Gas running on empty

We’ll need diesel to keep lights on without new supply

Australia must develop new sources of gas if it is to avoid a shortfall in supplies as soon as 2025 that may force generators to burn diesel to safeguard grid stability, the country’s energy market operator has warned.

The Australian Energy Market Operator (AEMO) said gas shortfalls could emerge as soon as 2025 under extreme weather conditions and the deficiencies will grow from 2026 in southern states. Even if Australia is to avoid the extreme weather conditions that drive demand for gas in Victoria and the ACT primarily, AEMO said a material shortfall would occur in 2028 as traditional sources to the east coast run dry.

AEMO chief executive Daniel Westerman said there had been progress in improving supplies to the southern states in recent months, which has helped offset declining production from the Bass Strait in the near term – and gas generators could run on diesel through 2026 in an emergency – but new supply would need to be delivered to have any hope of meeting the 2028 shortfall.

“A range of storage and pipeline projects have been completed, improving gas supplies to southern states that will help offset declining production from Bass Strait gas fields,” Mr Westerman said.

“However, gas production is forecast to fall faster than demand in the south, driven by declining production from Bass Strait.”

Australian gas generators were last forced to use diesel in 2022, when a domestic crisis was triggered by Russia’s invasion of Ukraine. Burning diesel is expensive and will hinder efforts to curtail carbon dioxide emissions.

Gas industry executives will hope the urgent call for action spurs authorities to approve new supplies and inhibits the capacity of opponents to block new developments.

Several new developments, such as Santos’ Narrabri gas project and Gina Rinehart and South Korean steel giant POSCO-backed Senex Energy’s expansion plans, remain sidelined as they wait for regulatory approvals that have dragged on for months.

The federal Labor government has insisted it supports and values the role of gas, but critics say regulatory delays are indicative of its commitment to new supplies.

Gas remains polarising and pockets of the electorate are deeply opposed to new developments; critics of the federal Labor government believe Prime Minister Anthony Albanese is unwilling to alienate a key voter bloc ahead of an election due in 2025.

But Australia’s energy industry insists Australia has no time to waste and further delays jeopardise the country’s manufacturing sector, damage the country’s transition away from coal and could stoke inflation.

Australia’s manufacturing sector can not easily transition to renewable energy sources.