and activists want to stop all new gas developments, with no regard for the devastating impact on Australia’s economy and energy security.”

Opposition resources spokeswoman Susan McDonald said: “The government’s decision to approve two offshore gas production licences was a panicked move designed to dilute the impact of today’s ACCC interim gas report.”

Victoria’s strident anti-gas Energy Minister, Lily D’Ambrosio, in June approved Victoria’s first new gas project in a decade, and left open the option of approving more exploration permits.

It was a backflip on her previous opposition for gas to power the state.

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The Australian Energy Market Operator warned in June that the east coast was facing a potential gas shortfall in winter across NSW, Victoria, South Australia, Tasmania and the ACT.

It followed a drop in wind-power generation in the cold months.

The shortfall did not ultimately occur last winter.