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LNG import terminals needed in Sydney-Melbourne to counter critical gas shortage

Published by , Deputy Editor
Tanks and Terminals,

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, according to a major energy report.

Based on new modelling by independent energy consultancy, EnergyQuest, gas production in the southern states (NSW, Victoria, South Australia and Tasmania) will start 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.

There is a particular challenge of meeting peak winter demand in Victoria, NSW and Tasmania, which can be up to 1200 terajoules (TJ) in a single day.

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 also 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.

The EnergyQuest executive said blocking LNG import projects would not reduce prices but increase them, as restricting supply had never crystallised reduced gas pricing.

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.

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