Extracts from the EnergyQuest report on the East Coast Gas market released today.
Key take away's are the supportive fundamentals for domestic gas prices and the increasing influence of international gas prices as the market relies on high price LNG import plants. Another observation worth noting is the average cost of production - EnergyQuest estimates these between $5/GJ - $6.60/GJ for the East Coast, wereas CTP average costs was $3/GJ for FY20/21.
"EnergyQuest’s latest East Coast Gas Outlook to 2040, Balanced on the Edge, reveals a widening long-term divide between gas supply and prices in Queensland/NT and the southern states.
By the middle of this decade gas production from offshore Victoria is expected to be 35% below the level in 2020. East coast LNG imports are likely to be needed earlier than this to manage the winter demand peaks.
The EnergyQuest report states that LNG imports and alternative markets for Gladstone LNG are expected to set gas marginal pricing by 2025, which will see a switch in domestic gas prices from cost of supply to LNG-linked global prices.
“Gas buyers and sellers are facing an increased degree of price uncertainty and risk. International energy prices are increasingly setting east coast domestic prices, increasing the volatility in domestic gas prices. Already in 2021, the
ACCC LNG netback price series has swung between A$6.44/GJ and A$19.62/GJ”
With declining Victorian gas production and therefore falling supply to NSW, the supply/demand situation in that state is finely balanced. While additional gas supplies from Queensland should alleviate conditions over the next couple of years, any slippage in first gas from either Narrabri or the Port Kembla LNG import project would negatively impact NSW at a time when Liddell, one of the state’s largest coal-fired generators, is set to close.
Shortages during winter peak demand periods are not forecast until at least 2026 if Port Kembla meets deadlines, committed gas field developments move ahead and pipeline expansions proceed. However, any failure or delay in commissioning may lead to a 100TJ-a-day gap in Victoria, NSW and South Australia by 2023 under extreme conditions during winter, when average consumer demand is three times more than in summer.
Based on input from well engineering specialists, EnergyQuest estimates the long-run ex-plant cost of gas for Queensland is A$4.98/GJ (real 2021 $). This is 23% lower than in our 2020 report, primarily due to updated lower production cost estimates. By contrast, the southern states’ cost of production is estimated to be A$6.61/GJ ex-plant, which is 6% higher than our 2020 report estimates.
https://www.energyquest.com.au/new-report-highlights-growing-divide-in-east-coast-gas-market/?utm_source=rss&utm_medium=rss&utm_campaign=new-report-highlights-growing-divide-in-east-coast-gas-market
