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AEMO calls for urgent investment increase as east coast gas crisis looms

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By Colin Hay - 
AEMO Australian Energy Market Operator investment increase east coast gas crisis

The energy industry has again called for more investment to be made into the east coast gas market after a new report highlighted the potential for significant looming shortages.

Industry lobby group Australian Energy Producers (AEP) warned that gas generators “may soon burn diesel” at extra cost and emissions to plug energy shortages unless new gas supply is developed.

The warning came after energy watchdog the Australian Energy Market Operator (AEMO) in suggested its Gas Statement of Opportunities that new investment was urgently needed to meet demand from homes and businesses as well as for use in gas-powered electricity generation.

Peak-day shortfalls

AEP chief executive Samantha McCulloch said the latest AEMO report highlighted the risks of peak-day shortfalls on some days under extreme winter conditions from 2025, the potential for seasonal supply gaps from 2026 in southern states and structural shortfalls from 2028.

“The warning bells are getting louder as report after report forecasts gas shortfalls and exposes the urgent need for new east coast gas supply,” Ms McCulloch said.

“How many warnings will it take before governments act to enable the urgent development of gas supplies?

“The policy failure is underscored when diesel, a higher-emitting and more expensive fuel, may be needed for electricity because governments have stifled new gas projects with approval delays and compounding interventions.”

Important role

Ms McCulloch said AEMO had reaffirmed the important role gas-powered electricity generation plays in reducing emissions and ensuring electricity reliability as a back-up to renewables and as coal retires.

“If gas supply from 2028 is to keep up with demand from homes and businesses, particularly for gas-powered electricity generation, then new investment is needed,” she said.

AEMO’s 2024 Victorian Gas Planning Report Update also found Australia’s biggest gas-consuming state is facing peak-day gas shortages from next year and supply forecasts have worsened as a result of investment uncertainty and project delays.

The watchdog’s chief executive officer Daniel Westerman says gas production is forecast to fall faster than demand in the south, driven by declining production from Bass Strait, which has historically supplied around two-thirds of southern Australia’s gas.

Juniors stepping up

A number of junior Australian oil and gas companies have already started doing their part to help fill the gas demand gap.

Blue Energy

In Queensland, Blue Energy (ASX: BLU) has made significant progress with its development and marketing activities in the Bowen Basin.

Blue recently signed a non-binding heads of agreement (HoA) with leading Australian energy utility AGL Energy (ASX: AGL).

The HoA is a further foundation gas volume that will contribute to the underpinning of the proposed gas pipeline from the North Bowen Basin into the Wallumbilla “hub” and for the development of Blue Energy’s gas resources and the broader North Bowen Basin in general.

The HoA is for the supply of up to 300 petajoules of gas deliverable at Wallumbilla over ten years from Blue Energy’s Northern Bowen Basin ATP814 coal seam gas licence in Queensland.

Blue Energy’s 100%-owned ATP814 permit has been independently assessed to contain more than 3,619PJ of recoverable gas.

Blue also currently has an additional 91PJ of proved plus probable reserves and 293PJ of proved plus probable plus possible reserves in close proximity to existing gas field infrastructure in the North Bowen Basin.

Vintage Energy

Further to the south, Vintage Energy (ASX: VEN) is looking to increase its level of gas production into the east coast grid.

Formed specifically to help add to the energy-hungry markets on the east coast, Vintage has had instant success in bringing its Odin and Vali gas fields online in 2023.

Now the company is preparing to drill new wells in the Cooper Basin to significantly lift its gas production from the Odin field in particular.

Vintage recorded a 96% increase in sales revenue for the December quarter, boosted by input from its Odin field in the South Australian section of the Cooper Basin.

Odin-1 – the only well in the field – is currently supplying into an attractive gas sales agreement and Vintage is evaluating opportunities to better leverage the field’s capabilities.

BPH Energy

In NSW, BPH Energy (ASX: BPH) is vowing the PEP-11 permit joint venture (JV) will fight on with its plans to develop a potentially very large gas asset off the coast.

BPH, a 36%-interest holder in unlisted PEP-11 permit operator Advent Energy, has told the market that there are questions over whether a new NSW government Bill banning offshore oil and gas activities will stand up legally as its oil and permit actually sits in waters that come under commonwealth jurisdiction.

The PEP-11 JV is currently waiting on a commonwealth decision on an extension and variation applications covering permit to allow them to drill the Seablue 1 gas well on the large Baleen prospect.

Advent is already in discussions with offshore drilling operators about the potential to lease a rig for a proposed exploration campaign.