As portents go, one buried deep in the new Energy Supply Association yearbook is a doozy, signalling some painful times for gas suppliers, manufacturers and politicians.
Electricity Gas Australia is an annual bible for those of us who follow the sector closely (and a disclaimer: I published its predecessor Electricity Australia for the Electricity Supply Association from 1991-2003).
Industry analysts, the lending and stockbroking community with energy interests and governments advisers in the states, Northern Territory and Canberra pore over the stats when the book arrives as all sorts of portents lie in its depths.
The doozy this year lies 54 pages in to the 114-page book. Projecting gas demand out to 2031-32, the new edition reflects a big reversal in the hopes and dreams of gas suppliers from even a year ago – more importantly, perhaps, it suggests a great big manufacturing problem.
Just last year Electricity Gas Australia was still forecasting that gas use in electricity generation and manufacturing would continue on a roll through this decade.
Starting with actual sales of 343 petajoules to power stations in 2010-11, the association projected 446 PJ by 2015-16 and 558 PJ by 2020-21.
For manufacturing, with sales of 368 PJ in 2010-11, the association projected 411 PJ in 2015-16 and 448 PJ in 2020-21.
To put these increases in perspective, one needs to know that the total gas consumption figure for New South Wales in the year they were made was 159 PJ.
Now comes the 2013 yearbook and the outlook is very different. Dismal barely suffices to make the point.
The association forecasts that the role of gas in electricity generation will slide from 332 PJ in 2011-12 to just 260 PJ mid-decade and be at 271 PJ in 2020-21. Investment in new baseload gas-fired generation on the east coast is now unlikely this decade, it adds.
For manufacturing, it predicts gas consumption will fall away from 332 PJ in 2011-12 to 300 PJ in mid-decade, then 271 PJ in 2020-21 and then go on sliding backwards through the 'Twenties.
A pair of markets that a year ago were still being thought of as delivering a combined 1294 PJ of sales by the dawn of the ‘Thirties is now seen as reaching only 512 PJ at that distant point.
(In passing, the yearbook also sees residential demand for gas falling back – declining from almost 144 PJ in 2011-12 to 130 PJ by the decade’s end.)
A year ago the association saw total national use of gas (leaving aside the hoovering up of the fuel for LNG exports) going up 38 per cent over the current decade; now it is projecting a 34 per cent fall.
This is how the Energy Supply Association sums up the situation in the new yearbook: “Domestic gas consumption has historically grown by around 3-5 per cent a year over the past decade. While there are current estimates available that suggest (this) will continue to rise at about 1 per cent a year over the period to 2050, there is potential for growth in domestic demand to reduce over the near term.”
The political point is that what happens to gas supply for power generation is of interest to policymakers but it is not going to get their pulses racing – but the implications of the foreshadowed tumbling in manufacturing’s gas is instructive.
We are talking industries with large numbers of employees.
Industries where gas is used directly as a feedstock to manufacture chemicals and other materials such as fertilisers, explosives, paints, pharmaceuticals, soaps, detergents, cosmetics and rubber and plastics products.
Manufacturers like the cement, brick, tiles, glass and plasterboard industries where gas-fired heat is a key input.
Substituting gas with electricity from wind turbines, solar PVs and geothermal power is not exactly the answer to their needs; if they are going to use less gas it is because they have cut operations or, like Incitec Pivot, set off to Louisiana to build a new factory.
People in power – the political kind – might care to look at the new ESAA numbers and ask themselves “What does it all mean?”
Meanwhile, from the perspective of gas producers, of course, the big picture is anything but doom and gloom.
The Energy Supply Association says LNG export earnings will rise 31 per cent just between this new financial year and 2017-18 to reach $52.8 billion (in today’s money values).
Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of OnPower, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.