Australia Secures New Gas Supply Deals to Address Energy Transition Challenges

The Australian government, in its pursuit of transitioning away from coal-fired power plants, announced on Monday the establishment of fresh gas supply agreements for the East Coast energy market, aiming to alleviate potential long-term supply shortages, as reported by Reuters.

Australian Energy Minister Chris Bowen disclosed that Woodside and Exxon Mobil’s Esso unit have entered into two new legally binding agreements with the government, committing to supply over 260 petajoules (PJ) of gas until 2033, in accordance with the gas code.

Australia extended a price cap of A$12 ($8) per gigajoule of natural gas last year, set to persist until mid-2025. However, this rule was relaxed for major producers, subject to their agreement to domestic supply commitments for the eastern region of the country.

Bowen emphasized the critical role of gas in supporting a cost-effective transition to a more renewable energy grid and sustaining Australian manufacturing, especially as aging coal facilities phase out.

The supply agreements, powering gas-fired power plants on the East Coast for approximately 2.5 years, will directly supply stations previously identified as susceptible to seasonal shortages. Bowen assured that these agreements would ensure adequate domestic supply, maintaining pressure on prices.

In March, Australia’s energy market operator highlighted the need for additional commitments to enhance domestic gas supply, recognizing the risk of prolonged supply gaps despite the nation’s gas surplus over domestic consumption.

While Australia produces more gas than required for domestic use, the majority is allocated for export. The Labor government emphasizes the significance of gas in the transition to cleaner energy, targeting 82% of power from renewable sources by 2030.

These recent commitments follow November 2023 agreements with Australia Pacific LNG (APLNG) and Senex Energy, aimed at supplying up to 300 PJ of gas until 2030. APLNG is jointly owned by Sinopec, Origin Energy, and ConocoPhillips.

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