AGL Employee

Hi @sunflower,


Unlike electricity in which we both generate and sell the power, AGL is not a significant producer of gas.  Therefore, we rely on buying gas in the national market from the major gas producers in Australia, such as ExxonMobil and BHP, to then sell this gas to our 1.4 million gas customers in the South Eastern states of Australia.


Gas is being exported by producers such as Shell, Origin and ENI (we have some minor shareholdings in gas producers) from Queensland and Western Australia and we do not have access to this gas.  Pipeline constraints prevent the gas being delivered from Queensland in amounts need to meet high winter demand and there is no pipeline from WA.  We have a regional demand imbalance not an overall gas shortage in Australia because the southern states relied on plentiful cheap gas from legacy gas fields in Bass Strait that are now in decline.  We need to import gas to meet the needs of the south eastern states.


A recent report[1] on the East Coast gas market by industry research firm Bloomberg New Energy Finance on the impact of liquefied natural gas (LNG) imports in Eastern Australia outlined the regional imbalance in the gas market:

“Demand for gas is just one part of the equation. The other is that cheap gas supplies from legacy gas fields are depleting fast. This has created regional gas supply and demand imbalances.

Most demand is concentrated in the south of Australia including Victoria, New South Wales and South Australia. These three states together accounted for three quarters of the domestic gas demand in eastern Australia, which reached 612 PJ (17 billion cubic metres (Bcm)) in 2017.

The legacy basins of gas supply, particularly in offshore Victoria, are depleting fast. These low-cost sources of gas were the fundamental reason for domestic gas prices being much lower than export netback prices in the past. New gas sources are largely in Queensland, more than 1,000km north of the demand centers.”


According to ExxonMobil, one of the Gippsland Basin’s large legacy fields has depleted earlier than expected, with another two fields expected to be depleted in the early 2020s.


In the longer term, the consultancy Energy Quest predicts gas production from Victoria’s offshore fields will fall by 57% in 2022 from the levels seen in 2017. It is not yet clear what the remaining smaller and new gas fields can deliver but this tightening supply situation is making it increasingly challenging for buyers of gas, like AGL, to secure the gas required to keep customers well supplied.


The Australian gas market is complex, but I hope this answered your question?


[1] Double Whammy of LNG Imports in Eastern Australia, BloombergNEF, December 19, 2018