• Gas reserves slashed as east coast supply crisis looms
Gas reserves slashed as east coast supply crisis looms
13 Mar, 2018, No Comment

Summary: Shocking new estimates on gas reserves have slashed the volume of gas expected to be recovered from coal seams in Queensland just as a supply deficit looms in the south with the decline of Bass Strait fields.....


The findings sharpen worries about the persistence of the east coast shortage and look set to strengthen the case for LNG imports into the south-east, despite scepticism by some gas buyers.

Queensland's coal seam gas reserves were written down by 1341 petajoules last year, more than all the gas estimated in the Cooper Basin, according to the annual reserves estimate by consultancy EnergyQuest, released exclusively to The Australian Financial Review.


The country's total gas reserves on a proven plus probable basis fell 4 per cent between December 2016 and February 2018, down by 5355 petajoules from 119,836 PJ to 114,481 PJ. As the reduction in reserves was more than the actual production in that time, the reserves replacement ratio fell into negative territory, meaning Australia failed to replace the reserves it produced.

LNG prices are well above domestic gas prices.
LNG prices are well above domestic gas prices. EnergyQuest


The impact was worst in eastern and southern Australia, with gas reserves dropping 6 per cent.


EnergyQuest chief executive Graeme Bethune said significant additional sources of gas supply are needed, with LNG imports – as proposed by two rival projects by AGL Energy and Andrew Forrest-backed Australian Industrial Energy – looking an obvious part of the solution as they would avoid the pitfalls of large-scale government-directed curbs on LNG export contracts.


"In our view there are two fundamental misconceptions about Queensland gas, one is that there is plenty of it, the second is that the problem in the south can be fixed by diverting modest gas volumes south without violating international LNG contracts," Dr Bethune told clients in the report.

He said the shrinking reserves mean the east coast has two gas challenges, the risk around reserves for long-term LNG contracts with buyers in Asia, and the insufficient investment in supply of gas for the domestic market.



Others such as Credit Suisse energy analyst Mark Samter have also made the case for LNG imports, arguing an import terminal can be set up relatively cheaply and easily, and so is the only option for a swift injection of new gas.

The increase in total petroleum output has masked a drop-off in oil production.
The increase in total petroleum output has masked a drop-off in oil production. EnergyQuest


Qenos, a major ethylene manufacturer, has meanwhile backed a potential pipeline from Western Australia as a preferable solution to LNG imports in the hope of avoiding a linkage between local gas prices and Asian LNG prices.


But EnergyAustralia, another major gas buyer, signalled it would consider buying through an LNG import terminal, saying that "all new sources of gas are welcome".

Dr Bethune said LNG imports are "cheaper, quicker and far more flexible" than building a pipeline from WA and noted that both Argentina and Egypt, which export gas, both increased domestic supply by importing LNG. In Australia this already occurs with crude oil, which is both exported from, and imported into the country.


The annual reserves assessment found Australia's proven and probable gas reserves fell by 5355 PJ last year, more than production of 4100 PJ. That put the "2P" reserves replacement ratio for gas in 2017 at negative 32 per cent.


Most write-downs of reserves were in Queensland, in particular at a field held by Shell's QCLNG, while Australia Pacific LNG and Santos also cut reserves at fields. Woodside Petroleum meanwhile reported write-downs of conventional gas volumes at the North West Shelf and Pluto ventures in Western Australia, but the proportional impact was greater on the east coast.


On gas prices, EnergyQuest found that average LNG export prices before freight charges rose 6 per cent in the December 2017 quarter to $8.27 a gigajoule, with average domestic prices about $3/GJ lower than export prices on the east coast, and $4/GJ lower on the west coast.

In oil, meanwhile, production continued its free-fall last year, falling 10.8 per cent. That was masked by surging LNG output which meant that total oil and gas output reached a record of 819.9 million barrels of oil equivalent, up 16.5 per cent on 2016.


Oil output has more than halved over the past decade. Exploration spending in the December quarter was the lowest for more than 13 years.

www.afr.com/business/energy/gas/reserves-shock-sharpens-east-coast-gas-crisis-20180309-h0xa3l

Leave a reply.
I want to post anonymously.
I want to use my name.
Would you like to be notified of new comments to this News Thread?           
Yes, email me as new comments are added