The rise of COVID-19 and the outcome of the OPEC+ meeting on 5-6 March have seen one of the biggest disruptions the gas industry has ever seen. This is a challenging situation for the gas industry, producers, pipeline operators, buyers and governments.

EnergyQuest has recently completed a major multi-client report: East Coast Gas Outlook to 2040: Keeping the Lights On which provides a comprehensive update of the long-term demand and supply outlook, based on an additional two years of data since the 2018 report. It also takes a close look at the outlook for the next couple of years in the light of the likely investment constraints companies will face.

Before the cataclysmic events of 2020, conditions in the east coast gas market had improved in 2019 and demand grew in all the key sectors.

Gas-fired power generation grew against the rise of renewables. Residential, industrial and commercial demand grew by 5 per cent. Drilling in Queensland’s coal seam gas fields increased, increasing production. Queensland met all of its demand, exporting more LNG, supplying the state and exporting to southern states. Supply was also augmented by first supplies from the Northern Territory, while there was a modest increase in Cooper Basin production. While facing a decline, Victorian offshore production was steady and short-term prices were the lowest since 2016.

However, there was only limited progress in resolving the medium and long-term east coast gas supply challenges.

EnergyQuest’s report finds that the next couple of years are likely to be characterised by economic disruption, uncertain energy demand and lower prices, both domestically and internationally and spending cuts for energy producers. This will create opportunities for energy buyers but challenges for producers.

Over the medium-term (to 2030) supply constraints will become increasingly evident with the decline of production offshore Victoria and absence of major new gas discoveries. Any developments onshore Victoria or New South Wales will provide some supply increments but are unlikely to materially shift the long-term demand-supply imbalance.

Development of the Arrow Energy Surat Basin acreage will provide some domestic gas but is most likely to feed QCLNG.

“We expect one and possibly two of the Gladstone LNG trains to be closed as increased gas volumes are diverted from the LNG projects to the domestic market. The gap between demand and supply will also increasingly rely on LNG imports at international prices,” the report notes.

“As we get into the 2030s the east coast LNG contracts will begin to tail-off.”

However, the report also notes that as the closure of coal-fired power generation accelerates, the demand for natural gas to back-up renewables is likely to grow.