THE IMPORTANCE OF NEW GAS PROJECTS AND EAST COAST AUSTRALIA GAS...

THE IMPORTANCE OF NEW GAS PROJECTS AND EAST COAST AUSTRALIA GAS SUPPLY

The analysis contained in the Australian Competition &Consumer Commission Gas inquiry 2017-2030 interim report (January 2023) (ACCCReport) emphasises that from 2026 there will be a material shortfall of supplyin gas in the Australian east coast gas market.

"From 2026 onwards the east coast gas marketis expected to experience a shortfall in supply from [proved and probable (2P)]reserves unless additional supply comes online. Under a Step Change scenariofor gas demand [which models a steep decline in gas demand], the shortfall maybe deferred until 2027. However, in the long-term there is not expected to besufficient gas production from 2P reserves to meet demand, as demand isexpected to decline over the longer-term through a shift to greaterelectrification and as energy policy shifts towards net-zero emissions targets.However, natural gas will likely be part of the transition between coal powergeneration and renewable energy sources, and there will be ongoing need for gasfrom commercial and industrial users in particular.

Without expansion in production, gas supply shortfalls areexpected arising from export and domestic demand even under a Step Changescenario in which there are greater shifts to electrification, consistent withnet-zero emissions targets. This would place continued upward pressure onprices in the gas market, as well as pressure on the electricity market throughthe role that gas powered generation will likely play in meeting peakelectricity demand and maintaining the stability of the east coast energy system.

Additional gas supply will be needed to avoidfuture shortfalls.

The analysis of the ACCC is reflected by therecent representa ve public comments of senior Commonwealth GovernmentMinisters.

(a) The Prime Minister the Hon Anthony Albanese MPsaid that "gas will play a role in renewables" when defending therole that gas will play in the transition to clean energy.

(b) The Hon Madeleine King MP correctly noted that:

"In the short term, medium term and long termwe will need gas. You need gas to process critical minerals and rare earthswhich are essential for clean energy technology."

(c) The Hon Chris Bowen MP said that:

"Gas is a flexible fuel necessary for peakingand firming as we undertake this transformation [to the government's renewablestarget".

(d) The Hon Dr Jim Chalmers MP noted that the gasindustry is a "really important" part of the nation's economy, andthat the Commonwealth Government is working on increasing gas supply.

The views of the ACCC are reflected withinindustry. Dr Kerry Schot (the former head of the Energy Security Board)recently observed that the pathway to net zero emissions is not realisticwithout further gas supply. A similar observation has been atributed to MrAdrian Dwyer (CEO of Infrastructure Partnerships Australia). The AustralianPetroleum Production and Exploration Association has also observed the need forAustralia to increase its domestic gas supply in light of the shortfallprojections noted above.

Closely related to the need for Australia to have new gas supply is the fact that a lack of gas supply is a key driver of inflation. As Dr Phillip Lowe, the Governor of the Reserve Bank of Australia,said in a Senate Estimates Hearing:

"One way of tackling inflation induced bysupply-side shocks is to address the supply side. At the moment there are twoareas I think we could be focusing on. It's the supply of gas and electricityin the domestic market-what we can constructively do to increase the supply. Idon't want to get drawn into what the right measures are, but just at theanalytical level, increased supply of gas and electricity in the domesticmarket would be helpful to combat rising energy prices."

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