Australia is in urgent need of new and diverse sources of gas supply into the domestic market, the country’s Competition & Consumer Commission chairman Rod Sims, said urging the LNG producers to support the domestic market.
Speaking at a conference in Sydney, Sims noted that Australia’s gas supply outlook is “now even worse than it was a year ago,” adding that the LNG producers could develop additional gas for the domestic market instead of selling it all on the LNG spot market.
Referring to the April 2016 inquiry’s description of a “triple whammy” affecting east coast gas supply, Sims said that the introduction of LNG exports tripled the demand for gas, oil prices fell faster than the optimistic forecasts underpinning these projects and regulatory uncertainty and exploration moratoria have significantly limited or delayed, gas supply.
The result of these three factors has brought up a debate about the three LNG projects on Curtis Island near Gladstone, Queensland, the QC LNG, GLNG and Australia Pacific LNG.
Sims said that the ACCC inquiry showed that the country “has and will benefit enormously from the three large LNG projects in Queensland.”
The gas availability is not the issue since the country has significant gas resources, and the three projects have developed gas resources that otherwise would not have been.
“If there is a criticism of the three LNG producers it is that they fell into the usual commodity project trap of assuming then-high $100 plus oil prices would continue, when long-run average prices of around $55 would have been a better planning assumption,” Sims said.
However, neither of the companies that developed the three LNG projects could have foreseen that after their investment decisions were made east coast onshore gas exploration and development would be largely prevented.
Recently, the state of Victoria banned all onshore gas exploration and production which has stopped even conventional gas projects.
With such government decision, Smith adds, “it is difficult to see how people can then criticize the commercial contracts that were freely entered into by the LNG producers at a time when the likely supply outlook was very different.”
LNG World News Staff