Keith Orchison, Director, Coolibah Pty Ltd and Chair, Australian Domestic Gas Outlook 2016

As Tom Parry, chairman of the Australian Energy Market Operator (AEMO), says, the challenge of delivering reliable energy to every east coast user is growing swiftly- but it is not a new challenge as, in the case of gas, even brief scrutiny of the proceedings of the Australian Domestic Gas Outlook (ADGO) conferences will demonstrate.

By the time the fourth ADGO convenes in Sydney next March, policymakers, regulators, producers and users will have been wrestling for five years with the best way to meet the gas needs of 90 per cent of the Australian population living on the east coast.

The briefest description of the situation today would be “work in progress.”

Mr Parry sums it up in the AEMO annual report, saying “The dynamic, changing eastern and south-eastern markets are showing ongoing shifts in consumption and supply positions.

“Older resources are reaching the later stages of production as new reserves are opened up, creating new flows and the need to focus on capacity and directional flow so gas can continue to reach high demand areas.”

As he observes, the ramp-up of LNG export operations in Queensland are having a major impact. AEMO projects that total east coast consumption (including the requirements of the export terminals) will see the region’s gas consumption rise at an annual average rate of 23 per cent between now and 2019.

Malcolm Roberts, who has taken over the role of chief executive of the Australian Petroleum Production and Exploration Association in 2015, after a stint as chair of the Queensland Competition Authority, agrees that the east coast gas market is undergoing “a fundamental transformation,” one that he is prepared to label as “painful” for all parts of the supply chain.

It’s painful, he adds, because it is a sudden and decisive break from the stable, insular market of past decades.

Mr Roberts concedes that Australian customers would prefer a ready supply of cheap gas but he argues that domestic supply and LNG exports should not be seen as competing priorities. Rather, he declares, they are complementary uses.

The starting point for all the debate, as exemplified by presentations and Q and A sessions at the three ADGO conferences in 2013, 2014 and 2015, is that there is no shortage of gas – eastern Australia has ample resources.

APPEA estimates that the proved and predictable reserves are sufficient to supply all needs for the next three decades. The Northern Territory Geological Survey adds that the NT’s shale gas resource could meet domestic demand at present levels for two centuries.

The producers’ case is that massive investment is needed, along with world-class innovation, to ensure that supply keeps pace with all demand.

It warns that the “difficult conditions” in the global petroleum market may flow through here and diminish the necessary exploration and development in a local environment where finding and producing costs are still rising.

As all stakeholders in the market acknowledge, the problems of delivering sufficient gas are being compounded by the political environment, notably in Victoria and New South Wales.

In this respect, the attitude of producers, pipeliners and large consumers, as evidenced continuously at the past three ADGO events, can be summed up in one word: “frustration.”

There is little to suggest that this feeling will be ameliorated by the time participants convene for the fourth ADGO – although there are many hopes riding on the outcomes of two important developments; the production of the gas market report commissioned from the Australian Competition and Consumer Commission by the federal government and the outcome of the efforts of the NT government to kick-start a project to carry Territory gas to the south-eastern states.

APPEA’s Mr Roberts argues that the greatest risk facing both the gas industry and its customers is not market failure but government failure.

He says a host of respected experts have confirmed that, properly regulated, coal seam gas and shale gas can be developed safely in Australia.

Governments should focus on removing unnecessary regulations, he says, while the upstream petroleum industry continues to pursue establishing and maintaining good relations with farmers and regional communities.

While all consumers have a stake in the successful resolution of the gas imbroglio that has enveloped eastern Australia for the past five years, the pressure is greatest for the large industrial companies, employers of tens of thousands of people – these major businesses are sandwiched between international competitors and the costs of operating in this country, not least energy costs.

Energy-intensive industries represent more than half the east coast market for gas and their concern is not just about current prices but also the uncertainty of the situation and the hurdle this presents to their future business plans and investment strategies.

The proceedings of the past three ADGO conferences are laden with manufacturers’ concerns about the gas supply situation worsening and with their jousts with suppliers over the best means of alleviating the problem.

For information on the conference, download the brochure here

Jessica Dickers is an experienced journalist, editor and content creator who is currently the Editor of Utility’s sister publication, Infrastructure. With a strong writing background, Jessica has experience in journalism, editing, print production, content marketing, event program creation, PR and editorial management. Her favourite part of her role as editor is collaborating with the sector to put together the best industry-leading content for the audience.

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