Page 6 - AsiaElec Week 30

AsiaElec COMMENTARY AsiaElec

Australian gas shortages make

case for upstream investment

Cooper Energy is pushing ahead with a new upstream project even though companies are
delaying investments amid the current industry downturn

AUSTRALIA THE coronavirus (COVID-19) pandemic has The company said on July 23 that it had pro-
derailed the global economy, depressing energy duced 3.49 PJ (90.91bn cubic metres) of gas in
WHAT: demand in the process and undermining inter- the quarter, compared with 1.41 PJ (36.73 bcm)
Cooper Energy has national oil and gas prices. The prospects of a in the January-March period. The bump in pro-
reported strong second- sustained recovery in demand are overshad- duction countered a 15% quarter-on-quarter
half production and owed by the threat of a government-ordered slide in crude and condensate production to
revenue figures lockdowns in the face of a global second wave 42,590 barrels of oil equivalent (boe).
of infections. Second-quarter revenue enjoyed a 61% bump
WHY: This year is already set to see the worst reces- on the quarter to AUD24.1mn ($17.2mn) thanks
The company’s focus on sion since the Great Depression, according to to higher gas sales, which also jumped 61% to
producing gas for the the International Monetary Fund (IMF). That AUD21.5mn ($15.3mn).
domestic market has outlook, however, could deteriorate further if Cooper’s increasing focus on gas production,
shielded it from the worst governments fail to balance their health obliga- which is sold to the domestic buyers via term
of the downturn tions with promoting economic activity. Erring contracts and spot sales, helped its financial year
too heavily on either side of the equation could 2019-2020 revenue climbed 3% year on year to
WHAT NEXT: cost the global economy dearly. AUD78.1mn ($55.7mn). Revenue from gas sales
Australia’s East Coast It is a situation keenly felt by Australia, which climbed 22% y/y to AUD63.6mn ($45.4mn).
demand is expected to in a mere matter of a weeks has gone from quiet The Sole gas field’s start-up in March was the
outstrip supply within a confidence over its handling of the pandemic to driver beyond the surge in performance and,
matter of years, making isolating the state of Victoria, as a second wave while there are still some operational uncer-
the case for continued there threatens to engulf the entire country. tainties still to be ironed out, the company
upstream investment The precarious position the country finds expects the field to lift its full-year production
itself in, with Treasurer Josh Frydenberg warn- significantly.
ing that Australia faces its largest budget defi- The company is upbeat on performance
cit since World War II, is shared by the local despite the fact that domestic gas prices have
upstream. Each of the country’s large developers retreated from highs of around AUD20 ($14.27)
has written down assets that were valued using per GJ in 2017 to levels not seen since Queens-
oil prices that are not only much higher than land’s trio of coal-bed methane (CBM) to liq- Pull quote to go
either those that emerged following the March uefied natural gas (LNG) projects started up in
collapse but also those predicted to emerge in the 2014. Part of that optimism may be found in the in here Pull quote
next year or so. fact that Australia’s constrained supply outlook to go in here Pull
While both gas export projects and oilfields suggests that prices are unlikely to remain at
have been squeezed by the global energy sector AUD4 ($2.85) per GJ. quote to go in
downturn, there is one segment of the Australian
energy sector that is offering a ray of hope – nat- Demand outweighs supply here Pull quote
ural gas fields that sell to local buyers. The Australian Energy Market Operator
(AEMO) has warned that domestic gas supply to go in here Pull
Golden age of gas shortages could emerge in Victoria by 2023, with quote to go in
Australian independent Santos revealed this other southern states set to feel the pinch shortly
week that higher domestic natural gas produc- after. here.
tion had helped to offset a decline in oil prices, Simply put, there are not enough gas sup-
which ultimately slashed 15% from its sec- ply projects in the pipeline to meet projected
ond-quarter revenue. demand and, while that timeline may be pushed
Santos is not the only company to have said back 12-24 months owing to the current pan-
higher local gas production acted as a shield demic, the country will eventually have to
to current energy market volatility, with fellow develop some sort of approach to social distanc-
independent Cooper Energy posting strong ing that does not involve lockdowns. The central
quarterly results on the back of its upstream gas government has said it does not want to see the
portfolio. country return to lockdown, and is watching

P6 www. NEWSBASE .com Week 30 29•July•2020