Gas supplies in southern states are likely to remain strained the rest of this winter, and the problems will worsen without the urgent addition of more backup resources, analysts including the market operator say.
Those states, particularly Victoria, have drawn down their gas storage as cold weather increased demand. Gas-fired power generation has also been double that expected on some days amid unusually calm periods, and gas production at Victoria’s Longford plant has dropped because of unscheduled maintenance.
Worried about gas supplies in Victoria, Rick Wilkinson, the chief executive of consultants EnergyQuest, described the situation as “very serious” and he predicted the state would “need a backup” to handle peak winter gas demand from 2026.
In what it called a “threat notice”, the Australian Energy Market Operator told major industry players last Thursday: “Reduced storage facility delivery capacity may pose a risk to gas supply adequacy in southern jurisdictions on peak demand days during the winter peak demand period (to the end of September).”
Longford, which processes gas piped from declining Bass Strait fields, was ramping up output towards 690 terajoules/day this week and was on track to hit 775TJ/day by early July, Aemo said.
But Wilkinson said that rebound would slow the drawdown of gas from Victoria’s main Iona storage site. Its level was dropping at the rate of about 1000TJ every three days, and was sitting at a five-year low of 15,230TJ as of Sunday.
“This is very serious,” Wilkinson told Guardian Australia. “The main reason is we have lost about 200-300TJ/day out of Longford compared with a year ago” as the gasfields deplete.
Gas prices on the wholesale market have eased back since the end of last week in Victoria and Sydney – in part because of lower demand – particularly from gas-fired power plants as windy weather returned.
Still, the present strains provide near-term challenges to the energy sector in eastern Australia far removed from the federal opposition’s contentious plan for Australia to have seven nuclear power plants some time after 2035.
A spokesperson for Aemo said the aim of Thursday’s notice was to signal the market faced elevated risks. Gas storage levels were slightly below those for this time of year compared with 2021 and 2022.
Gas pipelines from Queensland were already at full capacity so there was no extra help from that source as there was in those two earlier years. “Longford does not have the capacity it did back in 2021 and 2022 either,” the spokesperson said.
“Our projections are that we can get through if production and consumption run to plan with Iona’s decline expected to flatten this week,” he said. “[But] wind needs to be better than it has been.”
Fortunately unplanned coal outages were fewer than in recent years.
EnergyQuest’s Wilkinson said Victoria would struggle to meet peak winter gas demand days from 2026, noting Aemo’s own warnings. “We need a backup to the system,” he said.
One option had been to complete Andrew Forrest’s Port Kembla gas-import facility, which is 90% finished. But a regasification vessel that could have enabled the importation had headed instead to Egypt after local contracts had not been signed, Wilkinson said. Another probably won’t be available for a further 18 months.
Stepping up output from existing gasfields would probably provide only “marginal” extra gas, while new fields would take years to develop, he said.
A spokesperson for the energy minister, Chris Bowen, said the Albanese government had granted Aemo “adequate levers to address any issues and increase storage holdings if required”.
“Aemo is comfortable there is now sufficient supply in the market for at least four years because of the Albanese Government’s gas code of conduct which has secured more than 600 petajoules of gas for east coast gas users, the equivalent of six years’ supply for gas power generators,” she said.
A Victorian government spokesperson said gas supplies in the Gippsland basin were “depleting and exploration has been largely unsuccessful”.
“That’s why we’re reducing demand for gas through electrification and considering several options to secure new supply, including import terminal proposals, where they meet planning and environmental requirements.”
