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East coast Australia no longer forecast to see gas shortfall: energy operator

Singapore — The Australian Energy Market Operator said Friday that it is no longerforecasting the country's east coast to experience a gas shortfall in the nearfuture, crediting the improved outlook, in part, to the federal government'sLNG export control measures introduced last year.

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A change in international market dynamics, lower demand for gas-poweredgeneration and new pipeline interconnections were cited, along with theso-called Australian domestic gas supply mechanism as driving the healthierforecast.

"There are no gas supply gaps forecast in 2019, or in the short term,under expected conditions, although some field expansions are needed," AEMOsaid in its 2018 gas statement of opportunities report Friday.

However, Wood Mackenzie still sees a potential gas shortfall startingbetween 2023 and 2025, significantly earlier than the AEMO's estimate of 2030,the research and consultancy firm said Friday.

"Gas will need to be diverted from Queensland to ensure east coast demandcan be met," Wood Mackenzie's head of Asia-Pacific gas and LNG Nicholas Brownesaid. "If diversions do occur then it is unlikely that exports will ramp up tomaximum LNG production capacity from 2030 as the GSOO indicates."

This means east coast gas prices would need to be on a netback parity tothe price achievable in Asian markets, which is likely to tighten in the early2020s, Browne added. "...so we can expect Australian gas prices to rise, whichmay lead to industrial demand destruction in some industries where gas is aprimary cost."

The AEMO's revised outlook follows gas supply concerns raised by AEMO inrecent years that has in turned spurred the government to introduce the ADGSM. The Australian Petroleum Production and Exploration Association welcomedAEMO's statement.

"In the past year we have seen significant announcements from ArrowEnergy, Shell Australia, Senex, Cooper Energy, Strike Energy, GLNG, AustraliaPacific LNG, Origin Energy and Santos to bring on new supply in various partsof eastern Australia," the association's chief executive Malcolm Roberts saidFriday.

"Together with the revised demand and supply outlooks developed by AEMO,this means the industry has met in full the commitments provided to thegovernment in 2017," he said.

-- Abache Abreu, abache.abreu@spglobal.com

-- Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com