An Australian Energy Market Operator’s (AEMO) report predicts an increase in gas consumption in the next five years and a change to the eastern markets.
The AEMO’s second annual National Gas Forecasting Report (NGFR) predicts total gas consumption will more than double in the next five years before plateauing and remaining steady until 2035.
The report forecasts a transformation of eastern and south-eastern Australia’s interconnected gas markets from now until 2020, following the ramp-up of gas consumption to supply liquefied natural gas (LNG) exports.
At the forefront is LNG consumption, which is forecast to grow at an average annual rate of 32.5 per cent in the short term (to 2020) to supply LNG exports.
Total annual LNG consumption is forecast to increase from approximately 354 petajoules (PJ) in 2015 to 1,444 PJ by 2020.
APPEA Chief Executive, Malcolm Roberts, said the report highlighted the need for government policies that encouraged the development of new gas supply.
“Gas prices have increased in recent years for a number of reasons and this is having an impact on domestic demand,” Mr Roberts said.
“While the fall in the oil price will provide some relief to consumers in the short-term, it is vital that governments support policies that put downward pressure on gas prices by increasing supply.
Mr Roberts said that the market doesn’t deserve to needlessly suffer through policies that restrict gas development.
“The Victorian Government, in particular, needs to reconsider its current moratorium on onshore gas as it moves to develop a new gas supply strategy in 2016,” Mr Roberts said.
AEMO Managing Director and Chief Executive Officer, Matt Zema, said, “LNG export facilities in Queensland have brought international demand and international pricing to Australian gas markets,
“This is expected to more than double total gas consumption in eastern and south-eastern Australia over the next five years, compared to aggregated consumption in 2014 before the Queensland LNG projects began.”
Mr Zema said that other than LNG, the most significant change in gas consumption forecasts across the 20-year outlook period was in the gas-powered generation (GPG) sector.
“A short term decline is forecast in GPG consumption over the next five years, attributed to several factors,”
“It’s a response to an anticipated rise in wholesale gas prices; coupled with the pending expiration of existing gas supply contracts; the retirement of GPG plant Smithfield Energy Facility in New South Wales in 2018; and, a projected increase in renewable generation incentivised through the current renewable energy target,” Mr Zema said.
Mr Zema said that is we assume today’s market conditions and policy settings continue, the total annual GPG consumption is expected to increase to around 184 PJ by 2035, as industry invests in a range of generation sources to meet forecast electricity demand.
Consumption is also expected to increase in order to replace over 2,000 megawatts of announced coal-fired generation withdrawals from the National Electricity Market.
Mr Zema said the continued restructuring of Australian industry is likely to contribute to roughly a 30 PJ decline in industrial gas consumption over the short term.
“The 2015 NGFR identifies pockets of forecast growth in the food and services industries in particular. However this is offset by the forecast decline in total annual industrial gas consumption over the next five years, as industry restructures away from gas-intensive manufacturing,” Mr Zema said.
Mr Zema said new technologies and changing consumer behaviour were behind the flat forecasts for residential and commercial gas consumption over the next five years.
“Due to forecast improved energy efficiency of buildings and appliances, and switching from gas to electric appliances, we don’t anticipate much change in this sector in the short term, despite a forecast population growth of approximately 8 per cent,” Mr Zema said.