LNG Export Race ‘To Hit Supply’

From The Australian

By Annabel Hepworth and Matt Chambers

AUSTRALIA’S rush to become the world’s biggest liquefied natural gas exporter threatens to lead to high prices and a shortfall in domestic supplies, leaving most of the country to rely on coal-fired electricity for the next 25 years.

Major research to be released today shows the Gladstone region in central Queensland could face a gas shortfall from next year because demand from proposed projects in the area, which include Rio Tinto Alcan’s Yarwun refinery expansion, exceeds the capacity of the pipelines to supply the gas.

“Competition for gas supply may impact the timing or scope of the large industrial projects currently proposed in Gladstone,” says the Australian Energy Market Operator report.

Brisbane also faces possible insufficient gas supplies from 2018 and Townsville from 2021 unless extra pipeline capacity is built.

While there are sufficient gas reserves to meet demand, if these are not developed quickly enough to meet Asian-led demand for LNG exports, supply shortfalls to both the export and Queensland domestic markets could be seen by about 2016.

New AEMO modelling also reveals only 16 per cent of the current coal-fired electricity capacity will be retired or mothballed over the next 25 years, with the remaining coal-fired generation maintaining its competitiveness. Coal will still account for more than half of the energy produced in 2037.

The owner of the nation’s dirtiest power plant, Hazelwood in Victoria’s Latrobe Valley, and of the nearby Loy Yang B plant, French utilities giant GDF Suez, said rising east coast gas prices, along with a benign carbon tax, were good for business.

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