7.2.2.2  Gas

Overall, domestic demand for gas is expected to decline, with AEMO forecasting an annual average decline of 0.9 per cent for the next 20 years based on its medium scenario.241

There are two key drivers of this fall. Demand from gas-powered generation is forecast to decline by 2.3 per cent per year over the next 20 years, as a result of the expected high gas prices. A decline in demand from large industrial customers of 1.3 per cent per year over the next 20 years is forecast due to the prospective closure of oil refineries and higher gas prices.

Offsetting the decline in domestic demand is a large increase in consumption associated with LNG plants on the east coast. AEMO forecast this to increase rapidly over the next five years, from 13.3 PJ in 2014 to 1432 PJ by 2019. Demand from LNG production is expected to plateau after this period. This increase results in overall annual average growth in gas consumption by the combined domestic and export markets of 5.4 per cent per year over the next 20 years.242

The Audit consultant has projected demand and DEC for gas services in 2031 as follows:

■  gas transmission throughput in Australia is projected to grow from 1,334 PJ in 2011 to 3,178 PJ;

■  gas distribution throughput in Australia is projected to grow from 344 PJ in 2011 to 429 PJ; and

■  the DEC for gas transmission and distribution services across Australia is projected to increase from $2.3 billion in 2011 to $4.7 billion, an increase of around 100 per cent.

As with electricity, there is a degree of inconsistency between the AEMO's forecast of falling domestic demand for gas in the east coast domestic market and the expected rise in DEC in the Audit. Significantly, the DEC analysis was finalised before the latest AEMO gas market forecasts were published.243 Those forecasts were the first to show a break in what had previously been a direct link between economic growth and rising energy consumption. In addition, AEMO reports and forecasts gas consumption in PJ, whereas DEC is a measure of the value-add provided by gas infrastructure, in dollars. The two are not necessarily perfectly correlated.

Table 25 shows the absolute increase in DEC for gas services by state/territory between 2011 and 2031. The largest increase in DEC occurs in Queensland. This is attributable to the investment in pipelines to service LNG projects in Gladstone.

At the audit region level, the largest projected increase in DEC for gas transmission and distribution between 2011 and 2031 is in the Gladstone-Biloela region, with an increase of over $1.6 billion.

Table 25: Increase in DEC for gas services by state/territory - 2011 to 2031 (2011 prices)

Source: ACIL Allen Consulting (2014a)

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241.  Australian Energy Market Operator (2014b)

242.  Australian Energy Market Operator (2014b)

243.  Australian Energy Market Operator (2014b)