A new study by the Australian Government has confirmed the urgent need to develop new offshore and onshore gas supplies in south-east Australia.
The report, Offshore South East Australia Future Gas Supply Study, found gas supply from offshore south east Australia is expected to continue at close to current levels over the next five years before declining over the medium term, reducing the capacity of the gas industry to rapidly respond to unanticipated increases in peak winter demand.
Opportunities to increase supply in the short term are limited. All major known gas fields in the region have been developed and are significantly depleted, so maintaining supplies will require new gas discoveries, and accessing lower volume, deeper and lower-quality gas fields at a higher cost.
Minister for Resources and Northern Australia, Matt Canavan, said the study showed that the offshore south-east basins have up to 3.8 trillion standard cubic feet of known gas reserves, about eight to nine years supply.
A further 3.7 trillion cubic feet of contingent resources have the potential to extend production beyond this, but will require substantial investment to overcome infrastructure and technical constraints.
“Without further discoveries and development, gas supply from offshore south east Australia is expected to continue at slightly below current levels over the short term (one to five years), and then decline over the medium term,” Mr Canavan said.
“Although there is potential to increase production in four of the six gas plants in Victoria, which would increase competition and put downward pressure on prices, the only way to increase reliable and affordable gas supplies is to identify new onshore and offshore gas resources.
“There is an opportunity to deliver more gas through increased exploration, but the offshore gas is expected to come in more slowly because the fields are smaller and deeper with more impurities.”
The study also found that any increase in gas supply from existing projects in the short term will only result in a faster erosion of reserves, with implications for long-term security of supply.
“We need to find greater supplies both offshore and onshore. Given it takes five to ten years to get gas from discovery to production we need to move now,” Mr Canavan said.
To ensure future gas needs are met the Government is actively considering policy options to get more gas to eastern Australian consumers, power suppliers and industry.
“As well as introducing measures like the Australian Domestic Gas Security Mechanism to ensure that Australian users have access to gas at a reasonable price, we will continue to support gas exploration and development onshore and offshore,” Mr Canavan said.
“Measures like the $28.7 million package to accelerate the responsible development of onshore gas will make grants available to states and territories that are prepared to lift bans and moratoriums, supporting projects that are capable of delivering gas to the East Coast market within the next three years.”
APPEA Chief Executive Officer, Dr Malcolm Roberts, welcomed the report and said that it .confirms what the industry has been warning for years: that there is a pressing need to develop new gas supply to meet the energy demands of businesses and homes.
“A single sentence from the study sums up the transition occurring in the east coast market,” Dr Roberts said.
“Future [offshore] production sources will continue to shift from the high volume, shallow depth, high-quality gas fields to low volume, deeper, low-quality gas fields, and most will effectively backfill existing capacity rather than create net new gas volumes for the market.
“The major established gas fields of offshore south-east Australia are mature and are costly to develop,” he said.
“Offshore gas will continue to be vital to the market but the challenges and costs of creating new supply will only grow.
“Companies such as ExxonMobil, BHP, Cooper Energy and Beach Energy are committing billions in risk capital to find and develop new offshore gas supplies.”
Dr Roberts said governments will need to support developing onshore gas supply.
“The Australian Competition and Consumer Commission recently warned that Victorians can pay a 25 per cent premium in transport costs when they import interstate gas, a cost they could avoid if the State Government followed the lead of Queensland and South Australia to support local gas projects,” he said.
“Maintaining a ban on onshore gas restricts supply and drives prices up. Victoria has the opportunity to safely develop onshore gas which will be needed more and more, to complement offshore supply. Playing short-term politics with energy guarantees long term and unnecessary pain. Victoria needs to get on with developing new supply.
“As the report clearly states, successful exploration and appraisal will be required to maintain production over the longer term. All jurisdictions need to be part of the solution.”
The study was part of the Australian Government’s $90 million investment in gas security and supply.
Energy Networks Australia has welcomed the announcement of the study.
Energy Networks Australia Chief Executive Officer, Andrew Dillon, said a second interconnector could boost Tasmania’s contribution to the National Energy Market (NEM) and Australia’s transition to a cleaner energy system.
“For Tasmanian and mainland customers, a second interconnector could bolster supply, providing a safety net in times of great demand, whilst allowing more renewable energy to be fed into the national grid,” Mr Dillon said.
“We congratulate TasNetworks, the Australian Renewable Energy Agency (ARENA) and the Australian and Tasmanian Governments on this important collaboration.
“A more connected system is a more reliable system, and we can’t compromise on security and reliability as we transition to a low carbon energy future.”
Mr Dillon said that greater interconnection in the NEM can improve market competition by unlocking lower-cost generation at times of high demand and allow mainland customers to connect with cleaner sources of generation, while benefiting from the backup provided by a reliable grid.
“Where the cost-benefit analysis stacks up, more interconnection can support a competitive wholesale market in addition to supporting reliability of the energy system and maintaining power security,” Mr Dillon said.