Page 9 - AsianOil Week 29 2020

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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

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

Week 29 23•July•2020 www. NEWSBASE .com P9