Despite massive reserves, Australia may need to import natural gas
Three years ago, AGL Energy warned of the dramatic imbalance between Australia’s LNG export commitments and inadequate domestic supply. Today, AGL is assessing the merits of building a gas import facility. That’s right. Australia, with some of the world’s largest natural gas reserves, may soon need to import gas for domestic consumption. How has it come to this?
We have covered this significant market inefficiency extensively (see here, here and here). In a nutshell, at the height of the GFC, Australia approved the construction of three major LNG terminals on the east coast and committed to service long-term offshore contracts. These terminals are now operational, yet the export commitments are depleting our domestic access to gas.
Meanwhile, there is a glut of natural gas internationally as Asian, American and Middle Eastern nations have increased production alongside Australia. This means cheap gas offshore but expensive gas onshore.
Australia’s energy system is ill-equipped to deal with this domestic gas shortage and it will take years to remedy the inadequate infrastructure connecting the states.
AGL Energy, one of Australia’s largest generators and retailers of gas, may now be forced to spend $300 million on a gas import facility.
The perfect storm has arrived and we are starting to feel its effects. Unfortunately, we ain’t seen nothing yet.
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