Australia looking likely to import gas to fix looming shortfalls

Australia could be just years away from importing gas, despite the nation’s vast production of the fuel, amid new warnings of looming energy shortages that have seen an east-coast shipping terminal developer report growing demand from customers seeking liquefied gas cargoes from 2026.

Mining billionaire Andrew “Twiggy” Forrest’s privately owned Squadron Energy is building what could become Australia’s first terminal capable of receiving shipments of liquefied natural gas (LNG) from Queensland or overseas, and turn it back into vapour to supply homes and businesses.

Andrew Forrest’s Port Kembla LNG import venture envisages importing gas for as much as 25 years.

The proposed Port Kembla Energy Terminal, near Wollongong, has emerged as one of the most viable near-term solutions to boost gas supplies into NSW and Victoria, where the Australian Energy Market Operator (AEMO) is projecting an energy shortage when gas demand outstrips supply by 2027.

Exacerbating the risk of shortfalls, the Port Kembla terminal project was taken off the market operator’s list of “anticipated” new supply projects in its latest assessment because not enough customers had signed up to use it yet.

However, Squadron Energy has reaffirmed its commitment to completing the project, and said it was seeing “significant and growing” customer demand to contract gas through the terminal from 2026 onwards.

“Squadron Energy is committed to the delivery of LNG via the terminal, to support the needs of our assets and energy users, as Australia transitions to renewable energy,” Squadron chief executive Jason Willoughby said.

Another option is Viva Energy’s proposal to begin importing LNG shipments at the site of the Geelong oil refinery in Victoria. The project was initially planned to bring first gas by the winter of 2024, but a final investment decision on the project has since been delayed amid a drawn-out environmental approvals process and requests from the state government for additional information on its potential local impacts.

Graeme Bethune, of Adelaide energy consultancy EnergyQuest, said the forecast east-coast gas shortfalls and delays to the Geelong import terminal raised the prospect of gas being sent via pipeline from the Port Kembla import terminal into Victoria.

“LNG imports into NSW are entirely plausible,” Bethune said.

“[Pipeline operator] Jemena has talked about that in terms of the pipeline capacity, that would be reversing the eastern gas pipeline, which currently goes in the other direction from Victoria to NSW.”

Australia is one of the world’s largest producers of gas, but massive volumes of production from Queensland’s gas fields are locked into long-term export contracts to LNG buyers in Japan, Korea and China, while gas produced in Western Australia cannot be transported to the eastern states.

As gas fields in Bass Strait, which have traditionally supplied the bulk of east-coast gas demand, are rapidly drying up, AEMO has warned that Victoria could face gas shortfalls as soon as this winter if a burst of cold weather drives up heating usage at the same time as a slump in output from wind farms or breakdowns at coal-fired power plants.

By 2027, states including Victoria, NSW and South Australia would face yearly gas supply deficits unless new gas supplies were made available, AEMO said.

Conservation groups insist the projections leave ample time for governments to develop a strategy focused on reducing gas demand, such as switching appliances from gas to electric and prohibiting new residential gas connections, rather than starting up LNG imports.

“Port Kembla LNG has for years tried to secure customers for their gas but have failed to do so due to their high prices,” Environment Victoria’s Rai Miralles said. “Rather than offering expensive and polluting gas to consumers we should give them the opportunity to switch to efficient electric heating and hot water.”

State and federal governments are investing in a range of initiatives to cut household gas use, encouraging people to switch from gas-fired heaters and stoves.

However, AEMO has cautioned that gas demand is not falling fast enough to ease the looming crunch. It also forecasts that the need for new gas would still remain, even under the most ambitious electrification and decarbonisation scenarios. Increased power consumption by household appliances could double the demand for gas to generate electricity by 2042, AEMO said.

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