(Bloomberg) -- The lopsidedness of Australia’s fossil fuel endowment and demographic spread, coupled with insufficient infrastructure, means one of the world’s biggest exporters of liquefied natural gas will soon have to import the fuel.
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Eastern Australia is facing an energy shortfall as older offshore gas fields are depleted, according to Rystad Energy. There’s limited pipeline capacity to ship LNG thousands of miles from major production hubs in the northwest of the country, and the grid operator has repeatedly warned of potential shortages in the populous southeast as soon as 2027.
New South Wales, Victoria and Tasmania are already “testing their gas supply security for winter,” Kaushal Ramesh, Rystad Energy’s vice president for gas & LNG research, said in a note. That risks a repeat of an energy crunch three years ago, he said.
“Compared to the crisis year of 2022, these states now have severely diminished buffer capacity, which could trigger another price surge if multiple supply and demand shocks occur,” Ramesh said. “Even in our most optimistic scenario, LNG imports to Australia are looking like an inevitability.”
Energy policy is likely to take center stage in elections due by mid-May, where the ruling Labor party’s target to generate 82% of electricity from renewables will face off against the opposition’s pledge to build nuclear reactors, the research group said.
The Victorian government will push for the Australian Energy Market Operator to become an anchor buyer of LNG at a meeting of state and federal energy ministers on Friday, according to a report Monday in The Australian newspaper. Companies including billionaire Andrew Forrest’s Squadron Energy, Viva Energy Group and Royal Vopak NV have proposed LNG import terminals.
Australia would not be the first gas exporter that would need to turn to imports, although countries including Egypt and Indonesia have mainly needed to do so to meet increasing domestic demand caused by rapid population growth.
“It is ridiculous that one of the world’s largest gas exporters is looking to import gas,” said Saul Kavonic, an energy analyst at MST Marquee. “There is still ample gas in Queensland, where the LNG export projects are, but pipeline and storage constraints can still limit gas capacity in the southern states when it is suddenly needed.”