Via the AFR:
Victoria will experience significant gas shortages within three years unless additional supply is brought online, which could have flow-on effects for the whole National Electricity Market, according to a new report by the Australian Energy Market Operator.
The report – which mirrors similar concerns about NSW’s gas supplies and prompted Prime Minister Malcolm Turnbull last year to declare a national energy crisis – will put more pressure on the Andrews Labor government to lift its moratorium on onshore gas exploration in Victoria. The moratorium has been heavily criticised by industry and federal Energy Minister Josh Frydenberg.
…This was driven by a 38 per cent fall in annual gas production from the Gippsland Basin below 2018 production forecasts and a 68 per cent fall from Port Campbell, mostly due to some offshore fields ceasing production.
The forecast shortage in Victoria is 100-200Tj per day in winter. That’s roughly 9Pj per annum. Victoria currently produces around 350PJ per annum and the state only consumers 200Pj. But offshore reserves are falling, chart via The Australian:
However, framing this as a Victorian problem is ludicrous. VIC exports gas to NSW, SA and Asia via QLD. There is no Victorian gas market at all. There is an east coast market. The AEMO sounds rather politicised when it puts out stuff like this out.
Don’t get me wrong. I support onshore gas production in VIC and NSW. But I also support public policy clarity. Local fracking will not solve the the east coast gas market shortage. It is too expensive and there is nothing to stop it from being exported either!
What will solve the crisis is VERY OBVIOUS:
- install gas reservation that keeps 10% of east coast exports here;
- if prices don’t fall then fix them at $5Gj;
- gas sets the marginal cost of electricity in the National Electricity Market so power cost will also crash.
Why this is OK is equally straight forward:
- the east coast gas boom was a classic malinvestment bubble and the big gas companies that are shipping the east coast’s cheapest reserves to Asia at huge losses lied about having enough gas to fill their LNG plants;
- as such they have been buying up all of the third party gas on the east coast and driving up prices;
- by allowing them to do this we are bailing them out for misallocating capital;
- if we fix the price of gas they will have to bear the brunt of their bad decisions rather than passing them on to everyone else via local discriminatory pricing.
This solution to the gas market failure will crash Australian energy costs and put our decarbonisation program back on track as well. Cheaper gas can fulfill the role it was always planned to have displacing base load coal as renewable storage catches up.
Any other solution is, frankly, balderdash.
