Australian Energy Market Operator says eastern and south-eastern states could face even higher energy prices and a falling gas supply

This article is more than 2 years old

This article is more than 2 years old

Australia’s eastern states face an energy shortfall three times higher than forecast, with gas supply predicted to fall well short of what is needed unless action is taken, potentially meaning further export controls.

The Australian Energy Market Operator has reported next year’s gas supply shortfall could be “higher than expected” which could lead to even higher energy prices for eastern and south-eastern Australia, particularly for industry, which accounts for almost 40% of gas usage.

The Australian Competition and Consumer Commission also warned of a coming shortfall.

The government has a mechanism which would keep more gas onshore for domestic use and earlier this year started the process to enact it.

Labor has been calling on the government to start it up, but although the prime minister, Malcolm Turnbull, said it was “ready to go”, the government needed to make sure it was “fit for purpose”.

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“It is a process of careful consultation,” Turnbull said on Monday. “Had we made a determination a week ago, we would have done so on the basis of information which was inaccurate.

“If we are not able to receive the assurances from the industry to our satisfaction and that of the ACCC, then we will impose those export controls.”

Turnbull said states with a moratorium on gas exploration “have failed” and it was “one of the biggest long-term problems”.

In a statement which accompanied its report, Aemo’s chief executive, Audrey Zibelman, said: “Projections of aggregated gas production and LNG gas demand vary, based on market conditions and contracting, indicating a dynamic situation that can change rapidly and warrants continued close attention and monitoring.”

Turnbull said he had spoken to the gas export companies on Monday morning and said “they’ve indicated that they’re committed to ensuring [a shortage] does not occur too”.

“We want to see a plan from them, we want to see a commitment, then we want to be satisfied that it meets the requirements of the ACCC,” he said.

“This is all part of the process that we set out when we set up the gas security mechanism at the beginning of the year.”

Labor has repeatedly called on the government to pull the trigger to enact the export control mechanism but Turnbull said that proved “they have no idea how the mechanism works”.

“They haven’t bothered to get into that sort of detail, too much hard work I suspect,” he said. “The process is going exactly as we planned it to.”

The government has until 1 November to enact the mechanism, which would come into effect on 1 January.