Page 10 - GLNG Week 24 2022

GLNG COMMENTARY GLNG

Australia grapples with

worsening gas shortage

COMMMENTARY AUSTRALIA is facing a worsening natural gas of jobs at risk if energy-intensive businesses are
shortage, with the country’s newly elected Labor forced to shut. While many businesses buy their
government immediately finding itself under gas via cheaper long-term contracts, there is still
pressure to take action to alleviate the crisis. considerable uncertainty to contend with after
Indeed, last week new Australian Minister for those contracts expire, unless the country is able
Energy Chris Bowen pledged to take action to to bring down prices.
ensure that energy supply remains affordable There are other businesses that are heavily
and reliable amid what he described as a “perfect exposed to the spot market, though. Last week,
storm” for the country’s energy market. ABC News cited the example of Australia’s larg-
Also last week, the Australian Energy Market est plastics producer, Qenos, which buys about
Operator (AEMO) capped wholesale gas prices 40% of its gas on the open market.
in southern states and activated the Gas Supply “Prices have gone up in the spot market to
Guarantee mechanism for the first time since it between $30 and $40 a gigajoule [$788-1,051
was introduced in 2017. This came as heating per 1,000 cubic metres]. In fact, that’s in a month
demand spiked amid a cold snap, and will see the alone, that’s an increase of 300-400%,” Qenos’
gas industry work with the regulator to ensure CEO, Steve Bell, was quoted by the news service
peak demand for gas can be met. as saying. “For energy-intensive businesses like
ours that is not sustainable.”
Gas crisis
Resolving the crisis will not be quick or easy, Drastic action
however, and more drastic measures may be With no end to the gas crisis in sight, Aus-
required. Gas prices on the spot market have tralia’s new government appears likely to
quadrupled amid supply constraints, outages come under growing pressure to trigger the
at Australian coal-fired power plants and global domestic gas security mechanism. This
events, most notably the war in Ukraine, which would allow the government to impose
has put strong upward pressure on commodity LNG export restrictions, requiring Austral-
prices and upended energy trade flows. ia’s producers of the super-chilled fuel to
This makes things more difficult for busi- hold back some of their volumes for the
nesses and individuals alike. Australian man- domestic market.
ufacturers have warned that their operations However, Bowen warned that triggering the
could be affected by the increase in natural gas mechanism was not a short-term answer to the
prices. This puts potentially tens of thousands current supply crunch, because it would not be

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