18 August 2017
In my last article, I explained how gas prices in Australia are affected by market dynamics, gas sources and markets, import and export projects, even pipeline capacity. A strong understanding of those drivers can help you navigate the gas value chain, providing you with the opportunity to reduce costs and create real value for your business. For this article, I wanted to provide an easy-to-understand overview of the gas supply chain in south-eastern Australia, highlighting where our gas comes from and how we use it.
South-eastern Australia’s gas supply chain
When we discuss the Australian gas market, it’s important to note there are two distinct markets. The south-eastern market connects Queensland, New South Wales, Victoria, Tasmania and South Australia, with the recent completion of the Northern Gas Pipeline bringing the Northern Territory into the fold. Transmission pipelines link these multiple regions, managing supply and demand. The second market encompasses Western Australia which isn’t linked to the east coast as the vast distances required to be traversed by pipelines precludes connecting the two markets. The Western Australian gas market has seen its own share of price volatility over the past decade, but as supply and demand has balanced, gas prices have been returning towards historical norms. This article focuses on the south-eastern Australia gas market as this is where we’ve seen the greatest supply and demand change over the last few years.
The graphic below shows the south-eastern Australia gas supply chain at a glance. On current usage projections, south-eastern Australia’s total 2P (Proved and Probable) gas reserves (both developed and undeveloped) will be exhausted by around 2040, requiring the discovery and development of new and contingent resources to meet demand. About half of all Australian homes are hooked up to the gas network via more than 88,000 km of distribution pipelines. Residential and small businesses use about 37% of all gas supplied, with 49% used in commercial and industrial facilities, and the remaining 14% used in power generation.
Eastern Australia has three major LNG export terminals. When combined with west coast production, this means Australia is the second largest LNG exporter in the world. There are currently five announced LNG import terminals being considered in Australia. These projects are expected to bring gas to the southern states to assist with supply as legacy gas fields are depleted. The first LNG import terminal is planned to open sometime in 2021.
Read Part 1 of Demystifying the gas market: How to navigate the gas value chain to reduce costs and create value for your business: https://www.advisian.com/en-us/global-perspectives/demystifying-the-gas-market.