S&P/ASX 200 Index (ASX: XJO) energy shares could be set for some longer-term tailwinds amid a looming national gas crisis.
Here's how these top three ASX 200 energy shares are tracking at the time of writing on Friday:
- Woodside Energy Group Ltd (ASX: WDS) shares are up 0.7%
- Santos Ltd (ASX: STO) shares are up 1.7%
- Beach Energy Ltd (ASX: BPT) shares are up 1.5%
For some context, the ASX 200 is down 0.1% at this same time.
This comes as Australians are warned that a period of low winds has impacted wind power generation along the East Coast. Coupled with cold weather that's seeing people turn up their heaters, the Australian Energy Market Operator (AEMO) cautioned that the eastern and southern states could face a gas crunch through September.
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ASX 200 energy shares eyeing gas squeeze
The looming gas squeeze comes despite Australia sitting on enough on and offshore gas deposits to meet domestic needs for many decades to come.
But a range of state and federal restrictions have limited the ASX 200 energy shares from bringing that gas online. Domestic supply is also impacted by LNG exports.
"In the shorter term, … we need to have a balance of renewables and gas coming into the system. That's a balance which other countries are pursuing," shadow treasurer Angus Taylor said this week (quoted by The Australian Financial Review).
The government moved to assure Aussies that their lights and heaters won't be going out this winter.
"Today's [AEMO] notice is about a potential risk, not a risk that has eventuated. AEMO and the market are taking steps to ensure the risk is mitigated ahead of time," a spokeswoman for Energy Minister Chris Bowen said.
Australian Pipelines and Gas Association chief executive Steve Davies pointed to the need for more supplies. Should that eventuate, it could offer some ongoing support for ASX 200 energy shares like Woodside and Santos.
According to Davies:
The extreme lows in renewable generation, particularly wind yields, have meant gas-powered generation has picked up a significantly larger load to keep the lights on and ensure electric homes can remain heated…
But you can't have gas generation without supply.
Woodside seeks to avoid domestic shortfalls
Liz Westcott executive vice president of Australian operations at ASX 200 energy share Woodside, addressed the Energy Club WA on Tuesday.
Westcott said:
Cost-of-living pressures and the focus on energy security are contributing to growing public awareness of the importance of new gas supply…
It may mean a shift in expectations of our industry: to develop Australian natural gas resources in a timely fashion to avoid looming shortfalls. And in doing so, to support the economy and our community…
At a time when our society is increasingly polarised in a way that can stymie progress, we may have an opening here to work with various stakeholders to find common purpose and a commonsense approach.
In a statement on AEMO's gas crunch warning, Woodside said it's "taking steps to support the gas market in eastern Australia".
According to the company, "We are working with the operator to maximise gas production from the Gippsland Basin and offering all available volumes to market."
If the looming gas crisis tips the scales of public opinion and paves the way for new projects and streamlined approval systems, I can see some longer-term tailwinds emerging for ASX 200 energy shares.
