The 660 megawatt, gas-fired peaking plant was built between 2007 and 2009 by the State Labor government via Delta Electricity when the outlook for the fuel in power generation was at its peak of local optimism.
As Colongra was commissioned, one of five substantial gas plants built in Australia in this period, the energy industry was projecting that national demand for the fuel would double in 15 years, helped along by a tripling in its consumption by generators.
The Labor government approved $500 million being spent on Colongra “” John Robertson was the energy minister who launched it in 2009 “” and this week Snowy Hydro paid the Baird Coalition government $234 million for it, reflecting the over-supplied state of the east coast electricity market and the fact that peak power demand has not followed the trajectory expected at the start of this decade.
Meanwhile today’s generation demand for gas is 80 per cent of actual consumption in 2009 and the 15-year outlook is not much better than a quarter of what it was in 2009.
All of which goes to underscore why registrations are flowing in steadily for the third Quest Events Australian Domestic Gas Outlook conference, which I am co-chairing, to be held in Sydney from 24 to 26 March, just days before the Baird government goes to the polls while Labor will be stretching to build up a new leader, Robertson having been swept away in the aftermath of the Lindt Cafe siege.
As the Australian Energy Regulator says in its new State of the Energy Market review, the domestic gas scene is “volatile.”?
Weakening demand for gas for electricity production, the AER notes, is a factor in the Australian Energy Market Operator scaling back its earlier projections of gas supply shortfalls in eastern Australia in the next few years.
Among the “various contingencies”? the AER identifies as affecting forecasting are (1) the timing of each of the LNG trains’ commissioning at Gladstone, (2) consumption of electricity (and the gas share of production), (3) the availability of gas storage and (4) the effects of climate change policies.
To which, as the regulator notes, can be added the fate of the mooted pipeline linking the Northern Territory to eastern gas markets “” and, of course, how Santos and AGL Energy fare in their efforts to develop gas fields within the NSW borders.
The AER also observes that the potential to develop unconventional gas in the Cooper Basin in central Australia is “significant”? “” but it reminds readers that it may take a decade for production to be commercially viable, and this was written before the oil price drama burst on the global scene.
As for AEMO, the operator “” in a 17 December statement “” foresees gas consumption by power generators on the east coast declining at an average annual rate of 16.8 per cent between now and 2019 with industrial demand plunging too. The (slightly) brighter side is that population growth will provide 1.1 per cent annual average growth in residential and commercial demand.
For 2010 to 2013, AEMO reports, overall east coast domestic gas consumption fell back to 685 petajoules, 15 PJ less than at the start of the review period.
And it expects eastern Australian demand to tumble further to 523 PJ in 2019.
When you consider that the 2019 demand outlook for the east coast at the point Colongra was commissioned (2009) was around 1,200 PJ, this is an almighty turnaround.
The ADGO conference in March will canvass all this and much more, kicking off with a tour of the energy horizon by federal Industry Minister Ian Macfarlane with NSW Energy Minister Anthony Roberts tagged to follow him and then Martin Ferguson, wearing his BG Group director’s hat, making for a vibrant opening morning!
One of the critical issues from a federal and southern State perspective is how to preserve as much as possible of the east coast manufacturing base during a period in which fuel prices rise sharply in order to take advantage of the mooted better supply conditions in the next decade. Just how big this problem is can be seen by looking at how the outlook for manufacturing’s demand for gas has changed in just the period since Colongra was built: the expectation was that factory consumption would hit 500 PJ around 2024-25 and now that forecast lies around 245 PJ.
Manufacturers to a large extent have hung their hat on trying to drive policymakers to adopt gas reservation as a supposed cure. Governments have shown, most recently at the CoAG Energy Council meeting in early December, that they won’t have a bar of this “solution.”?
The outlook conference offers an important opportunity for stakeholders to canvass realistic alternatives.
The ADGO opening day also includes Richard Cottee, now MD of Central Petroleum, on the future of east coast gas development and “a bigger vision”? for this market, Queensland Energy Minister Mark McArdle, Energy Supply Association CEO Matthew Warren (essaying a look at the outlook for east coast gas prices, supply and demand) and the new CEO of the Plastics & Chemicals Industries Association, Samantha Read.
Day two, to be chaired by Thomson Reuters’ Clyde Russell, will include federal Labor’s energy spokesman, Gary Gray, David Byers, chief executive of the Australian Petroleum Production & Exploration Association, senior public servants from Victoria and South Australia on their States’ plans for gas development,a study in contrasts you could say, and Jemena’s CEO, Paul Adams,on the pipeline scene.
I’m particularly looking forward to listening to Mark Textor, managing director of Crosby Textor, doing a forensic analysis of what polling really tells us about the public’s perceptions of the gas industry and how they can be improved.
There’s even more on the ADGO agenda (you can find it all at www.questevents.com.au) and I reckon the program lives up to the motto Quest MD Jamie Turmanis and I adopted for these “energy outlook”? forums a bit more than three years ago: “Not your ordinary energy conference.”?
The attendances we have been attracting, and the early rush of registrations for the 2015 gas event, suggests this is not just our own opinion.