Formal advice of a three-year reprieve on gas shortages expected to hit south-eastern states has been seized on by anti-fossil fuel activists of evidence there’s no need for AGL Energy’s proposed LNG import terminal in Victoria just days before a state government decision on whether the project can proceed.

The Australian Energy Market Operator said in its annual outlook for the east coast gas market, released on Monday, that the LNG import terminal being developed by mining billionaire Andrew Forrest in Port Kembla meant gas shouldn’t become scarce in Victoria and NSW until 2026.

It also highlighted uncertainty at the long-term outlook for gas usage, with industrial demand expected to be flat or decline in the next 20 years while gas use in power generation is expected to decline. Meanwhile, a scenario where the production of hydrogen became economic could see overall demand for gas on the east coast dive by up to 20 per cent by 2040.

Environment Victoria, a staunch opponent of AGL’s Crib Point import terminal in Westernport Bay, said AEMO’s assessment gave time to reduce gas usage and head off the need for the import project. Other pressure groups said the findings showed there was no need for the Morrison government to use taxpayer money to open up new gas fields and support gas infrastructure.

But prospective LNG importers argued that AEMO’s assessment supports the need for their projects.

AEMO’s Gas Statement of Opportunities confirms that supply gaps in the eastern and south-eastern Australian states from 2023 are imminent unless additional southern reserves and resources, or alternative infrastructure, are developed,” said a spokeswoman for AGL, which is developing Crib Point with pipeliner APA Group.

“AGL and APA’s proposed gas import terminal is well located to deliver gas into markets in Victoria, South Australia and New South Wales, the households and businesses most at risk of gas supply shortfalls in advance of this deadline, reconfirming the role the terminal is designed to play in the market.”

A decision on whether the Victorian state government will grant planning approval for Crib Point is due within days.

Oil refiner Viva Energy also stood by its LNG import project at Geelong.

“The AEMO report … continues to highlight the need for more gas in south-eastern Australia in the future,” a spokesman said.

“Viva Energy believes that the development of a gas import terminal at our refinery in Geelong remains the most efficient solution to filling this need into the future.”

The APPEA lobby group representing gas producers also highlighted AEMO’s finding that additional supply is still needed, with chief executive Andrew McConville calling for policy certainty to provide confidence for investment in projects.

Still, Australian Industry Group principal policy adviser Tennant Reed said that while the AEMO report showed a real risk of supply falling short of demand in the near term, the significant uncertainty over demand would likely make it hard for LNG import terminal ventures and other developers to get confidence about customer demand for their projects.

He also pointed to work by the Victorian and NSW governments on energy efficiency that had improved the supply-demand balance outlook for the next few years and said there was still significant potential in buildings, homes and businesses “to get more value out of each unit of gas used and to be less exposed to the price of gas”.

The debate come as gas buyers are gearing up to resume their battle with east coast producers over a code of conduct that the federal government requested to give buyers more power to negotiate affordable prices in supply contracts.

After weeks of delays, which led to a public reprimand last week by competition chief Rod Sims, APPEA passed a draft version of the code to major customer groups last Friday. But while buyers are yet to respond, sources said the proposal fell drastically short of what they needed and what the federal government promised when it announced the code in September.

Federal Energy Minister Angus Taylor has threatened to impose a mandatory code on producers in the absence of a consensus between buyers and sellers, raising fears among producers of a government-controlled price for gas.

Extracted in full from: AEMO gas findings reignite battle over LNG imports (