Gladstone LNG 'oversold' in lock-in contracts, shortage looms
INDUSTRY experts are urging Gladstone's three liquefied natural gas plants to keep more of its exports in Australia instead of Asia.
Local gas demand is one of the growing issues facing the three sites, on top of fears they have insufficient supplies to fulfil long term international contracts.
EnergyQuest declared yesterday that Gladstone's gas has been "oversold" and there were "serious issues" with the long-term security of Gladstone's gas supplies.
Chief executive officer Dr Graeme Bethume said there was a supply gap for the east coast market of about 172 petajoules by 2020, which would build to 205PJ by 2025.
Domestic gas market fears are rife too, with prices doubling compared to 2015, caused by a boost in demand and a lack of supply.
The warning was echoed by AGL Energy, which claimed we could see a gas shortage as soon as this winter, if Gladstone's three LNG sites don't sell more gas to local users.
AGL head of wholesale markets Richard Wrightson told the Australian Financial review, "If there's an exceptionally mild winter then we could scrape through, but if it's a cold winter, no".
The shortfall has been caused by a misconception about the quality of the gas reserves used by the east coast market, their East Coast Gas Report found.
Dr Bethume said their "highly forensic review" found the amount of high quality gas reserves earmarked for the east coast market was far smaller than anticipated.
He said just 50% of 2P gas reserves, considered the best for export, were actually suitable for commercial production.
Dr Bethume's views on the market were slightly more optimistic, claiming it's more of a long-term issue.
"The most pessimistic view (is) the project wouldn't be able to fulfil the full contracts," he said.
"For example, some of them have 20-year contracts, they could be short 10 years."
He expects Gladstone's three LNG sites to sell more gas domestically come winter, as demand drives up by July.
"What's relevant here is that winter in Australia is summer in north Asia (the major gas user), meaning their demand for gas is lower," Dr Bethume said.
"We'd expect export prices to be lower in July and August than they are now, but there will be strong domestic prices.
"That's a natural opportunity to divert some of the Queensland gas to the domestic market."
Oil and gas lobby group APPEA told The Observer this week the industry was aware of the domestic needs.
"The only way to meet the needs of all gas users is to urgently increase gas supply," APPEA Queensland director Rhys Turner said.
He said restrictions would deliver less supply.