Our own European gas shortage

Australia is the world’s second biggest gas exporter, yet still we may face a regional version of the current European-styled gas supply crunch. Nationals leaders need not worry: Queensland is not affected. The ground zero of this looming gas shortage is Victoria, the result of declining local production and infrastructure constraints.

How this gas market crunch is resolved, or not, has serious consequences for the Victorian economy. Victoria was the biggest gas market in Australia for most of the 20th century. The gas from Bass Strait underpinned its industrial base and the biggest residential gas market in the country.

Development of major new gas fields in the Western Australia and Queensland has accelerated investment in gas powered industries like alumina and ammonia, while Victorian gas fields have begun a gradual but permanent production decline.

It’s always possible to transport more gas to Victoria. Gas is, after all, a logistics business. Moving gas longer distances from production to customers comes with a price premium.

Australia’s new world class gas fields are around the north of the continent: the Carnarvon and Canning basins, the Browse and Bonaparte Basins off the northern WA coastline, Beetaloo 600km south of Darwin, and the Bowen basin north of Brisbane.

The declining gas fields are in the south: the Cooper Basin near the tri-state border of SA, NSW and Queensland, and the Gippsland Basin in Bass Strait. And therein lies the problem.

The combined decline of production from the Cooper and Gippsland Basins means south-eastern Australia faces growing shortfalls in gas this decade, starting as early as next year if there is a cold winter. The ACCC has warned of a 6PJ shortfall in SE Australia in 2022.

Gas experts EnergyQuest think at least two gas import terminals will be needed in south-eastern Australia by 2030 to replace a 125PJ gas shortfall as the legacy fields decline.

This could be worse in cold winters, when low temperatures drive spikes in gas demand for heating.

Expanding gas transmission pipelines south is possible but will cost more. There is already a $2/GJ price differential predicted in the southern states by 2030. Piping gas over long distances becomes energy intensive and expensive.

Earlier this year the Victorian Government vetoed AGL’s attempt to build a gas import terminal at Crib Point in Western port. The Victorian government also lifted its moratorium of onshore gas development in 2020, but has maintained its ban on unconventional gas development, like in Europe.

Viva Energy has a gas import terminal proposed for Geelong and Venice Energy has one proposed for Adelaide. Andrew “Twiggy” Forrest’s Squadron Energy has claimed to have started work on a gas import terminal into Pt Kembla in NSW. Gas from this terminal would still incur the additional cost of piping the gas south to Melbourne.

The Victorian Government appears reticent to make any decisions that bring more gas in to the state, preferring options like electrifying residential gas consumers, and sourcing additional energy from cleaner sources like hydrogen or biomethane.

The challenge with this approach is variously cost, pace and scalability. Will Victoria’s remaining gas dependent industries end up paying a premium to continue operations (and jobs) in Victoria, and at what point would they consider moving west or north to where the gas is?