Page 5 - AsiaElec Week 08
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AsiaElec COMMENTARY AsiaElec
Long-term prospects
Beyond the short term, however, the picture is not quite so positive. The supply-demand out- look remains tight during the 2021-2031 forecast period.
The ACCC said sufficient gas production from proved and probable (2P) reserves was expected to meet domestic demand and LNG contractual commitments in the short to medium term. It said, however, that gas pro- duction from 2P reserves was expected to fall short thereafter.
The commission added: “Whether supply will be sufficient to meet demand in the long term remains dependent on whether new or additional sources of supply are developed and broughttomarket.”Asitstands,theEastCoast gas market appears set to become increasingly reliant on production from undeveloped 2P reserves as developed reserves decline. The ACCC observed that this shift was likely to be most evident between 2021 and 2025.
It pointed to several new projects that were expected to commence production over this time, but highlighted the uncertainties sur- rounding them. Arrow Energy’s Surat gas project, for example, is expected to contribute almost 20% of production from undeveloped 2P reserves during the outlook period, even though the project is yet to receive a final investment decision (FID).
The commission raised concerns that the majority of new projects would be coal-bed methane (CBM) developments, noting that pro- ducers have previously faced a range of technical and financial challenges when developing the unconventional resource.
“When coupled with the uncertainty sur- rounding the expected timing of production,
there is a risk that actual supply may be less than forecast over the decade to 2031,” it said.
The ACCC’s lack of faith in CBM projects appears to stem from the checkered past of such projects.
Reserve replacement anxiety
The ACCC noted that in the 12 months to June 30, 2019, the Surat Basin’s reserves shrank by 2,000 PJ (52.1 bcm), driven by a 1,751 PJ (45.61 bcm) write-down of 2P reserves owing to reserve downgrades and other downward revisions. It said 75% of the write-down occurred in Arrow’s Surat Basin fields, which saw a net 2P reserve write down of 747 PJ (19.46 bcm). This followed a 2,933 PJ (76.4 bcm) write-down of Arrow’s 2P reservesintheBowenBasinin2018.
While the ACCC said the extent of the writ- edowns in both basins over the last two years highlighted some of the technical challenges of unconventional resource development, the com- mission added that it could also reflect a decision by some LNG producers to “warehouse” gas by delaying some developments.
The report quoted a small producer in Queensland saying said that it was “being prevented from developing its current mod- est reserves and resources due to the adjacent permit holder... not progressing their existing government approved...projects, for apparently global strategic reasons”. Another small pro- ducer said one of the main barriers to the com- mercial recovery of its 2C resources was that its larger joint venture partner was “not motivated to pursue a larger development”.
While the ACCC said there was no evidence to support such an accusation, it intends to mon- itor closely producers’ development decisions over the remaining term of the inquiry.
Week 08 26•February•2020 w w w. N E W S B A S E . c o m P5
