Australia reaches gas supply deals for East Coast energy markets

The Australian government announced on Monday that it had reached new gas supply agreements for its East Coast energy market, to reduce long-term supply gaps as the nation rapidly shifts itself off of coal-fired power plants, Reuters reported on Monday.

Chris Bowen, Australian Energy Minister announced that Woodside and Exxon Mobil’s Esso unit would make two new, legally binding agreements with the government to supply more than 260 petajoules (PJ) of gas through 2033 per the gas code.

A price cap of A$12 ($8) per gigajoule of natural gas was extended by Australia last year, at least until mid-2025. However, the rule was loosened for large producers provided they agreed to domestic supply commitments for the eastern region of the country.

“Gas is critical to supporting a lower-cost, more renewable grid as aging coal exits, and to support Australian manufacturing,” Bowen stated.

The supply agreements, which will power gas-fired power plants on the East Coast for about 2.5 years, will directly feed the stations that were previously identified as being particularly impacted by seasonal shortages, according to Bowen. He further added that the agreements would guarantee a sufficient domestic supply to maintain price pressure.

In March, Australia’s energy market operator stated that the nation needed to secure more commitments to increase its domestic gas supply as it was at risk of long-term supply gaps.

Despite producing more gas than it needs for domestic consumption, the majority of Australia’s supply is reserved for export.

Gas is a vital component in the shift to cleaner energy, according to the Labor government, which wants 82 per cent of power to come from renewable sources by 2030.

The most recent pledges come after agreements made in November 2023 to supply up to 300 PJ of gas until 2030 with Australia Pacific LNG (APLNG) and Senex Energy, which is owned by Posco International of South Korea. Sinopec, Origin Energy, and ConocoPhillips jointly own APLNG.

($1 = 1.5168 Australian dollars)