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Australia's east coast needs to urgently start importing LNG: EnergyQuest

Sydney — Australia's gas-strapped east coast needs to urgently start importing LNG in order to mitigate a range of risk factors stretching from supply issues to regulatory uncertainties, energy consultancy EnergyQuest said Wednesday.

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It said that its modeling shows gas production in the states of New South Wales, Victoria, South Australia and Tasmania will start falling short of demand by 2022, and that by 2025, annual gas production offshore Victoria will more than halve from current levels, dropping to 146 PJ from 336 PJ in 2018.

Supply from Queensland would need to increase to nearly one third of southern supply to fill the gap, and moving that volume would run into constraints along the QSN Link pipeline and the Moomba Sydney pipeline, it said, adding that more Queensland gas would also only be a short-term palliative to the problem.

"We expect Queensland gas production to start declining from 2025, due to a shortage of quality gas resources," EnergyQuest CEO Graeme Bethune said.

"Queensland also has investment risks. Maximizing production from Queensland's coal seam gas fields requires investors to be sufficiently confident of the investment climate to drill around 1,000 new wells a year at a total cost of A$1 billion-A$2 billion," Bethune said.

"The southern states need a new permanent source of gas supply, which can only be met by the proposed LNG import projects," EnergyQuest said.

There are currently five LNG import project plans on the table, and questions have been raised about how many of these would be justified. EnergyQuest said that plants in Sydney, New South Wales, and Melbourne, Victoria, should be built, and criticized state governments for slow action in addressing the issue.

"Timing is critical and it is concerning that the regulatory processes in Victoria and NSW are dragging out, delaying decisions to go ahead with these new terminals," Bethune said.

"Here, we have investors willing to spend their own money to alleviate the east coast gas shortage, but there does not appear to be any sense of urgency on expediting the approval process," he said.

EnergyQuest also noted that developing LNG import terminals sooner rather than later would reduce the risks associated with further regulatory intervention in diverting Gladstone-based LNG to the domestic east coast market.

In a preview to Wednesday's report, EnergyQuest said last week that Gladstone's three LNG export plants -- the Origin-ConocoPhillips Australia Pacific LNG, the Santos-led Gladstone LNG and Shell's Queensland Curtis LNG -- face the prospect of needing to shut two of their six trains amid political pressure to cover supply shortfalls.

Of the five LNG import project plans that have been announced, two are proposed for Victoria, two for New South Wales and one for South Australia.

The Victorian projects are AGL's Crib Point and one by ExxonMobil, which has not specified where the project would be located. The NSW-based ones are Australian Industrial Energy's Port Kembla Project and EPIK's Newcastle LNG. Meanwhile, Venice Energy has a plan for an LNG project at Port Adelaide in South Australia.

"LNG importing is the only certain supply option for the east coast after 2026," Bethune added.

-- Nathan Richardson,

-- Edited by Shashwat Pradhan,