3 minute read

Crib Point 2: Keeping our supply secure

Phaedra Deckhart
Phaedra Deckart
07 April 2020

Gas is an important natural resource for households, businesses and industries, and is used in a range of ways across Australia.

Domestic demand for gas in eastern Australia is derived from three sources: commercial and industrial gas, gas powered generators, and residential customers. In Victoria, gas consumption primarily stems from the residential and commercial sectors.

Despite Australia’s considerable gas reserves and position as one of the world’s largest exporters of gas, we face potential gas shortages over coming years in the south-eastern states of Victoria, New South Wales, and South Australia.

Here’s a quick explanation of why.

How did this happen?

Australia is one of the world’s largest exporters of Liquefied Natural Gas (LNG), with most of this gas coming from Queensland and Western Australia.

Due to the vast distance across the Australian continent, our largest population centres in the east are not connected to the new gas reserves and LNG production plants in Western Australia. Historically, the south-eastern states have received much of their gas from Victoria’s offshore Gippsland and Otway Basins in Bass Strait.

These mature, southern gas reserves are facing declining production – which is reducing gas availability in Victoria, and limiting gas exports to New South Wales and South Australia.

The South West Queensland Pipeline is currently the only pipeline that connects Queensland to the southern states. Built in 1996 and expanded in 2012-13, the pipeline has a maximum capacity of 384TJ/day, which means it is already close to reaching operational capacity during Australia’s winter months.

For instance, daily gas usage on a peak Victorian winter day is around 1,200 TJ/day, while NSW is 600 TJ/day and SA is 400 TJ/day. As supplies from Victoria and Central Australia continue their natural projected declines, the Queensland pipeline will not have the capacity to be able to deliver the increasingly large quantities of gas required to ensure the continued and uninterrupted supply of gas.

More recently, with the addition of the Northern Gas Pipeline, the east coast gas network has also been connected to gas reserves in the Northern Territory. While the Northern Territory has brought online new gas production sources, the distance to pipe the gas to the east coast is vast – which means the cost to transport the Northern Territory’s gas to the southern states is very high.

The gas shortage in Australia’s south-east was acknowledged in the Australian Energy Market Operator’s (AEMO) 2020 Gas Statement of Opportunities. This report advised that the east coast gas market faces tight supply from 2023 unless more is done to supplement the rapidly depleting output from the Bass Strait gas fields and northern supplies limited by their pipeline capacity.

The forecast gas shortage becomes more acute for the southern states from 2023 if no further sources of gas or alternative infrastructure are developed.

What solution is AGL pursuing?

In our previous article on Crib Point: Why import gas? we explained the rationale behind plans to use an existing jetty at Crib Point, Western Port in Victoria to import LNG into Victoria, New South Wales, and South Australia – providing much needed additional supply of gas to customers.

The Victorian economy is highly reliant on gas. The state accounts for more than 50% of the south-eastern gas demand due to heating during cold winters and significant, gas-intensive manufacturing plants. Furthermore, New South Wales and South Australia rely on Victorian gas to top up their supply.

AGL supports initiatives that improve efficiency in meeting our customers’ demand for gas, which is why it’s imperative we address these shortages that are predicted from 2023.

Recently, the Victorian Government made the decision to lift the ban on conventional onshore gas exploration from July 2021. It will likely take between 7-10 years for any gas found to be brought online, however, which means this is unlikely to solve AEMO’s predicted short-medium term shortages.

Therefore, in addition to the timetable challenges, importing gas is likely to be Victoria’s lowest cost solution – despite Australia’s significant gas reserves in northern Australia.

AGL’s proposed plans for a gas import jetty at Crib Point are now being independently assessed through the Environment Effects Statement (EES) process, under the Environment Effects Act 1978. The EES will look at the potential environmental, social, economic, and planning impacts of the Gas Import Jetty and Pipeline Project, as well as our approach to mitigating these impacts.

During these challenging times, it’s important for the project team to continue to engage with local community members on our plans. In response to Federal and State Government social distancing requirements and concerns voiced by the community around exposure, we are now seeking advice from the Victorian State Government around how planning processes will be handled during the COVID-19 pandemic.

For more information on the project, please contact us via AGLCommunity@agl.com.au.