Demand for electricity 'to double'

AUSTRALIA'S domestic consumption of natural gas is forecast to almost double over the next 25 years, driven by demand from the electricity generation, mining and manufacturing sectors.In its 2006 review of electricity and gas supply and demand, released this month, the Energy Supply Association of Australia (ESAA) says increased value is being placed on the country's abundant gas resources.
"While much of the gas output is exported, due largely to the location of the bulk of resources on the remote North West Shelf, the widening network of gas transmission infrastructure is helping to meet domestic demand from the central and eastern Australian reserves," ESAA adds.
The association says there are now 110,000km of gas transmission and distribution lines across the country and 1112 petajoules were sold to domestic customers in 2004-05, an increase of more than 6 per cent over the previous financial year. ESAA predicts that domestic gas sales will rise to more than 2100 petajoules by 2030, an increase of 92 per cent.
The association reports that current demand is dominated by the manufacturing and power generation sectors, with consumption of 415 petajoules and 358 petajoules, respectively, in 2004-05, accounting for almost 70 per cent of use. ESAA projects large increases in these sectors over the next 25 years -- with power generation demand forecast to jump to 709 petajoules, and the manufacturers to remain the biggest customers with 746 petajoules in 2030.
Residential customers account for 12 per cent of demand, just over 134 petajoules in 2004-05, and ESAA forecasts that consumption by households will rise to almost 220 petajoules by 2030. Demand from the mining sector is predicted to more than double - 138 petajoules now to 360 petajoules in 2030.
The attraction of gas, says ESAA, is that it is cost-competitive and a cleaner fuel in an environment where governments and industry need to address greenhouse gas emission issues as part of climate change policy.
The association notes that the average annual rise in gas demand in Australia over the next 25 years is expected to be well above annual growth rates for primary fuels overall. It forecasts that oil demand will still remain the dominant fuel requirement, rising from 1809 petajoules now to 2980 petajoules in 2030 with black coal continuing in second place, rising from 1573 petajoules today to 2247 petajoules in 2030.
While the renewable energy sector's contribution will grow, ESAA predicts that it will still remain only a small part of the national energy consumption equation - 4.8 per cent now, rising to just 5.8 per cent in 2030.
A key question for the demand path for natural gas will be its price. Unlike oil, Australian domestic gas prices are not linked to global movements. Graeme Bethune, principal of the EnergyQuest consultancy, points out that Australians enjoy some of the cheapest gas prices outside Russia, the Middle East and Argentina.
Where Americans pay $8 per million cubic feet for gas and Europeans on average a little more, Australian natural gas wholesale prices range between $3 and $3.50 per mcf while Queensland coal seam methane, which has captured 15 per cent of the east coast market in five years, sells for $2 to $3 per mcf.
Bethune says there has been a radical change in the Australian east coast gas market since the 1990s, when there were buyer concerns about cost, supply and the lack of competition. In 2006, he points out, there are substantial supplies of world-competitive gas from multiple suppliers.
The strongest counter-balance to rises in domestic natural gas prices through linkage to Australia's global LNG trade comes from the rise and rise of the coal seam gas industry in Queensland.
Research released last month by Resource & Land Management Services says coal seam gas, which had a negligible profile in Australia a decade ago, is now accepted to provide the largest onshore gas reserves on the eastern seaboard. So-called "2P reserves" - "proved and probable" -- are described as nearing 5000 petajoules and RLMS claims they could reach 10,000 petajoules by the end of the decade. Origin Energy has speculated that there may be 15,000 petajoules of recoverable reserves - enough to meet Queensland's gas demand at present levels for 150 years, or that of all the eastern states for 20 years.
The RLMS research group says the coal seam industry, especially if there is any further slippage in the PNG pipeline project, could be the major source of gas to the east Australian market within the next decade.
There are 10 companies, including Santos, Origin, BHP Billiton and Anglo-American, working to develop coal seam gas from the Queensland Surat and Bowen basins.
Origin Energy estimates the petroleum industry will invest $2 billion in the area over 20 years after spending $700 million in the past decade, and predicts production of coal seam gas could triple in the next five years.