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Gas shortage to worsen energy crisis

Major energy consumers are growing even more concerned over the outlook for energy prices in Australia, after AGL Energy advised domestic gas consumers may be left short due massive demand from new east coast export facilities.

AGL’s head of wholesale markets Richard Wrightson reportedly told the AFR the Queensland LNG industry would divert gas to a raft of recently-opened export facilities, exposing domestic consumers to international competition.

Without a significant increase in supply, Wrightson suggested this could mean some major energy users will struggle to stay up and running.

“I don’t believe there is adequate supply of gas to the market unless those LNG trains can push gas south rather than export,” he was quoted as saying.

“If there’s an exceptionally mild winter then we could scrape through, but if it’s a cold winter, no.

“We are actually out of contracted gas; we don’t have any left in our portfolio.”

Wrightson’s comments came as market analyst EnergyQuest released the results of its “highly forensic review” of the east coast gas sector, which found estimates of commercial gas reserves to service Queensland’s new Gladstone-based LNG industry and local domestic gas consumption “carry substantial risks that are not widely appreciated”.

“As Queensland’s coal seam gas output will now dominate future total production in the east coast gas market, we undertook a detailed bottom-up analysis of this market’s gas production outlook,” EnergyQuest CEO Dr Graeme Bethune said.

“In particular, we compared stated Proved and Probable reserves (known as 2P, gas volumes already classed to be commercial) and matched them against our own assessment of drilling statistics for 8,000 gas wells, stated reserves for 50 gas exploration permits and 250 production licences (PL) and 10 years of production data from 250 PLs along the east coast.

“Our conclusion is that CSG (which comprises 91% of stated east coast reserves) has been oversold, with potential reserves risk.

“The new Gladstone CSG to LNG industry is fed by booked 2P reserves but substantial reserves are booked in areas that have not yet demonstrated any commercial production.”

Bethune said the scenario was compounded by the fact the east coast’s conventional gas fields are now mature and face increasing output challenges.

“While there is some investment underway in new east coast gas supply, it is nowhere near sufficient and this reinforces the growing concern about gas supply security on the east coast,” he said.

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