Wood Mackenzie: Australian government declares gas to be essential until 2050 and beyond
Australia’s Future Gas Strategy (FGS) highlighted a commitment for Australia to remain a reliable trading partner for liquefied natural gas (LNG), while underscoring the role of gas in Australia’s energy mix until 2050 and beyond, according to Wood Mackenzie. This strategy may lower perceptions of “sovereign risk” for investors.
However, challenges remain in attracting investment to Australia’s gas industry, including government intervention, legal challenges and difficulties in accessing affordable capital. “A turnaround in sentiment will not be quick. In parallel, the government must be seen to support and implement this strategy, and back away from hasty interventions,” said John Gibb, research director, Australasia Upstream.
The FGS prioritizes the development of existing gas discoveries in basins with existing infrastructure to prevent domestic supply shortages. “A ‘use it or lose it’ policy on existing discoveries may be implemented to drive development of discovered gas resources. This would need careful consideration, with potential issues from misalignment of resource and infrastructure ownership, which has long stymied gas development on Australia’s North West Shelf, to LNG plant backfill schedules–where these long-term investments often require decades worth of gas discoveries in store,” said Dr Anne Forbes, senior analyst, Australasia upstream.
Additionally, the strategy commits to further releases of offshore acreage for greenhouse gas storage assessment, which has been highly sought after in recent years. The FGS also pledges to review the offshore regulatory regime for Carbon Capture and Storage (CCS) and introduce measures to further cross-border CCS. This could encourage international investment in CCS projects in Australia.
Emissions reduction is a key focus of the FGS, aligning with Australia’s commitment to reaching net zero emissions by 2050. Six upcoming decarbonization plans will address the reduction in gas demand, while the management of unavoidable emissions will be covered by the forthcoming Electricity and Resource Sector Plan and the Safeguard Mechanism (SGM) legislation.
