Australia's LNG exports may have to be diverted to fend off winter gas shortage

Australia's east coast liquefied natural gas (LNG) exporters may need to divert excess gas supply for domestic customers to stave off any potential supply shortages this winter in the country's south, the energy market operator said on Thursday.

Australia's east coast liquefied natural gas (LNG) exporters may need to divert excess gas supply for domestic customers to stave off any potential supply shortages this winter in the country's south, the energy market operator said on Thursday. Despite increased production commitments from the industry since last year, the supply in southern Australia is declining rapidly, raising risks of near-term shortages and long-term supply gaps, the Australian Energy Market Operator (AEMO) said.

"To minimise shortfall risks, committed infrastructure and supply projects must be completed on time ... additional gas storage and pipeline development and LNG import terminals could potentially play a role," CEO Daniel Westerman said in a statement accompanying AEMO's closely watched outlook. "The risk of gas shortfalls each year from winter 2023 to 2026 in all southern jurisdictions remains under extreme weather conditions ... with those risks further exacerbated if gas storage levels are insufficient," Westerman said.

From 2026, Australia must require additional commitments to expand its gas supply or have enough renewable projects to offset the demand for gas. The investment uncertainty over the development of Squadron Energy's Port Kembla in New South Wales - Australia's first LNG import terminal and set to become a hub for moving gas to the south - could also impact supply shortfall, AEMO said.

Like many countries, Australia has been hit by soaring power and gas prices after Russia's war with Ukraine and also from planned and unplanned outages at several coal-fired plants. To bring relief to families already battling high living costs, the federal government in December announced a 12-month cap on prices.

This prompted warnings from the three east coast LNG exporters - Australia Pacific LNG, run by ConocoPhillips , Gladstone LNG, run by Santos Ltd and Queensland Curtis LNG, run by Shell - that the move could deter future investment and put supply at risk. Though Australia produces more gas than it needs to meet its domestic demands, most supply is contracted for exports.

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