Western Australia faces gas shortage over the next decade unless major new supplies are developed, with shortages more extreme from 2031 after the government shuts its coal-fired power stations.
Western Australia faces gas shortage over the next decade unless major new supplies are developed, with shortages more extreme from 2031 after the government shuts its coal-fired power stations.
These are the key findings of the Australian Energy Market Operator (AEMO) in its 2023 Gas Statement of Opportunities for WA.
AEMO has revised its forecasts for the next three years, with gas supply forecast to be 105 petajoules short of domestic demand up to 2026.
“This means that there is a risk of shortages in the event of supply outages or peaks in demand without corresponding responses from suppliers and consumers,” the report found.
The tight conditions already prevailing have resulted in a sharp increase in the spot gas price in WA, from $2.13 per gigajoule in May 2020 to around $10 per GJ.
The WA gas market is expected to remain in deficit throughout the majority of the forecast period.
AEMO’s executive general manager WA & Strategy Kate Ryan said the report reaffirms the need for investment in new gas supplies.
“The 2023 WA GSOO identifies an increasing need for investment in additional gas supply into the state's domestic market,” she said.
AEMO forecasts domestic gas demand in WA will increase by an average of 2.2 per cent annually between 2024 and 2033.
A key driver is the increased use of gas to generate electricity in the South West – this is anticipated to grow at an average of 5.8 per cent per year.
AEMO also factors in increased demand for industrial processing, as projects such as Perdaman’s Pilbara urea project come online.
Over the same period, supply is expected to decline 0.9 per cent on average each year as production from existing WA gas fields declines.
AEMO said the market will be in deficit across the next decade, with the shortfall increasing after 2031 to more than 100 terajoules per day, which equates to more than 10 per cent of demand.
“As such, timely investments in new gas developments are needed to maintain a secure and reliable energy system,” Ms Ryan said.
The report factors in new supply from four projects – Strike Energy’s South Erregulla development in mid-2026, Woodside Energy’s Scarborough project (2027), Mineral Resources’ Lockyer Deep asset (2028) and Beach Energy and Mitsui’s Waitsia Stage Two joint venture (2029).
“Despite these new projects coming online, AEMO has identified the need for new gas supply to meet forecast demand under all scenarios,” Ms Ryan said.
She said there are many offshore and onshore undeveloped projects that could supply the WA domestic market, but these projects are too speculative to include in the potential supply forecasts.
AEMO said the retirement of 1.6 gigawatts of coal-fired plant over the next 10 years and rising electricity demand will require more gas-powered generation in the South West.
The state government has acknowledged it may need to invest in new gas-fired power but has emphasised its focus on new renewable energy supplies.
It has also bankrolled the construction of two major batteries, at Kwinana and Collie, to help meet peak electricity demand.
The AEMO report notes that the volume of gas in long-term storage at Tubridgi has declined substantially since peaking in September 2020.
Since then, gas has been withdrawn at an average rate of 8 PJ per annum to help meet domestic demand.
At this rate of extraction, the Tubridgi long term storage will be depleted by the end of 2026.
The AEMO report comes one week ahead of the expected release of a parliamentary inquiry’s report into the domestic gas market.
The inquiry heard claims that gas producers are not living up to their requirement to set aside 15 per cent of their production for the domestic market.
