gas shortage may be bigger than forecast

http://www.theaustralian.com.au/business/mining-energy/gas-shortage-may-be-bigger-than-forecast/story-e6frg9df-1226573918316


Gas shortage may be bigger than forecast

by:PAUL CLEARY
From:The Australian
February 09, 201312:00AM


AUSTRALIA'S looming domestic gas shortage could prove to be even more acute than forecast because the nation's market advisory body has admitted its projections are based on optimistic assumptions about supply.

And coal-seam gas companies that are preparing to join the export boom over the next two years are refusing to say how much gas they have available for the domestic market.

The Australian Energy Market Operator produced a report in December that foreshadowed continued rises in domestic gas prices on the east coast because liquefied natural gas exports were about to take off. Out of total reserves of 48,497 petajoules of gas, less than 10 per cent of this amount, or 4000 PJ, was "uncommitted gas currently available".

"The relatively small volume of uncommitted 2P reserves may prompt a market response when companies look to recontract in the short term," the report said.

Industrial users of gas have already been hit with increases of more than 100 per cent over the past year, and more increases are now expected.

In compiling its projections, AEMO concedes that it has not taken into account the growing resistance among farmers and other landholders to grant gas companies access to their land.

"Reserve estimates do not consider landholder access issues. Reserve projections consider that reserve development will occur maintaining a 15-year reserves-to-production ratio, where production is allocated on a least-cost basis," a spokeswoman said in response to questions from The Weekend Australian.

AEMO's analysis relies on the assumption that if physical reserves are present, they will be developed to meet demand.

AEMO chief executive Matt Zema declined to be interviewed.

But the three big LNG export plants on Queensland's Curtis Island are likely to put an even greater drain on domestic gas supplies when they begin exporting over the next two years, should they fall short in securing access to gas reserves.

The activist group Lock the Gate, which now has NSW and Queensland farmers on its board of directors, says that as much as 40 per cent of landholders in southeast Queensland have refused access to gas companies.

However, Santos and BG Group, operators of two of the Curtis Island projects, deny that they are behind on securing access rights to gasfields.

The Australian recently revealed that major corporations, including Brickworks, were unable to renew gas supply contracts beyond 2015. Gas companies have disputed these claims but at they same time they have declined to disclose how much gas is available in the domestic market.

Santos, which is developing the Gladstone LNG project, said there was potential to bring more gas on stream from the Cooper Basin and coal-seam gas from NSW. "Specific volumes are the subject of commercial discussions. However, we can say that we have gas now, and we have gas available beyond 2015-16," the spokesman said.

Origin Energy, which is a partner in the APLNG project, said the company was offering long-term gas supply contracts to large customers to meet their domestic requirements over coming years, but declined to say exactly how much was available.

"Origin's view is there are sufficient gas reserves that exist in eastern Australia to supply both growing domestic and international markets," the spokeswoman said.

Resources Minister Martin Ferguson said he was working with states and territories to develop a national harmonised regulatory framework for coal-seam gas."The framework will improve the approvals system so that Australia's abundant gas reserves get to market through an environmental process in which the public has confidence. In order to manage any short-term tightness in the market, all levels of government must work to remove barriers to the timely development of domestic gas supply," his spokeswoman said.