Wood Mackenzie has just commented that liquefied natural gas (LNG) has the potential to ‘change everything’ in Australia’s east coast gas market. Volatile gas demand, declining mature gas fields and LNG exports are expected to result in impending east-coast gas shortages and rising prices.
Wood Mackenzie is predicting that LNG is expected to be both the cause and solution to these impending gas shortages.
“Gas prices are expected to rise, and the political climate to heat up further,” a representative from the organisation commented in an article last week. This comes after traditional east coast reserves such as the Gippsland Basin (about 200km east of Melbourne) are diminishing and production is also set to decline.
“Unless significant new reserves are commercialised within five to seven years, the east coast market comprising the eastern and southern states of Queensland, New South Wales, Victoria and South Australia will be short of gas,” they said.
Wood Mackenzie has also predicted Australian gas-intensive industries such as petrochemicals and fertiliser production, will start to struggle to compete globally, resulting in a risk of closures. This risk will likely lead to more public pressure on the gas industry and government, further leading to Australian politicians to propose solutions to combat this.
“Wood Mackenzie sees an outlook of gas shortages in east Australia from the early to mid-2020s,” the organisation commented.
To lessen these shortages, gas supply must be diverted from LNG export projects or imported. Both options mean that the introduction of Asian LNG-linked pricing in eastern Australia is ‘inevitable,’ the organisation explained. If this was to occur, it will have a significant impact on domestic gas prices, including differentials between state-level prices. Thus, it will impact Australian gas flows and the economics of future gas production in Australia.
More information on this will be available in Wood Mackenzie’s upcoming report, Australia’s east coast gas market – how LNG changes everything.
Once released, you will be able to find it here.