A new gas import terminal could help Australia avoid a looming gas shortage. 

The Australian Energy Market Operator has issued its latest Gas Statement of Opportunities report, which looks at a range of demand and supply scenarios from now to 2040.

It says there has been a faster-than-expected output drop in the ageing Bass Strait gas fields, creating a risk of near-term gas shortages in south-eastern Australia. 

But the report finds that if the Port Kembla Gas Terminal near Wollongong becomes operational before the 2023 winter, the threat of a gas gap would be pushed back by three years.

Until then, it warns that a demand spike in a one-in-20-year extreme cold snap could squeeze supplies and create a shortage. 

Over time, the drop in legacy gasfields in Bass Strait looks like it will be made up by increased output from Moomba in South Australia and Victoria’s Port Campbell gasfield. 

However, AEMO says Victoria will still rely on gas imports from other states “to cover its winter demands for heating in future”.

“Our annual analysis shows that without the Port Kembla Gas Terminal, the decline in flexible gas from existing fields would mean we need to rely heavily on storage, and increasingly on constrained pipeline infrastructure to meet the needs of gas consumers, especially during high demand days in winter,” says Nicola Falcon, AEMO’s group manager for forecasting.

Australia is one of the world’s biggest gas exporters, but long-term contracts signed over the last decade has led to a shortage of domestic supplies.

AEMO also expected the use of gas to generate electricity will decline as renewable energy supplies expand. Already, the 127 petajoules of gas power generation in 2020 was about a quarter less than 2019 levels; the lowest in more than a decade.

The report claims that the federal government’s so-called ‘gas-led recovery from COVID-19’ will mostly be filled by new supply sources. However, this assumption includes the $3 billion Narrabri gasfield in northern NSW, which owner Santos is yet to finally commit to.