The Australian Government recently announced as part of the 2022-23 Federal Budget that it will invest
The announcement comes at least partially in response to increased uncertainty in the international gas market brought on by the ongoing conflict in
The investment also coincides with the
The international gas market has plunged further into a state of volatility and uncertainty as major oil and gas companies withdraw from Russian gas projects in the wake of the
Also, as part of a suite of economic sanctions,
From an Australian perspective, in addition to the imminent extra 35 per cent tariff on Russian imports and the requirement to freeze the assets of certain individuals and entities identified as strategically or economically significant to
Overall, the sanctions are likely to signal a drastic shift in the architecture of the global gas market. In addition to potentially accelerating major gas importers' efforts to transition to renewable energy alternatives, demand on other major gas exporters, such as
Prime Minister
The Australian Government's 2022-23 Federal Budget has allocated
Federal Minister for Industry, Energy and Emissions Reduction,
The seven projects selected for early works support are:
- the expansion of the South West Pipeline (SWP) to handle excess supply from the Iona storage facility in
Victoria (APA Group ); -
the Heytesbury Underground Gas Storage (HUGS) project, aimed at utilising depleted underground gas fields to expand gas storage in
Victoria (Lochard Energy ); Project Range , aimed at increasing contingent gas supply from the Surat basin inQueensland (APA Group );-
the
Surat Hub Project , which will increase capacity in the existing Berwyndale to Wallumbilla pipelines inQueensland (APA Group ); -
the development of a new Gas Infrastructure Hub to drain and harvest gas from existing mines in the
Bowen Basin inQueensland (Transition Energy Corporation Pty Ltd ); -
the second stage of the East Coast Gas Grid Expansion, progressing towards the eventual goal of increasing east coast gas transportation capacity by 25 per cent (
APA Group ); and -
a feasibility study into the most efficient infrastructure to deliver natural gas from the Beetaloo sub-basin in the
Northern Territory to the east coast gas market. The Federal and Northern Territory Governments recently signed aA$872 million joint funding deal to accelerate gas production in theBeetaloo Basin .
The projects broadly focus on increasing domestic supply and enhancing transportation capacity to target projected shortfalls in southeast
Part of the funding will also be allocated to feasibility studies and options for pipelines to transport carbon dioxide fro m major gas and industrial hubs to prospective sites for carbon capture and storage.
This investment is in addition to the Australian Government's recent A
In line with its 2022 Draft Integrated System Plan, which Corrs discussed in our recent article, AEMO identifies a number of possible future scenarios for the gas supply-demand balance in its 2022 GSOO.
AEMO observes that the gas supply outlook has improved since its previous GSOO, but notes the future position may vary based on the pace of the transformation of the energy sector on the path to net zero emissions. Regardless, AEMO acknowledges the continued role of gas in supporting and firming variable renewable energy (VRE) in the National Electricity Market as coal generation resources continue to retire, and emphasises the need to manage the risk of gas supply shortfall in the coming years.
Indeed, the GSOO echoes concerns voiced by the
In the short term, up until 2026, AEMO predicts that the timely completion of committed and anticipated gas infrastructure projects could mitigate shortfalls as south-eastern supply drops off. However, the need to carefully manage demand during peak periods will remain, as supply is likely to be tight. To this end AEMO stresses the importance of 'sector coupling', ie coordinating demand response between the gas, electricity, and emerging hydrogen sectors.
In the longer term, regardless of which energy supply-demand scenario eventuates, AEMO identifies the need to bring new gas resources to market in order to meet forecast domestic demand from as early as 2026. The extent of new supply needed will depend on the pace of introduction of VRE generation and variable trends in consumption behaviour. Notwithstanding domestic needs, significant additional supply beyond committed and anticipated projects will be necessary to sustain projected LNG exports.
The Australian Government will now undertake a negotiation process to develop grant agreements and finalise how the
The new NGIP will also provide updated information on the rapidly changing state of the east coast gas market, as will the ACCC's next Gas Inquiry Interim Report, which is expected in July this year.
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