Domestic gas shortage may be worse than predicted

The Australian Energy Market Operator (AEMO) has admitted that its gas reserve projections are based on optimistic supply assumptions, raising the prospect that Australia's looming domestic gas shortage could be more severe than forecast, according to The Australian.

The market advisory body has conceded that its projections do not take into account the growing resistance among farmers and landowners to grant gas companies access to their lands, limiting companies' ability to tap reserves.

"Reserve estimates do not consider landholder access issues,” a spokeswoman for AEMO said, according to The Australian. "Reserve projections consider that reserve development will occur maintaining a 15-year reserves-to-production ratio, where production is allocated on a least-cost basis.”

The activist group Lock the Gate has said that as many as 40 per cent of landholders in southeast Queensland have refused gas companies' access to their lands, the newspaper noted.

In December the AEMO issued a report foreshadowing a continued rise in domestic gas prices on the east coast because liquefied natural gas (LNG) exports were set to jump.

The lack of domestic supply has caused industry users of gas to see their gas costs jump more than 100 per cent in the past year. Prices are expected to climb higher, though the extent of the looming jump in prices is difficult to predict.

To add to the uncertainty, coal-seam gas companies preparing to target export markets have refused to reveal how much gas they have available for the domestic market, The Australian added.