The ACCC has released its Gas inquiry March 2023 interim report, which found that a previously forecasted shortfall in the east coast gas market could be avoided if LNG producers contract another three petajoules (PJ) of gas in 2023.
It represents an improvement of 27PJ since the previous forecast in January. In August 2022, the ACCC forecasted a shortfall of 56PJ in the east coast gas market in 2023.
The interim report compiles supply data from producers and demand data based on LNG sales forecasts and AEMO forecasts of domestic gas demand to give an outlook for the remainder of 2023.
ACCC Chair, Gina Cass-Gottlieb, said, “The available data shows that the outlook for the east coast gas market has improved and the market is not expected to face a material shortfall in 2023.
“If LNG producers commit an extra 3PJ of gas to the domestic market, in addition to amounts already contracted, a shortfall will likely be avoided, but we remain concerned about adequacy of gas supply in the winter months.”
The improvement in the outlook since the ACCC’s previous report is due to an increase in forecast gas production and the LNG producers committing some additional sales to the domestic market.
The Federal Government procured the Heads of Agreement, secured in September 2022 with the three east coast LNG Exporters, which ensures that an additional 157PJ of gas is made available to the domestic market before being contracted for export.
Minister for Resources and Minister for Northern Australia, Madeleine King, said, “The Government understands that reliable energy supply and affordable energy prices are top of mind for Australian families and Australian businesses.
“This is why we also took action with the Energy Price Relief package to take the sting out of energy price rises.
“I continue to work with the resources sector to ensure it delivers the energy and minerals needed for our own security and clean energy transformation, as well as the energy security of our trading partners,“ Ms King said.
The report provides information relevant to the Government in assessing whether there is likely to be a supply shortfall for the purposes of the Australian Domestic Gas Security Mechanism (ADGSM).
The Australian Petroleum Production & Exploration Association (APPEA) said the report showed there would be sufficient gas supply this year, with the government confirming there was no need to trigger gas export controls under the ADGSM.
APPEA Chief Executive, Samantha McCulloch, said, “The gas industry continues to fulfil its long-held commitment to supply the domestic market and power millions of Australian homes and businesses.
“The industry has worked constructively with authorities to ensure supply, including through the latest Heads of Agreement (HoA) put in place in September 2022, and the ACCC is now comfortable there will not be a material shortfall this year.
“We stepped up as an industry last winter to keep the lights on for millions of homes and businesses when other east coast energy sources faltered, and the industry will continue to ensure domestic supply.”
The ACCC’s first seasonal forecast is more mixed within the year, with an11 PJ domestic gas shortfall expected over winter, including a 26PJ shortfall in the southern states (Victoria and South Australia). Additional gas will be required from Queensland producers.
However, in the fourth quarter a surplus of 18PJ is expected across the east coast gas market.
Ms Cass-Gottlieb said, “East coast LNG producers are expected to have uncontracted gas in each of the quarters of 2023 that could be used to prevent any shortfalls. However, they have firmly committed 45PJ of their previously uncontracted gas to LNG spot cargoes or additional sales, leaving less uncontracted gas.
“If gas supply is brought forward, for example through gas swaps, or if LNG producers commit further gas to the domestic market, supply should be sufficient to meet demand in the third quarter of 2023.
“We encourage producers to consider this information and amend their plans to ensure domestic demand will be met each quarter.
“Some caution is recommended in relation to these revised forecasts. A risk remains that lower-than-expected gas supply, including from the Northern Territory or the Gippsland Basin, or higher than expected domestic demand, such as for gas powered generation could lead to lower available gas supply.”
The report relates to the near-term outlook for 2023 only. Forecasts reported in the January 2023 interim report indicated shortfalls would be likely from 2027 if production was not expanded.
The ACCC will continue to examine the long-term outlook in future reports.