26 Feb 2014

Concern about security of gas supplies in NSW is justified. However, household gas supplies are likely to be unaffected. Most of the impact in terms of physical supply and pricing will be felt by large energy-intensive businesses.

Gas that was once available from the Cooper Basin is almost certainly going to flow north into Queensland and into the large LNG export trains. So unless NSW begins producing more gas within its borders, it will effectively become reliant upon a single source of supply – Victoria.

There are a number of problems associated with relying solely upon Victoria. The Eastern Gas Pipeline which brings gas from Victoria does not have sufficient capacity to meet winter ”peak demand” for heating even with the recently announced expansions to the alternative pipeline known as the Culcairn interconnect. Having a single source of supply raises significant security of supply issues.

Unless more gas is produced in NSW, there are likely to be times in winter where supply is curtailed because of shortages. If this occurs, regulations dictate that gas is likely to be ”turned off” for large industrial users before households and essential services. So if there are gas shortages, businesses, rather than households, will face disruption.

This is a guest blog by Tim Nelson, Head of Economics, Policy and Sustainability at AGL Energy.