The Queensland gas market lacks liquidity, with gas in short supply for new contracts both pre- and post-2015.
That, coupled with the uncertainties of domestic and international LNG and future gas prices, is contributing to a high level of uncertainty in the market according to the 2012 Gas Market Review Report released last week by Queensland Energy Minister Mark McArdle.
The Queensland Gas Market Advisor has cautioned that if the next 12 months does not bring about improvement in the future domestic supply situation, there could be insufficient time for development, consideration, consultation and implementation of measures that could be implemented by government to address a domestic supply constraint between the years 2015 and 2020.
The report looks at factors including future pricing, supply-demand balance and peak demand, as well as barriers to market growth and increased competition in Queensland.
Gas exploration and production in Queensland has a cyclical development pattern, with the state undergoing a lengthy period of incremental development interspersed with periods of major investment, projects and growth.
Since 2008, Queensland has experienced unprecedented growth with the development of the coal seam gas (CSG) to liquefied natural gas (LNG) export industry. The overwhelming majority of Australia’s current proven plus probable reserves are found in Queensland — more than 93 per cent.
McArdle said the review found the dominance of LNG in Queensland created a high level of uncertainty for domestic supply, pricing and overall demand.
“Queensland is experiencing the benefits of a period of very high gas industry growth through the development of the LNG industry,” he said.
McArdle noted that some major domestic gas users had raised concerns about the affordability and security of supply, particularly as it pertains to securing medium and long-term contracts.
“While our state’s growing gas supply industry will underpin strong economic growth in national and international gas export markets, a secure, accessible and reliable domestic gas supply is a key ingredient in supporting wider Queensland growth,” he said.
Earlier this month, the Newman Government held a high-level meeting with the gas industry to address growing concerns about domestic supply.
Following the meeting, in a letter dated September 11, 2012, the Australian Petroleum Production and Exploration Association Limited (APPEA) released a statement in which it said it would “continue to play a co-ordinating role in the event that a major gas user claims difficultly in sourcing offers for supply.”
“In the first instance, we recommend that such companies be referred to the list of key contacts in selected APPEA member companies who handle enquiries from major gas customers which was provided to the Queensland Gas Market Advisor on 12 June 2012,” the statement continued.
“Should further recourse be required, the Chief Executives of gas companies may be contacted, and APPEA is also available to facilitate contact between users and suppliers.”
McArdle vowed to continue to monitor the situation, adding that the industry had assured him that there was more than enough gas in the ground to supply demand for both the export and domestic markets.
“Over the next 12 months, the gas industry should demonstrate it will deliver on the commitments it has made to support the domestic market,” he said.