CTP AGM notes, page-26

How is it double standards? I linked to a report that wasn't even by AEMO but prepared for them by a contractor, which quoted pipeline tariffs. I never questioned the validity of AEMO's data, particularly when it comes to reporting on current pipeline tariffs, reserves, production etc.

The point I was making was that their forecasting from that data is highly uncertain because it is using trailing indicators to create a leading forecast of supply and demand, even though those same trailing indicators are likely to create the exact opposite conditions going forward.

It's no coincidence that AEMO previously forecast a massive gas shortage in NSW in 2016 but is now forecasting no shortage. It's because the initial forecast was done by modelling growth trends in gas consumption even though gas was going into supply shock, with gas for industrial users either extremely expensive ($8/GJ-plus compared to $2-3/GJ historically) or completely unavailable. Fast forward a year or two, and those supply issues, together with the persistently high AUD, caused severe pain to manufacturing and have now caused them to lower their consumption forecasts.

With current low energy prices, demand will quite likely pick up again, right at the time that nearly all Australian gas producers are cutting exploration and jobs to conserve capital. This is all just relatively short-term fluctuations in the longer-term issue, which is that the East Coast gas market, which has for decades had access to cheap and plentiful gas, is about to be exposed to much higher international pricing - and that is much higher even at these oil prices. This is happening just as the traditional sources of cheap conventional gas (Cooper, Surat, and some of the Bass fields) are running out of cheap gas.

That is the key issue here, not short-term AEMO forecasts of over- or under-supply in NSW. East-coast gas demand is going to go up around fivefold in the next few years, and it doesn't matter a jot to CTP whether there is a deficit in NSW or not - as soon as it becomes more profitable to sell their $1/GJ gas to an LNG plant instead of domestically, they will find a buyer. CSG is expensive gas to produce and if the LNG operators can buy it cheaper and defer their own, more expensive production, they will do so.

That's why arguing over the latest annual forecast for East Coast domestic demand is pointless. Firstly, next year's AEMO report will forecast something completely different from this year's, because the assumptions will have changed to reflect this year's data. Secondly, unless there is a reservation policy introduced, that domestic market (making up ~20% of the total demand) is going to have to compete with the LNG plants trying to pay off $70B of investment. And it doesn't really matter if the global LNG market is oversupplied - the LNG operators still need to fill those cargoes and pay off that debt. They will be competing for the cheapest gas they can source within the pipeline system, and CTP's gas will be right in the mix for that.

You are correct that Cottee is referring to old information when he talks about the big gas deficit in NSW. The current forecast is for no deficit. But that's also pretty irrelevant in the scheme of things. There are much bigger, global market forces now at play.