Australia faces ‘perfect storm’ over gas supply as minister warns problem won’t be resolved soon


The new energy minister has warned that Australia is on the brink of a gas crisis and the problem will not be resolved soon.

On his first day as Minister for Climate Change and Energy, Chris Bowen left all options on the table to reduce the rising cost of gas and electricity, including a ‘gas trigger’ controversial to requisition gas supplies for export.

“We must act and we are acting,” he promised gas users during his first press conference.

Australia’s energy market operator has activated the gas supply guarantee, which will see the gas industry work with the regulator to ensure peak gas demand can be met.

This follows a cap of $40 per gigajoule imposed in some states, following the spike in wholesale prices.

Mr Bowen noted that the decision to pull the gas trigger was up to the Resources Minister but that it would not have an immediate impact anyway, downplaying suggestions it could be used to solve the crisis .

The current cold spell in southeastern Australia and the collapse of a gas supplier last week have seen spot gas prices soar.

Prices were already high due to increased international demand as nations around the world weaned off Russian gas and coal.

Problems with some coal-fired power plants in Australia have also contributed to pressure on domestic gas prices.

“Australian energy markets are facing a perfect storm,” Mr Bowen said.

“There are a number of factors at play in relation to the very serious and difficult situation with the electricity supply, and in particular the gas supply.

The “Gas trigger” will not come into force until next year

The federal government has the power to compel exporters to keep more gas ashore for domestic use, under the Australian Domestic Gas Security Mechanism (ADGSM), known as the gas trigger.

Resources Minister Madeleine King is talking to gas companies today to urge them to make additional supply available.

Mr Bowen said he would not rule out the use of the gas trigger, but pointed to myriad problems with the mechanism.

“It can only come into effect on January 1, even if it were withdrawn today. It’s not a short-term answer,” he said.

He also noted that it requires lengthy consultations and can only be used when there are supply shortages predicted for an upcoming year.

“It’s not [a policy] designed to deal with the current crisis,” he said.

‘More renewables’ will ease pressure, but not anytime soon: Bowen

Labor was elected with a far-reaching policy to accelerate the switch to renewables, which Mr Bowen said was the best solution to tackling price issues.

But he acknowledges that most of these policies would not help in the short term.

“The previous government didn’t do the work to increase renewables, to increase storage,” he said.

“If we had more storage and more renewables and better transmission, we would be in a much better position to deal with today’s challenges.”

Commonwealth, state and territory energy ministers will meet early next week to discuss other policy options to mitigate price rises this winter.

The Australian Petroleum Production and Exploration Association, which represents gas exporters, said it would work with the regulator.

“We understand that current spot prices, which represent only 10-15% of the industrial gas market, are under pressure,” said interim chief executive Damian Dwyer.

“We emphasize that the majority of manufacturers are unaffected as they have long-term contracts that not long ago were offered for this year at price levels of around $6/GJ to $9 $/GJ.”


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