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From today's Energy News Premium ...

"Queensland gas department urges domestic ‘security’
Friday, 28 September 2012

THE Queensland Department of Energy and Water Supply has advised state government to seriously consider “the security of domestic gas supply and market liquidity” when approving any new LNG trains.
It has written a report which sets out to quantify the issues surrounding the Queensland domestic market, with its numbers leading it to a conclusion which has shades of domestic gas reservation policy about it.

It found that under a modest LNG and modest oil price scenario, prices could reach $6.50 per gigajoule by 2015, with that price increasing to an upper limit of $12/GJ by 2020.

It said while coal seam gas explorers had extensively expanded the state’s gas reserves over the past few years, the demand of the state’s LNG developments ushered in an age where supply was scarce for domestic buyers.

However, it said under a modest development reference case, the state was left with a relatively scant 2000 petajoules of gas on a 2P basis which has not been contracted to an LNG project.

The department also theorised that all four LNG proponents would invariably face a gas shortage “at some stage”, leading to players aggressively moving to acquire permits in CSG fields across the state.

However, it also noted that if LNG development were restricted to eight trains by 2020 and another four trains by 2030, there would be sufficient gas reserves to supply both the domestic and LNG market.

However, the real pinch in gas on the market is expected to begin in 2014 when LNG trains start coming online, leading the department to model the costs of bringing in additional gas from Victoria’s Bass Strait.

However, it found this scenario would be too costly to consider realistic.

Interviewing domestic market players, the department found there was a lack of liquidity in the market, even now, and that the LNG projects would only exacerbate the situation further.

In all, the state’s gas market advisor said if the state government did not take some sort of action within the next year then it would be tough to see the government being able to force changes to alleviate the expected domestic shortfall in the 2015-2020 period."