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Rising export demand likely to push up domestic gas prices

11 Dec 2012 SYDNEY MORNING HERALD - BRIAN ROBINS


EASTERN Australia may face gas shortages over the next few years as a result of surging demand from Queensland's gas export projects, the Australian Energy Market Operator has warned in a report to be released on Tuesday.

"The relatively small volume of uncommitted available reserves, combined with a large proportion of reserves committed or earmarked for LNG projects, may create challenges for domestic supply," AEMO's managing director and chief executive, Matt Zema, said.

"Forecast domestic gas demand for a number of proposed large industrial projects currently exceeds the capacity of the pipelines to supply gas in Gladstone from 2013. Competition for gas supply may impact the timing or scope of these proposed projects."

Rising LNG exports from Queensland are expected to require between 43,000 and 53,000 petajoules of gas reserves, AEMO said. If reserves are not developed in a timely fashion, supply shortfalls may emerge as export projects begin to reach their capacity from 2016.

Gas retailers AGL and Origin Energy have already warned of higher domestic gas prices due to rising competition from exports.

Much of the forecast rise in gas demand will be for exports, with electricity generators unlikely to install new gas-fired plants for at least a decade, the forecast said.

Combined cycle gas turbines would require a higher carbon price and lower gas prices to compete with other generation sources, the survey noted, although there is ongoing need for gas peaking power generation.

In the medium to long term, depletion of gas in the Cooper-Eromanga basins in central Australia may prompt the development of reserves elsewhere to maintain supplies to NSW. As conventional gas reserves are depleted or committed to export projects, coal seam gas, shale and tight gas reserves will be used by the domestic market. Increased gas pipeline capacity may be needed, with gasfields around Casino in NSW likely to be tapped from 2018.