AEMO Managing Director and Chief Executive Officer Matt Zema said that while there are no gas supply shortfalls forecast until 2029, the 2016 GSOO shows that developed gas reserves in eastern and south-eastern Australia are only sufficient to meet forecast gas demand until 2019.
“This means that currently undeveloped gas reserves, including those reported as contingent resources and possible reserves, will be required to “˜come online’ to meet forecast demand as early as 2019 when developed reserves are forecast to start to deplete,”? said Mr Zema.
Mr Zema said that the need to convert undeveloped gas reserves and resources into working gas fields from 2019 reflects forecasts from AEMO’s 2015 National Gas Forecasting Report (NGFR), which projects total annual gas consumption in eastern and south-eastern Australia to double over the next five years to 2020 as Queensland’s liquefied natural gas export facilities ramp up production.
The 2016 GSOO uses the demand forecast scenarios from the 2015 NGFR, and production and supply information provided by industry, including wholesale gas contract information, to assess the adequacy of gas infrastructure and resources to meet demand in eastern and south-eastern Australia to 2035. The GSOO is based on data provided by industry participants up to 10 December 2015.
“The need to convert undeveloped gas reserves and resources into working gas fields from 2019 becomes clearer still when we take export LNG demand out of the picture,”? said Mr Zema.
The figure displayed shows eastern and south-eastern Australia’s domestic gas demand (excluding export LNG demand) under the medium (considered most likely) scenario.1 The forecast shows that as developed gas reserves decline from 2019, the timely development of undeveloped gas reserves and resources will be key to ensuring there is sufficient gas supply to meet forecast domestic demand to 2035. Contingent resources and possible reserves are forecast to start producing from 2020, while highly uncertain prospective resources are forecast to be required from 2026, to meet domestic demand.
“It’s important we highlight this now, as there are technical and commercial uncertainties associated with developing contingent resources and possible gas reserves,”? said Mr Zema. “And reducing this uncertainty requires the timely development of these resources at a time when low oil prices have led to a significant fall in revenue streams and reductions in capital budgets for gas developers and producers, heightening the risk that some resource development may not be commercially viable.”?
The 2016 GSOO reports that gas transmission and processing infrastructure is adequate to meet forecast total domestic gas and export LNG demand until 2029. Shortfalls relating to projected pipeline and facility constraints, and forecast increased demand for gas-powered generation (GPG), are observed in Queensland (Gladstone and Townsville) from 2029, totalling 50 petajoules across the 20-year outlook to 2035.
“The GSOO medium scenario is AEMO’s best estimate of the future based on current information as provided by industry. However the GSOO includes supply and demand input assumptions that are highly uncertain, as changes in economic conditions, policy settings, global oil prices, and weather events continue to increase gas market volatility, and impact investment and development decisions,”? said Mr Zema. “To explore this further, we have conducted sensitivity analysis around the medium scenario to test the impact of some of these factors on the supply adequacy assessment.”?
Sensitivity modelling shows gas supply shortfalls are projected to increase under drought conditions (due to increased demand for GPG), or if gas producers reduce capital expenditure in response to sustained low oil prices and/or higher production costs. Conversely, a new supply source from the Northern Gas Pipeline is forecast to extend the life of developed gas reserves by up to three years.
“AEMO continues to liaise with gas industry participants and monitor key uncertainties facing the sector, and we will update the GSOO if there are material changes to market conditions,”? said Mr Zema.