'Difficult spot': The Curtis Island site sucking Australia's gas

SANTOS'S Curtis Island venture is guzzling up to 500 terajoules of domestic gas a day to help fill its export deals, straining the east coast gas supply.

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According to a report by Energy Edge, Santos has at times been buying almost half of the whole east coast's energy gas demand to fill its two production trains for international export.

BIG HURDLE: Santos GLNG has started bring gas into its production Train 1 on curtis Island.
BIG HURDLE: Santos GLNG has started bring gas into its production Train 1 on curtis Island.

Using a range of public sources, the market analysts reported that the $24.1 billion GLNG site has bought between 500-600 terajoules of CSG a day for its own production.

In comparison, the whole east coast market from Queensland, New South Wales, Victoria and Tasmania needs about 1250 terajoules a day.

Some analysts argue this should have been expected, considering the GLNG venture was approved by the Federal Government on the basis that it would use some third party gas.

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Energy Edge's Josh Stabler said the extreme purchases were to make up for Santos's own failed gas wells.

"However, Santos GLNG has had some lower performing fields in the Surat Basin and remains short (net buyer) from the market," Mr Stabler said.

On average Santos is buying between 300-400 terajoules a day for export.

"The shortfall in gas has been made up by purchases from domestic parties including other LNG facilities, retailers, generators and end users," Mr Stabler said.

"The combination of increased LNG gas demand, limited gas supply in the southern gas markets (New South Wales and Victoria's supply constraints), and reduced production from coal-fired electricity generation assets, have driven up gas and electricity prices across the eastern markets."

 

QGC LNG ship Methane Rita Andrea.
QGC LNG ship Methane Rita Andrea. CONTRIBUTED

Oil and gas consultancy group Wood Mackenzie analyst Saul Kavonic said GLNG was in a "uniquely difficult spot".

While owners of APLNG and QCLNG told the Prime Minister they would supply more gas to the domestic market, Santos said they would put the recommendation "on notice".

Now it's feared GLNG won't be able to make a commitment to supply the domestic market because of its shortfalls.

"Unlike neighbouring projects QCLNG and APLNG, which have the flexibility to and will deliver gas into the domestic market, GLNG does not have the equity reserves position to be a net supplier to the domestic gas market," Mr Kavonic said.

Wood Mackenzie expects GLNG to rely on third party gas to supply almost 40% of its gas feedstock for the next five years to fill its production trains for exports to Asian countries.

Mr Kavonic said that would equate to about a fifth of the east coast gas supply, which would otherwise been available to the domestic market.

"While there may be potential for domestic gas diversions from GLNG on a commercial basis, GLNG has the least flexibility here given its LNG contract position, reserves shortage, and JV misalignment preventing renegotiation of its main third party gas supply agreement," Mr Kavonic said.

Santos declined to comment.