Page 4 - AsianOil Week 23 2022

AsianOil COMMENTARY AsianOil

Australia grapples with

worsening gas shortage

Australia’s new government has pledged to tackle

a worsening gas shortage, which has considerable

implications for the country’s LNG industry

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

P4 www. NEWSBASE .com Week 23 10•June•2022