08/12/2016 - 05:30

Risks to excess gas supply

08/12/2016 - 05:30

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The state’s domestic gas market is expected to have excess supply of 640 terajoules per day by 2021, according to the Australian Energy Market Operator, although a delay in commencement of production at the Wheatstone or Gorgon domestic gas facilities could lead to a tightening of the supply as early as next year.

The Fortescue River pipeline, one example of infrastructure built to move mining from diesel to gas.

The state’s domestic gas market is expected to have excess supply of 640 terajoules per day by 2021, according to the Australian Energy Market Operator, although a delay in commencement of production at the Wheatstone or Gorgon domestic gas facilities could lead to a tightening of the supply as early as next year.

In its latest statement on gas opportunities, AEMO said the domestic gas facilities at the two Chevron-led upcoming projects would support supply in the market, with new LNG export facilities required to quarantine part of their production for local users.

Gorgon phase two was expected in 2020, with Wheatstone in 2018.

“However, if these facilities were to be delayed beyond these projected commencement dates, short-term gas supply in 2017 or 2018 for the WA gas market may tighten when large gas supply contracts with the North West Shelf expire,” the report said.

“From 2022, the level of supply is subject to the continued expenditure to develop gas reserves for the WA domestic market.”

In the longer term, a lack of exploration could present challenges for supply.

“Exploration in WA’s gas basins is at its lowest level since 1990,” the report said.

“If exploration remains low, new gas projects may not be developed and existing domestic gas production facilities may cease production due to lack of gas feedstock.

“At the current production rates of domestic gas and liquefied natural gas, proved and probable (2P) reserves can last until 2035, but a large proportion of these reserves are held by LNG export companies and joint ventures.

“These suppliers may only make gas available beyond their domestic market obligation quantities if the price is commercially viable.”

Demand growth is projected to be 0.1 per cent per annum for the next ten years, mostly driven by switching of fuel from diesel to gas in mining facilities.

In the short run, it will actually contracted slightly, from 1074tj/d next year to 1068tj/d in 2021.

One decision that could impact the demand side of the market will rest with Synergy, which will be shutting off 380 megawatts of electricity generation capacity.

Whether that capacity is gas or some other generator is yet to be determined, however, so it has not been included in the modelling, AEMO said.

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