Read part one of this article here.
The natural gas balance
Australia's natural gas production matched consumption until 1989, when the first cargo of LNG was exported from the North West Shelf Venture (NWSV.) Since that time, LNG exports have risen dramatically, and Australia is the third largest LNG exporter in the world. In 2012 and 2013 domestic use fell, and in those two years exports began to surpass consumption for the first time.
Approximately 38% of domestic natural gas supply went to the transformation sector in 2012, chiefly for electricity generation. Energy industry own use accounted for 21% of domestic supply. At the final consumption level, the end use sectors were approximately 56% industrial users, 26% residential customers, 8% commercial and public sector, 5% chemical and petrochemical use, and 4% transport sector. On the production side, more current data is available through calendar year 2014, published by the Australian Department of Industry and Science. Natural gas production rose from 49 773 million m3 in 2012 to 51 526 m3 in 2013 to a new high of 53 527 m3 in 2014.
Australia's natural gas market is segmented into a Northern market, a Western market, and an Eastern market. These markets are not connected via pipeline. The majority of the natural gas developments geared toward LNG are in Western Australia and the Northern Territory. These two states contain approximately 12% of Australia's population, yet their land mass is over 50% of the country. Over 85% of the population resides in three eastern states: New South Wales, Victoria and Queensland, plus the Australian Capital Territory. The state of South Australia accounts for approximately 7% of the population. There are numerous oil and gas fields inland traversing the borders between Queensland, New South Wales, and South Australia. There are also multiple fields offshore and onshore in Victoria, many in the Bass Strait, which includes Australia's famous Gippsland Basin.
Australian government policy has been inconsistent with respect to natural gas. In 2012, the Australian government under former Prime Minister Julia Gillard enacted a carbon tax of AUS$23/t. One of the key goals was to shift electricity generation to natural gas and away from coal, and immediately this stimulated interest in natural gas development and utilisation. On a BTU basis, coal has been less expensive than natural gas. A carbon tax was considered a way to even out this cost disparity, and to reduce the carbon intensity of Australia's economy. But soon after, Prime Ministerial candidate Tony Abbott made repealing the carbon tax a central pledge during his campaign, stating that a repeal would reduce electricity prices and stimulate economic growth. His campaign was successful, and the legislation needed to repeal the carbon tax was passed in July 2014.
The recent drop in global oil prices also is being felt in natural gas markets. Australian domestic gas prices were low historically, but many consumers expected that the rise in LNG exports at international prices would pull up domestic prices. Yet the drop in oil prices has thus far countered the expected increase. Many natural gas customers are growing more price sensitive since oil prices have fallen so dramatically. With close links to changing international markets, Australian consumers, producers, exporters and potential exporters are watching the Asian market with special attention, since the majority of Australia's new investments depend on export markets.
Read part three of this article here.
Written by Nancy Yamaguchi. This is an abridged article taken from the May 2015 issue of Hydrocarbon Engineering.
Read the article online at: https://www.hydrocarbonengineering.com/special-reports/28042015/australian-natural-gas-part-two-669/