Australia's east coast energy crisis may intensify amid renewed gas shortfall

STR/AFP/Getty Images

An increased shortfall in gas supplies for Australia’s east coast may force the government to enact further restrictions on Queensland producers.

According to a report in The Australian, the latest forecast from the Australian Energy Market Operator (AEMO) predicts that gas shortages could be as much 107 petajoules (PJ) beneath market requirements next year.

It’s a sharp increase from AEMO’s previous report in March, which predicted no energy shortfalls in 2018 and gas shortages to range between 10-54PJ from 2019-2024. Annual east coast energy usage in Australia is around 650PJ.

The AEMO report will be submitted to the government today, as a committee, which includes prime minister Malcom Turnbull, is scheduled to meet with the chief of the Australian Competition & Consumer Commission (ACCC), Rod Sims, to determine what additional measures the government will take to address the east coast energy crisis.

The Australian reported that the meeting may add to speculation the government will increase its powers set out in the Australian Domestic Gas Security Mechanism, with the ACCC set to finalised its own report with the next 24 hours.

Under the guidelines established earlier this year, the government can impose export restrictions on any gas supplier that isn’t a net contributor of gas to the Australian market.

Within that framework, Santos’ GLNG project in Gladstone is most at risk. However, given the increased shortfalls predicted in the latest AEMO report, there’s renewed expectations that restrictions may be extended to other major gas projects.

Those include Royal Dutch Shell’s LNG project in Curtis, Queensland and the Australia Pacific LNG plant, a joint venture between Origin Energy and ConocoPhillips.

The Australian reported that Sims was unhappy last week that uncontracted gas was still being sold on international spot markets. The Australia Pacific LNG plant has around 65PJ of uncontracted gas, that it said could be supplied to the Australian market next year.

Petroleum industry spokesman Malcolm Robert told The Australian that he hopes a solution can be reached for energy companies to supply extra gas to the market without the government having to enact additional restrictions.

The government’s energy committee has until November 1 to determine how it will address the looming shortfall. The industry will then have 30 days to respond, before restrictions take effect on January 1, 2018.

The Australian has more here.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.