East coast gas crisis “could close” a Curtis Island production train

The push for domestic gas supply could mean that one or possibly two of the Curtis Island LNG trains could be shut down and Australia would have to deal with a supply shortage through imports, according to a leading energy analyst.


Jun 05, 2020, updated Jun 05, 2020
Santos's Curtis Island LNG project near Gladstone

Santos's Curtis Island LNG project near Gladstone

Another five major projects, worth about $60 billion, were in limbo, according to the EnergyQuest report.

They were the Crux, Barossa, Scarborough, Pluto 2 and Browse projects.

The development of the six production trains on Curtis Island, near Gladstone, cost $70 billion when they were completed in 2014-15 to export Queensland’s coal seam gas to the world and EnergyQuest said exports hit a record 2 million tonnes in April.

EnergyQuest’s Graeme Bethune said over the next 10 years supply constraints will become increasingly evident with the decline of production from offshore Victoria and the absence of major new gas discoveries.

“Any developments onshore Victoria or NSW will provide some supply increments but are unlikely to materially shift the long-term demand-supply imbalance.

“Development of the Arrow Energy Surat Basin acreage will provide some domestic gas, but is most likely to feed QCLNG.

“We expect one and possibly two of the Gladstone LNG trains to be closed as increased gas volumes are diverted from the LNG projects to the domestic market.”

“The gap between demand and supply will also increasingly rely on LNG imports at international prices.”

Bethune said an ongoing concern was that the east coast was “fundamentally short of gas”.

“The volume of gas capable of being commercialised at market prices is exaggerated and what gas there is has been oversold,” the report.

“Over the last five years the east coast has produced 8400 petajoules of gas but proved and probable gas reserves have shrunk by 13,100 petajoules. The difference written off is 4700 petajoules, of what five years ago was regarded as solid gas reserves.

“As we get into the 2030s the east coast LNG contracts will begin to tail-off. At the same time, as the closure of coal-fired power generation accelerates, the demand for natural gas to back-up renewables is likely to grow.”

But Bethune also warned that geopolitical attitudes had changed.

“Exporting LNG to China and thereby reducing pollution was once seen as a good thing. Now exporting to China is seen as over-dependence on a country with whom we are no longer on speaking terms,” he said.

The report has tipped that Australia’s 2020 LNG exports will earn about $50 billion and had already achieved about $38 billion in 9 months to the end of March.

It said there Australia’s exports were expected to continue to hold at near-record levels and were underpinned by strong demand in north Asia.

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