The Australian Competition and Consumer Commission said Bass Strait gas production from ExxonMobil and BHP will drop 26% next year, a drop of 86PJ - which is more than the Australian Energy Market Operator's projected east coast shortfall - to 244PJ.

 

An ExxonMobil spokesman said those lower levels would persist until 2020.

 

"We continue to assess opportunities to bring additional supply to the domestic market with our efforts focused on both near-term and longer-term supply," the spokesman said.

 

He added that the joint venture had invested $5.5 billion over the past 10 years to access more gas for domestic markets.

 

"While Esso and BHP supply a significant proportion of the eastern Australia marketplace, we only hold 5% of eastern Australia's high confidence gas reserves," he added.

 

The warning came just days after EnergyQuest CEO Dr Graeme Bethune told Energy News that depleting fields offshore Victoria and the Cooper Basin producing less at an annualised rate than it has in years showed the east coast was "not out of the woods yet".

 

This came despite Wood Mackenzie saying last week that it was "hard to justify the Australian Domestic Gas Security Mechanism for 2018" as it believes the swath of new supply announcements made by Santos and Origin Energy pushed the eastern Australian gas shortfall out until 2021.

 

Yet the Australian Energy Market Operator disputed that call yesterday, saying the east coast faced a shortfall of between 48-102PJ by 2019, when total projected domgas demand is expected to be about 598PJ, a fall from 642PJ in 2018.

 

"The results of AEMO's recent analysis and the ever-tighter integration of the electricity and gas markets, together with the increasingly dynamic character of Australia's energy system, suggest there is a need to look at reforms to improve predictability and stability in energy markets to the benefit of consumers," AEMO CEO Audrey Zibelman said.

 

She was positive on the gas producers, though, commending them for their "supportive and collaborative approach" throughout AEMO's ongoing consultations to date, and recommended the Commonwealth continue to engage them.

 

Zibelman noted that gas production and LNG gas demand were "very dynamic" and vary based on market conditions and contracting.

 

AEMO's latest forecast is more pessimistic about the supply-demand balance than its March 2017 forecast, and last year's which eased previous 2018 shortage predictions as Gladstone's LNG facilities had cut export forecasts amid low commodity prices. 

 

 

Australian Petroleum Production and Exploration Association CEO Dr Malcolm Roberts said his group needed to see more information to understand AEMO's forecasts.

 

As Energy News reported earlier this month following an interview with APA Group CEO Mick McCormack, Dr Roberts said industry had substantially increased the flow of gas to the domestic market, to which the ACCC said the LNG projects would contribute more gas to than "take out".

 

Thus Queensland is now meeting its domestic and export demand almost entirely from local supply, while its gas is being sold in southern markets. 

 

"Comparing [yesterday's] reports with AEMO's March 2017 Gas Statement of Opportunities shows that it is not a lack of gas production or demand for gas from the LNG projects producing the forecast shortfall - it is AEMO's forecast of sharp increases in demand from the electricity generation and industrial sectors," Dr Roberts said.

 

While AEMO is now predicting a dip of 58PJ in gas production next year, it is more than offset by a larger drop in demand for gas from the LNG projects (73 PJ). 

 

Yet AEMO is now forecasting two new demand scenarios - an "expected" scenario and an "uncertainty" scenario, with both forecasting surges in demand from the electricity generation and industrial sectors.

 

For electricity generation, AEMO forecasts as much as a 76% increase in demand.  

 

Dr Roberts said AEMO was clearly worried that wind, hydroelectric and coal generation output may fall, as a third of the shortfall in regulator's uncertainty scenario stems from concerns that wind and hydro-electricity production may be too low.  Another 10% or so stems from concerns of lower coal output.

 

Adding to that demand surge, AEMO is also forecasting a lift in demand from the industrial sector, all of which Dr Roberts said reinforced how vital it was for all governments to support developing new gas supplies as quickly and as cheaply as possible.  

 

"For its part, the gas industry is striving to lift production, often in the face of regulatory barriers and escalating costs," he said.  

 

"More gas supply and more gas suppliers is the only sustainable way to meet long-term demand and to put downward pressure on prices."

 

Prime Minister Malcolm Turnbull stepped up the pressure on New South Wales, Victoria and the Northern Territory to lift their drilling bans to ease market pressure.

 

Turnbull also encouraged the NSW government to support Santos' Narrabri CSG project.