Page 5 - GLNG Week 07 2021

GLNG COMMENTARY GLNG

The existing correction
in Australian gas prices,
driven in part by record
low oil and spot LNG,
may not last.

Supply security quick to highlight the ACCC’s findings that the
While the East Coast gas market is expected to domestic well is supplied in the short term and
have sufficient supplies to meet the next three that domestic prices declined throughout 2020.
years of demand, the ACCC warned that the There has, however, been some push back from
country’s southern states could experience a industry around allegations that the overseas
shortfall of up to 30 PJ by 2024, while the broader buyers of Australian gas are getting a better deal
East Coast market faced a similar challenge than domestic consumers.
come 2026.
“It is concerning that the risk of a gas supply Push back
shortfall in Australia’s southern states contin- Industry body Australian Petroleum Production
ues, despite this having been a looming issue for and Exploration Association (APPEA) argued
some time,” Sims said. that prices paid by Australian industrial custom-
He added: “There are new sources of supply ers were well below those paid by industrial cus-
and related infrastructure that could be brought tomers in Australia’s major export destinations.
online to avoid a potential shortfall. It is crucial APPEA said: “The ACCC and International
that investment decisions are made now to Gas Union have both found domestic Austral-
ensure there’s enough supply, and to provide ian gas prices to be lower on average than the
downward pressure on future price rises.” prices paid by Asian customers for Australian Friction between
One bright spot for the local gas supply pic- gas.”
ture has been Beach Energy’s new discovery at It added: “Recent market releases by major domestic buyers
the Enterprise gas field offshore Victoria. Beach Australian oil and gas companies have shown and the LNG
said the find had boosted its 2P reserves by realised prices in the domestic gas market
21mm barrels of oil equivalent (boe), including remain well below LNG prices received by those export sector is
97 PJ (2.53bn cubic metres) of sales gas. same companies in their major export markets.”
Given that southern states face the greatest APPEA CEO Andrew McConville said the only likely to grow
risk of shortfall in the future, Sims urged the fed- industry would “welcome the opportunity” to
eral and state governments either to encourage discuss the differences between spot and term in the coming
investment in north-south transportation infra- contract pricing with the ACCC. years.
structure or in one or more of the five import Friction between domestic buyers and the
terminal projects proposed for the East Coast. LNG export sector is only likely to grow in the
The five projects are based around the use of a coming years, as export volumes expand and
floating storage and regasification unit (FSRU) new liquefaction capacity is eventually sanc-
and are scattered across New South Wales, Vic- tioned. This suggests the industry needs to work
toria and South Australia. However, because harder to win the ACCC over to its interpreta-
the five projects’ combined capacity exceeds the tion of supply and demand dynamic. If it does
southern states’ total demand, the ACCC said not, then further accusations of unfair pricing
there was “no expectation that all of these pro- and supply strategies seem likely, bringing with
jects would be developed”. them the risk that the government may eventu-
The Australian oil and gas sector has been ally act against industry interests.™

Week 07 19•February•2021 www. NEWSBASE .com P5