Australia’s ACCC forecasts slim gas surplus for Jul-Sep

Market: Natural gas
05/04/24

Australia's east coast gas market will likely experience a small surplus for this year's third quarter, forecasts the Australian Competition and Consumer Commission (ACCC), with Queensland state driving increased supplies in the country's largest domestic gas market.

The region, which includes four of Australia's five major state capitals, will have a 6PJ (160mn m³) surplus during July-September, according to the ACCC's March 2024 interim gas inquiry report, with 510PJ of supplies compared with 504PJ of demand. This is mainly because of Queensland's 30PJ surplus and accounting for the unlikely possibility that the state's three LNG projects export all uncontracted gas.

The July-September supply and demand balance is an 11PJ increase since the ACCC's December 2023 report when a 5PJ shortfall was projected. The 156PJ required in the east coast market for the quarter means it remains the highest demand period but is 11pc lower than actual demand in July-September 2023.

LNG export demand for third quarter of 2024 is predicted to have increased by 13PJ since December 2023 to 310PJ, despite the 7.8mn t/yr, two train Gladstone LNG taking the equivalent of half a train off line in early July and one full train off line in the second half of July and early August. This is likely because of lower scheduled downtime at the Shell-operated 8.5mn t/yr Queensland-Curtis LNG compared with 2023.

But the ACCC cautioned that the outlook is subject to some uncertainty in supplies and demand, pointing to February storms in Victoria state that saw coal-fired power outages that raised demand for gas-fired power generation. The report's forecast is largely reliant on a 13PJ lower demand for gas-fired generation in the quarter.

The southern states of Victoria, New South Wales, South Australia and Tasmania are forecast to experience a 25PJ gas shortfall, although demand should be met by a combination of capacity in storage and pipelines running south, the ACCC said.

The Bureau of Meteorology's (BoM) latest climate driver forecast indicates the El Nino weather pattern is decaying and neutral climate drivers are expected by May. While four of seven international models are predicting a La Nina, which brings colder, wetter weather to east Australia, by the end of the southern winter, early autumn predictions are historically the least accurate, the BoM said on 2 April.

By Tom Major

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With current targets set for 2030, just five years away, there's insufficient support for long-term investments. The EU's legislative cycle is fixed, so expectations for changes are low. Therefore, it's crucial that member states take initiative and extend their targets beyond 2030, potentially up to 2035, even if not mandated by the EU. Some member states might do so, recognising the need for longer-term targets to encourage the necessary capital expenditure for the energy transition. Do you see different interpretations in mass balancing, GHG accounting and subsidies? Interpretations of the rules around ‘mass-balancing', greenhouse gas (GHG) emissions accounting and the usability of subsidised biomethane [for different fuel blending mandates] vary across EU member states, leading to challenges in creating a cohesive internal market. When it comes to mass-balancing, the challenges arise in trying to apply mass balance rules for liquids, which often have a physically traceable flow, to gas molecules in the interconnected European grid. Once biomethane is injected, physical verification becomes impossible, necessitating different rules than those for liquids moving around in segregated batches. The EU mandates that sustainability verification of biomethane occurs at the production point and requires mechanisms to prevent double counting and verification of biomethane transactions. However, some member states resist adapting these rules for gases, insisting on physical traceability similar to that of liquids. This resistance may stem from protectionist motives or political agendas, but ultimately it results in non-adherence to EU rules and breaches of European legislation. The issue with GHG accounting often stems from member states' differing interpretations of the IPCC Guidelines for National Greenhouse Gas Inventories. Some states, like the Netherlands, argue that mass balance is an administrative method, which the guidelines supposedly exclude. Mass balancing involves rigorous verification by auditors and certifying bodies, ensuring a robust accounting system that is distinct from book and claim methods. This distinction is crucial because mass balance is based on verifying that traded molecules of biomethane are always accompanied by proofs of sustainability that are not a separately tradeable object. In fact, mass balancing provides a verifiable and accountable method that is perfectly aligned with UN guidelines and ensuring accurate GHG accounting. The issue related to the use of subsidised volumes of biomethane is highly political. Member states often argue that if they provide financial support — directly through subsidies or indirectly through suppliers' quotas — they should remain in control of the entire value chain. For example, if a member state gives feed-in tariffs to biomethane production, it may want to block exports of these volumes. Conversely, if a member state imposes a quota to gas suppliers, it may require this to be fulfilled with domestic biomethane production. No other commodity — not even football players — is subject to similar restrictions to export and/or imports only because subsidies are involved. This protectionist approach creates barriers to internal trade within the EU, hindering the development of a unified biomethane market and limiting the potential for growth and decarbonisation across the region. The Netherlands next year will implement two significant pieces of legislation — a green supply obligation for gas suppliers and a RED III transposition. The Dutch approach combines GHG accounting arguments with a rejection of EU mass-balance rules, essentially prohibiting biomethane imports unless physically segregated as bio-LNG or bio-CNG. This requirement contradicts EU law, as highlighted by the EU Commission's recent detailed opinion to the Netherlands . France's upcoming blending and green gas obligation, effective in 2026, mandates satisfaction through French production only. Similarly, the Czech Republic recently enacted a law prohibiting the export of some subsidised biomethane . Italy's transport system, while effective nationally, disregards EU mass balance rules. These cases indicate a deeper political disconnect and highlight the need for better alignment and communication within the EU. We know you've been getting a lot of questions around whether subsidised bio-LNG is eligible under FuelEU. What have your findings been? The eligibility of subsidised bio-LNG under FuelEU has been a topic of considerable enquiry. We've sought clarity from the European Commission, as this issue intersects multiple regulatory and legal frameworks. Initially, we interpreted EU law principles, which discourage double support, to mean that FuelEU, being a quota system, would qualify as a support scheme under Article 2's definition, equating quota systems with subsidies. However, a commission representative has publicly stated that FuelEU does not constitute a support scheme and thus is not subject to this interpretation. On this basis, FuelEU would not differentiate between subsidised and unsubsidised bio-LNG. A similar rationale applies to the Emissions Trading System, which, while not a quota obligation, has been deemed to not be a support scheme. Despite these clarifications, the use of subsidised biomethane across Europe remains an area requiring further elucidation from European institutions. It is not without risks, and stakeholders require more definitive guidance to navigate the regulatory landscape effectively. By Emma Tribe and Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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