East coast gas prices rocket after AEMO issues warning about winter shortage

East coast gas prices have rocketed after the energy market operator issued a rare notice warning of a looming shortage through winter.

Short-term wholesale prices in Sydney jumped 43 per cent over two days and hit more than $27 per gigajoule on Thursday, according to Australian Energy Market Operator data.

The potential deficit in the southern States has been driven by strong demand from gas-fired power generation and supply troubles, sparking fears of energy woes in the coldest months.

Storage levels at the Iona facility in Victoria have dropped about a third since early May and ExxonMobil’s Longford plant had been producing below capacity amid an outage.

Industry representatives gathered at an urgent Friday conference, in which AEMO asked producers to take steps to maximise supply and users to consider their needs.

They were showed a presentation indicating demand for gas used in power generation for the first few months of the year was more than double the level of the same period in 2023.

Australian Energy Producers chief executive Samantha McCulloch said a cold snap and lower wind generation had led to a surged in demand for gas to produce power.

“It didn’t have to be this way,” she told The Nightly.

“We have had repeated warnings of gas supply shortfalls from the energy market operator — in particular in southern States during winter peaks — and calls for investment in new supply to meet demand and keep prices affordable.

“However, instead of bringing on new supply, we have seen government interventions and anti-gas policies in southern States creating barriers to the new gas projects we need.”

She said east coast producers were operating at more than 99 per cent of capacity and Queensland was piping the fuel south.

But she noted spot prices published by AEMO only represent a fraction of the market.

Prime Minister Anthony Albanese told ABC more gas was needed on the east coast, which he said “has been known for some time”.

He pointed to the Government’s pivot on the fuel with the release of the Future Gas Strategy in May, a report that declared gas would be needed to 2050 and beyond.

“Gas has an important role to play in manufacturing in particular (and) also in providing firming capacity for the renewables rollout,” Mr Albanese said.

Earlier in June, the Federal Government announced a supply deal with Shell subsidiary Walloons which was set to bring 40 petajoules to the market over three years.

That followed agreements with Woodside, Esso, Senex and APLNG totalling more than 600PJ.

The Government said at the time the market operator had confirmed the deals would push back a projected shortage until 2028.

Wind and solar were filling 13 per cent of demand on the east coast system on Friday afternoon, with gas at roughly the same level.