Cold snap, LNG production outage trigger gas shortfall threat

Jack QuailNewsWire
Not Supplied
Camera IconNot Supplied Credit: News Corp Australia

Eastern Australia faces the threat of gas shortages during the height of winter, thanks to increased demand and a shortfall in supply.

Strained LNG production owing to unplanned production outages, reduced renewable generation and heightened demand during a winter cold snap risks creating a shortfall in gas supplies across Australia's east coast.

In a “threat notice” issued on Wednesday evening, the Australian Energy Market Operator (AEMO) warned that gas supplies across the eastern states may be inadequate to meet peak demand, calling on producers to ramp up production to prevent shortages.

“The nature and magnitude of the potential risk or threat is the potential for peak day shortfalls under some possible demand and/or supply scenarios,” AEMO said in the notice.

Camera IconResidents of eastern Australia may need to rug up even more as the energy authority warns of gas shortfalls in peak periods. Newswire / Gaye Gerard Credit: News Corp Australia

The threat is expected to last as late as September 30, it noted, with users in Victoria, South Australia, ACT, Tasmania and NSW at risk.

During the winter months when electricity use is generally higher, gas is particularly important for electricity generation as renewable power regularly reduces due to seasonally lower wind levels and reduced solar generation.

In the week to June 20, renewables have comprised roughly 27 per cent of generation in the national electricity market, below its average in the previous 12 months of 38 per cent.

Camera IconThe energy market operator, led by Daniel Westerman, warned on the heightened risk of gas supply shortfalls across Australia’s east coast states. Newswire / Nicki Connolly Credit: News Corp Australia

Simultaneously, the east coast’s biggest domestic gas supplier, the Longford Gas Plant which is co-owned by ExxonMobil and Woodside Energy, had reported an unplanned outage extension, with maintenance constraining production capacity through to July 1 at the latest.

The Longford outage had resulted in a rundown of gas storage facilities, AEMO said, with the Iona facility on Victoria’s southwest coast facing continued high withdrawals.

Storage facilities in Newcastle and Dandenong would similarly face reduced LNG inventories.

“Further storage inventory depletion may occur if an unplanned event occurs that impacts either gas demand or supply,” the AEMO notice said.

“Low or depleted storage inventory will result in reduced gas supply capacity in the southern jurisdictions.”

The market operator called on producers, pipeline operators and other market participants “to take reasonable measures to maximise production and supply from Queensland to the southern jurisdictions to reduce the rate of storage inventory depletion”.

An outage at ExxonMobil and Woodside’s Longford Gas Plant in Gippsland has crimped LNG production at the site. Supplied.
Camera IconAn outage at ExxonMobil and Woodside’s Longford Gas Plant in Gippsland has crimped LNG production at the site. Supplied. Credit: Supplied

The pipeline connecting Queensland producers to southern states is currently running at 106 per cent of capacity.

In April, a separate report released by the Australian Competition and Consumer Commission projected a 6PJ surplus of LNG across Australia’s east coast market.

However, “material uncertainties which could increase or decrease forecast supply or demand,” the ACCC report cautioned.

“This includes the variability of weather affecting gas-powered generation, uncertainties in supply, and additional or fewer LNG exports,” it said.

“Actual gas supply may fall short of the volumes forecast by producers due to production issues and delays in regulatory approvals required to finalise investment in newly-developed fields.”

The AEMO has previously sounded the alarm on gas shortages facing households and manufacturers in Australia’s southern states.

In March, the market operator warned that gas production in Victoria was set to plunge by 48 per cent by 2028, meaning that the state, which was traditionally a net LNG exporter, was set to become a net-importer.

More to come.

Originally published as Cold snap, LNG production outage trigger gas shortfall threat

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