QLD GOVT to recommission Swanbank E power station

A joint statement issued by Queensland Treasurer Curtis Pitt and Queensland Energy Minister Mark Bailey in early June announced that the Swanbank E Power Station (385 MW) would be recommissioned in the first quarter of 2018. Bringing the gas-powered station back online is part of a multi-faceted approach by the government to increase supply and reduce volatility in the energy market.

Stanwell Corporation withdrew Swanbank E from operation in late 2014 due to an over-supply of generation. Since then, Stanwell has been selling their gas to LNG exporters and the Brisbane Short Term Trading Market (STTM). Once back in operation Stanwell will no longer do this because the gas will be consumed by the power station. This will reduce the overall volumes sold to LNG exporters and the STTM. It is important to note that the Brisbane STTM is where gas powered generators buy gas from, particularly in periods of high electricity demand.

It will remain to be seen how effective the increased supply of electricity will be, considering the increased competition for gas in the Queensland market. If more gas becomes available from either increased gas production or government -imposed export restrictions, then we are likely to see prices and volatility reduce. Alternatively, the implications are likely to be modest if more gas isn’t made available.

PM Confirms Gas Export Restrictions

Gas Export Controls

The Prime Minister has this week announced he will take immediate action as part of his commitment to ensure a reliable and affordable energy supply for consumers.

Prime Minister Malcolm Turnbull, unveiled the Australian Domestic Gas Security Mechanism in April which allows the government to implement export controls and pass legislation as required to secure supply and put downward pressure on prices.

Mr Turnbull this week confirmed that gas export restrictions would be put in place from 1 January 2018.

The introduction of the LNG export market to Australia has created a complex situation where domestic gas consumers are paying more for gas than international buyers of the same product. The main driver behind this is the structure of the gas export contracts which are linked to the price of oil.

The specific mechanism that will be put in place by the government is yet to be determined and will need to be done carefully to ensure security of supply and fair treatment to consumers. Implications of intervention include; but won’t be limited to:

  •                 Reduced investment in upstream gas which will bring higher prices long term;
  •                 Uncertainty for domestic and international consumers;
  •                 Reduced gas prices not flowing through to the electricity prices.

The Federal government is currently in consultation with industry to understand how best to implement an export restriction.

PM announces measures to keep gas in Australia

The Prime Minister has today announced plans to impose export restrictions on gas producers to ensure domestic supply is maintained at reasonable prices.

The Turnbull Government unveiled their Australian Domestic Gas Security Mechanism which will give the government power to implement export controls where there is a shortfall of gas supply in the domestic market.

The shortage of gas supplies has resulted in higher prices domestically than the markets where gas is exported. The government wants to guarantee supply, and ensure gas prices are affordable for Australians.

Prime Minister, Malcolm Turnbull has met with gas producers in March and April to seek a commitment to increase supply to the domestic market. Although progress has been made, expectations have not been met.

The purpose of the Australian Domestic Gas Security Mechanism is to ensure supply always meets forecast domestic requirements which will put downward pressure on retail prices.

There will be an adequacy test which will compare how much an exporter draws on the domestic market with usage from their own tenement. If they draw more from the market than they put in, they must explain how they will fill any domestic shortfalls as part of their overall production and exports. Failing this, the Minister for Resources will order them to limit their export.

Although the government remains committed to LNG exports, it will not support a position that affects jobs and Australian interests.

The government expects this to be a temporary measure to restore certainty to the market.

Regulations are expected to be in place by 1 July 2017, after full industry consultation.

The government’s statement can be viewed at http://www.pm.gov.au/media/2017-04-27/delivering-affordable-gas-all-australians