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Growing divide in the east coast gas market: EnergyQuest

EnergyQuest has revealed a widening long-term divide between gas supply and prices in Queensland, the Northern Territory and southern states, with the industry balanced on the edge of not meeting demand in just a few years.

Outlined in its latest East Coast Gas Outlook to 2040 report, CEO Graeme Bethune said that based on LNG netbacks, the company’s latest base-case gas price projection is for a 2030 gas price at the Wallumbilla hub in Queensland of $8.70/gigajoule (GJ), similar to current sport prices.

However, the Melbourne price is projected to be $11.05/GJ in 2030, significantly higher than the current spot prices ($8.05/GJ on August 5) and well beyond the capacity to pay for energy-intensive Victorian manufacturing.

The Wallumbilla Hub is closest to the large CSG fields and Northern Territory gas.

“The Northern Region, which includes Queensland and the NT, is projected to be selfsufficient in gas supply – even with the three LNG export projects at Gladstone – until around 2030 when the CSG fields begin to decline and limit LNG feedstock gas,” Bethune said.

“The Southern Region, comprising NSW, Victoria, Tasmania and South Australia, is already contending with the decline of the legacy basins. By 2030 we project Victorian gas production to be 68 per cent lower than in 2020. The southern states will need support from Queensland and the Northern Territory plus at least two LNG import terminals. The southern supply outlook also relies critically on significant gas production from the NSW Narrabri gas project by 2025.”

Bethune further stated that EnergyQuest’s analysis is based on conservative assumptions about future gas demand, assuming Victorian demand in 2030 is 12 per cent lower than in 2020.

In addition, the report outlined that Victorian peak demand days can swing 40 per cent around winter averages, and the winter seasonal average is three times the summer demand.

The seasonal and peak day supply to the southern states depends critically on Longford and the declining Gippsland Basin, limited gas storage and the swing capacity of northern gas being shipped long distances.

“To address the forecast shortfalls in production, there are five proposals to build LNG import terminals on the east coast of Australia, at least one of which is targeting first gas to meet winter 2023 peak demand. We believe that at least two of these are needed,” he said.

Bethune said APA Group’s planned 25 per cent expansion of the pipeline capacity from the Wallumbilla Hub in Queensland to Sydney should also help alleviate forecast southern winter peak demand in 2023.

“However, 91 per cent of the expanded pipeline capacity from Wallumbilla to Moomba for winter 2023 is already contracted which will limit firm access on the critical peak days. Also sending gas by pipeline from Queensland to Melbourne is expensive, increasing Victorian gas prices,” he said.

“Good progress has been made by companies in maintaining or lowering gas production costs.”

However, it is the continued decline in gas reserves which is a major concern, with write-downs of Queensland gas reserves now being seen in the southern states.

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