A key Victoria state gas storage facility is being drained to dangerously low levels on the back of soaring demand, raising the prospect of another dramatic market intervention to boost the electricity supply.
Gas from Lochard Energy’s Iona storage facility, located near Port Campbell in southwest Victoria, is falling to near-record levels as eastern states take advantage of oil price caps state, sparking fresh concerns about a gas supply crisis this winter.
On Monday evening, the national energy regulator, the Australian Energy Market Operator (AEMO), issued a statement warning that if gas from the Iona plant continues to be drained at the current rate, it will could be forced to intervene to guarantee the supply of gas for electricity generators.
“AEMO has determined that market or operational responses may not be sufficient to mitigate the threat. AEMO is considering all other possible options before intervening,” he said.
Last month, the AEMO took the unprecedented step of briefly suspending the entire East Coast electricity market to bring calm to the volatile system.
Victoria is the only state in which a price cap of $40 per gigajoule remains in place to contain soaring wholesale prices.
The cap, which was triggered automatically at the end of May under Australian gas market rules, has prompted New South Wales and Queensland to get more of their gas from the Iona plant, which is the largest independent provider of storage services in the East Coast gas market.
The surge in demand caused storage at the plant to drop from 48% to 43% in one week. The looming supply shortage prompted the AEMO to issue a “system security threat” notice in a bid to head off supply shortages this winter.