Queensland to re-start state-owned gas-fired power plant amid lack of industry investment

The Australian state of Queensland is planning to restart the 385-MW Swanbank E gas-fired power station next year in an effort to increase supply and reduce volatility in the state’s wholesale energy market, it said in a statement June 4.

Government-owned operator of Swanbank E, Stanwell Corporation, placed the plant into cold storage during “the height of the [Liberal National Party of Queensland’s] asset sales frenzy in 2014” in readiness for a sell off to the private sector, state treasurer Curtis Pitt said.

“It is expected that the potential impacts of bringing this additional capacity online in the first quarter of 2018 is likely to reduce the price volatility in the electricity market during this period,” he said.

Queensland energy minister, Mark Bailey, said firing the gas-fired power station up again was necessary after the extreme record heat waves and a lack of federal energy certainty under prime minister, Malcolm Turnbull’s government which “has undermined industry investment and placed upward pressure on wholesale electricity prices”.

Underlying east coast gas demand falling

Australia’s east coast domestic gas demand fell by “a modest 2.5%” year on year in the March quarter, however, underlying gas demand is falling significantly faster, energy consultancy EnergyQuest said Tuesday.

“Excluding gas-use for power generation, gas use fell by 8% and excluding gas used to fuel Queensland LNG plants as well, the fall in gas-use was a staggering 16%,” it said.

Australia’s east coast gas market includes the states of Queensland, New South Wales, Victoria, South Australia and Tasmania. Rising gas prices in the region have caused alarm in recent months and, despite the weaker gas demand, there are concerns that there could be gas shortages seen by the end of the decade.

Short-term east coast gas prices averaged A$9.95/GJ (US$7.45 at current US conversion) in 1Q 2015, which is double those of a year earlier, EnergyQuest CEO Graeme Bethune said.

“Average prices close to A$10/GJ are clearly hitting demand,” he said.

However, they are not translating into a gas investment boom and the region facing a “drought of investment in domestic gas” with the major reason being the fall in the oil price, Bethune said.

“After the price rallying to around US$55/b following the OPEC meeting in November last year, the price is now softening in the face of rising US production. Australian gas development is likely to remain constrained by a sustained low oil price,” he said.

EnergyQuest did point to some positive signs of potential increased east coast domestic supply.

“Shell has been working to facilitate increased supply from QCLNG and completion of the Reedy Creek to Wallumbilla Pipeline in mid-2018 and will facilitate further supply into the domestic market from APLNG,” Bethune said.

“Arrow is expanding Tipton West and Daandine, both likely precursors to further development. The Queensland Government is releasing domestic gas acreage and the South Australian government is also encouraging gas development. AGL is working to develop an LNG import terminal in the southern states,” he added.

Nathan Richardson