18 May 2020

Key messages

AEMO forecast a supply shortfall in Victoria to take effect from around 2023. To help mitigate this:

  • Opportunities exist to expand APA’s East Coast Grid, to transport established gas reserves located in northern Australia
  • APA has proactively engaged with market participants exploring frontier resources in the Northern Territory, Queensland, Victoria and New South Wales

East Coast supply shortfall

APA, a majority Australian owned and operated business, has conducted a review of the 2020 Gas Statement of Opportunities (2020 GSOO), produced by the Australian Energy Market Operator (AEMO), and concurs with AEMO’s findings that the gas supply/demand balance on the east coast remains tight, with gas production in Victoria continuing to decline.  Specifically:

  • AEMO and other gas market analysts are forecasting a supply shortfall in Victoria to take effect from around 2023, and agrees that there are risks that weather-driven variances in consumption or electricity market activity could create winter peak-day shortages prior to then;
  • production from southern gas fields (principally Gippsland and Otway) will decline in the short to medium term, with reserve estimates reducing and producers are either writing down resources or failing to replace production; and
  • Absent any proposed LNG Import Facility or material development in the south, there will be more reliance on supplies from Queensland and the Cooper Basin to meet New South Wales, South Australian and Victorian gas demand.

In response to the forecast shortfall, APA has proactively engaged with market participants to mitigate the risk of supply shortfalls to the southern states and has developed its growth strategy with these issues front of mind.

Expansion of the East Coast Grid

As noted within the 2020 GSOO (section 5.4.2), APA has investigated expansion of the East Coast Grid, principally involving the Moomba Sydney Pipeline system (MSP) and South West Queensland Pipeline (SWQP), to provide the market with additional capacity through the staged installation of compression facilities.  Both of these pipelines are currently only lightly compressed which makes compression for the next stages of expansion, more economic and less intrusive for landholders than looping or building new pipelines.  Expansion through compression is also better suited to seasonal demand profiles as the compressors only need to operate during peak periods.  APA’s expansion options have been developed further, since originally communicated to AEMO, with potential for:

  • SWQP to provide additional westernhaul capacity of ~200TJ per day;
  • MSP to provide additional southernhaul capacity of ~225TJ per day to Sydney; and
  • MSP to provide additional southernhaul capacity of ~200TJ per day to Melbourne.

In addition to the uncontracted capacity now available – note that a 36-month outlook is reported on through APA’s website - APA’s expectation is that additional transportation capacity could be brought to market 18 months from FID.

It is also noted that AEMO, within the Victorian Planning document referenced in the 2020 GSOO, has flagged expansion of APA’s South West Pipeline, running from Port Campbell to Melbourne, as a project that could improve the future annual supply balance in Victoria.  As has always been the case, APA will investigate and assess any opportunity to expand and/or extend our existing network as required by the market.

Development of current and prospective gas fields

AEMO has indicated that, beyond 2023 and more drastically beyond 2032, the market will need to look beyond legacy fields to new sources to meet domestic gas demand.  In addition to the recent development of the Orbost Gas Processing Facility, APA has been working closely with a number of producers exploring frontier resources in the Beetaloo/McArthur (Northern Territory), Gallilee/Bowen (Queensland) and Gunnedah (i.e. Narrabri Gas Project, New South Wales) basins.  Pipelines from these basins would have the potential to connect to APA’s East Coast Grid through existing hubs at Moomba or Wallumbilla, or directly to the MSP/SWQP to further justify the above mentioned capacity expansion.

LNG import facilities

APA is engaged with the proponents and potential shippers of the proposed LNG import terminals at Port Kembla (New South Wales) and Crib Point (Victoria).  Both projects have the potential to supply up to 550TJ/d of gas to the domestic market, connecting to the MSP at Wilton, and the Victorian Transmission System at Packenham respectively.  Where possible, given the location of both pipelines is close to major demand hubs, APA’s proposals envisage connections to new power generation projects as well as regional and interstate markets.

We encourage interested parties to contact Craig Stallan (Acting Group Executive, Strategy & Commercial) to explore potential opportunities where APA can assist in mitigating the forecast supply shortfall.