The eastern states will have only a small surplus of gas in early 2024 if all uncontracted LNG is exported to the spot market, according to the Australian Competition and Consumer Commission, in a finding that reduces the spare volumes from its assessment in June.
Though the federal government pointed to an improved outlook for east coast gas in the first quarter of 2024, with no domestic shortages and higher exports, the ACCC remained cautious.
“While the overall outlook is positive, there remains risk that the outlook could worsen, particularly from higher-than-expected gas demand,” the watchdog said in an update to a report in June that underscores the tight balance between supply and demand.
It said that if the three LNG producers in Gladstone exported all their gas, supplies would need to be piped in from other states or withdrawn from storage to meet total Queensland demand.
The report, to be released on Wednesday, puts the east coast’s likely surplus of gas at 1.4 petajoules in the first quarter of 2024, if all uncontracted LNG is exported. That compares with a surplus forecast three months ago of 7.2PJ.
However, supply will be 5.9PJ higher than forecast in June, and 13 per cent up on the first quarter of 2023. Export demand is expected to be 8.2PJ higher than forecast in June and 9 per cent higher than in the March quarter this year, yielding an extra $2 billion for producers, according to government figures.
“This latest advice from the ACCC shows the gas outlook for 2024 is improving thanks to the sustained effort of government and industry to ensure there is sufficient gas supply at reasonable prices to meet domestic demand,” Resources Minister Madeleine King said.
Still, the surplus forecast for early 2024 looks unlikely to ease concerns about longer-term winter shortages, given a dearth of commitments on new supply projects since the Albanese government imposed price caps last December.
The Australian Energy Market Operator warned in March that businesses and households could face winter shortfalls, especially from 2027 onwards, amid dwindling production from the Bass Strait, the biggest source of domestic gas for the east coast.
The ACCC’s update, which focuses on the first quarter of 2024, cautions that an upswing in gas used to generate electricity could push the market into deficit, noting that would depend on weather and other uncertainties in the power market. It estimates 111.4PJ of domestic demand in the quarter, and 353.7PJ of demand for LNG exports.
The forecast signalled that a decision to trigger the Australian Domestic Gas Security Mechanism – the government’s LNG export control policy – is unlikely for the March quarter.
The watchdog said several factors had changed since June, including a rise in output expected from producers, to 485PJ, higher demand for LNG exports and lower expected spot sales. LNG producers are expected to hold 18.5PJ of uncontracted gas that can be made available to the domestic market, exported or stored.
Treasurer Jim Chalmers said the report showed warnings from the Liberals and Nationals that the government’s price caps and gas code of conduct would cause shortages were false and that the policy was working.
“Our Energy Price Relief Plan is deliberately designed to deliver better, fairer prices for Australian consumers at the same time as we honour our trusted role as an energy supplier, and it’s really pleasing to see more evidence that it is working as we intended,” he said.
Source: Financial Review