A new major energy report has determined that LNG import projects are urgently needed in both Melbourne and Sydney to counter the risks of a growing shortage of gas in the southern states.

Based on new modelling by independent energy consultancy, EnergyQuest, gas production in the southern states (NSW, Victoria, South Australia and Tasmania) starts to shortfall demand by 2022. By 2025, the report forecasts that annual gas production offshore Victoria will more than halve from current levels, dropping to 146 petajoules (PJ) from 336 PJ in 2018.

Supply from Queensland would need to increase to nearly one third of southern supply to fill the gap. However, moving this volume of gas south would run into constraints on the QSN Link Pipeline and the Moomba Sydney Pipeline.

EnergyQuest warned, however, that more Queensland gas would only be a short-term palliative to the problems in the south because Queensland has challenges too. 

With the rapid decline of the Gippsland legacy fields, Victoria’s peak production capability will decline to around 400 TJ per day. The decline leaves a large gap, which will emerge early next decade. 

The report found that the southern states need a new permanent source of gas supply, which can only be met by the proposed LNG import projects.

The report found that LNG import terminals can provide long-term contracts to gas-users with transparent pricing, they would be located near major demand centres and are also well suited to meeting peaking demand. Such terminals will also provide increased competition in the east coast gas market, something which is otherwise likely to decline.

Overall, the report concludes there is a high degree of uncertainty in the east coast gas industry, including supply uncertainty, demand reaction to high prices and risk, mismatched supply/demand balances, infrastructure constraints, regulator risk and public support for the industry.

EnergyQuest says that in light of the range of risks, developing LNG import terminals sooner rather than later would be a prudent form of risk mitigation. EnergyQuest found that not only are LNG import plants needed for the country’s two largest cities but will be needed before 2026 to meet peak demand in Victoria.

There are five current proposals to build LNG import terminals on the east coast of Australia. While this may seem at odds with LNG exports, EnergyQuest says some countries already export and import LNG, including the US, Malaysia, U.A.E. and Egypt.

For more information visit www.energyquest.com.au

1st March 2019