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Gas Statement of Opportunities (GSOO) January 2014

11 March 2014 – WA Power and Gas Conference Allan Dawson

Agenda

•  Gas Services Information – the new GBB and GSOO

•  GSOO – Objectives and requirements

•  GSOO – Key Issues

•  Responses to industry feedback on the first GSOO

•  Key Findings of the January 2014 GOO •  Supply-demand balance •  North West Shelf

•  Resources and Reserves

•  Future challenges for the WA LNG sector

•  Comparison of forecasts in July 2013 GSOO

•  GBB data

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Gas Services Information – GBB & GSOO

•  Gas Services Information Act 2012 enacted by the WA Government in April 2012, providing for the establishment of the GBB and the GSOO

•  Initial provisions of the Gas Services Information Regulations

2012 were made in June 2012, formally appointing the IMO •  Remaining GSI Regulations and Rules commenced on 29 June

2013 •  GBB commenced operation on 1 August 2013 •  First GSOO published July 2013, second GSOO published

January 2014

GSOO – Purpose and Objectives

•  Objectives of GBB and GSOO are to promote the long term interests of consumers of natural gas in relation to: a) the security, reliability and availability of natural gas supply b) the efficient operation and use of natural gas services c) the efficient investment in natural gas services d) the facilitation of competition in the use of natural gas services

   

•  The GSOO is a periodic (annual) statement the primary purpose of which is to include information and assessments relating to medium to long term natural gas supply and demand and natural gas transmission and storage capacity in Western Australia

(see sections 5 and 6 of the Gas Services Information Act 2012)

GSOO requirements

GSOO must contain information about: •  natural gas reserves (including prospective or contingent

resources) •  gas production facilities •  gas transmission pipelines and pipeline augmentations •  gas storage facilities •  large facilities using gas

GSOO must contain, for the period of at least 10 years, projected information about: •  capacity of gas production facilities, gas transmission pipelines

and gas storage facilities including constraints affecting those facilities

•  demand for natural gas (see Part 6 of the Gas Services Information Rules)

GSOO – Key Issues GSOO provides further independent insight in the WA domestic gas market:

•  Recognises limitations of using production capacity as a measure of supply – forecasts potential gas supply

•  Focuses on topics of industry concern (e.g. North West Shelf)

•  Provides estimates of gas usage by WA’s LNG sector

•  Provides coverage on international and Asia Pacific LNG markets and the potential impact on domestic gas

•  Considers resources in a range of basins that could potentially supply the WA domestic market

•  Reports on utilisation of existing gas transmission infrastructure

•  Provides a view of issues in the near future that may affect the WA domestic and LNG markets  

Response to industry feedback The following changes implemented in January 2014 due to industry feedback: •  Increased focus on NWS (reserves, contractual commitments) •  Linkage of reserves to production facilities •  Consideration of different production costs for each facility •  Increase in assumed price elasticity of demand •  Corrections in price forecast model •  Reduction of time lag between LNG price and domestic gas price

Still under consideration: •  Inclusion of gas demand projects yet to reach final investment

decision •  Impact of US LNG exports on LNG pricing

Supply and Demand Balance, 2014 – 2023

Source: IMO’s Gas Statement of Opportunities – January 2014

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Qua

ntity

(TJ/

day)

Year

Base Demand Scenario Lower Potential Supply Forecasts Upper Potential Supply Forecasts Gas Production Capacity

Key Findings – Supply and Demand Balance

•  For the 2014 to 2020 period, likely to be adequate gas supply to meet existing contracted gas demand and expected growth in gas demand in the domestic market assuming that commercially acceptable terms can be agreed

•  For the 2021 to 2023 period:

•  the availability of gas to the WA domestic market is likely to be sufficient if the NWS JVs supply at levels considered in the Upper potential supply forecasts, but

•  may not be sufficient (at forecast prices) to meet forecast domestic demand if the NWS JVs do not supply gas to the domestic market beyond existing contracts

 

Key Findings – North West Shelf

•  The NWS appears to have sufficient 2P reserves for the forecast period

•  But the availability of gas supply from the NWS JVs is pivotal to

the domestic gas supply-demand balance for the 2021 to 2023 period and is dependent on:

•  the outcomes of ongoing discussions between the WA Government and the NWS JVs about the status of remaining NWS reserves

•  investment decisions required by the NWS JVs to access remaining undeveloped reserves

•  investment required to extend the life of the aging domestic gas production facility at the Karratha Gas Plant

•  Opportunities for other producers ???

Other Key Findings

•  Existing gas resources are forecast to be sufficient to meet forecast domestic and LNG (including FLNG) demand levels for at least the next ten years

•  WA is highly reliant on the Carnarvon Basin for gas reserves and

resources •  Longer‑term supplies rely heavily on WA’s unconventional gas

resources (tight and shale resources), which have not yet been verified

Future Challenges for the WA LNG Sector

•  A number of medium to long-term growth challenges confronting the WA LNG market, such as •  the potential end of premium Asia Pacific LNG pricing •  a move toward shorter-term LNG contracts in the Asia

Pacific region •  the high relative cost of LNG production in Australia •  the threat of unconventional gas entering the international

gas market •  These factors are not expected to affect the domestic gas sector

in the 10-year forecast period

Demand forecasts – comparison of July 2013 and Jan 2014 GSOOs

Source: IMO’s Gas Statements of Opportunities, July 2013 and January 2014

900

950

1,000

1,050

1,100

1,150

1,200

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Qua

ntity

(TJ/

day)

Year

Low Scenario (January 2014) Base Scenario (January 2014) High Scenario (January 2014)

Low Scenario (July 2013) Base Scenario (July 2013) High Scenario (July 2013)

Supply forecasts – comparison of July 2013 and Jan 2014 GSOOs

Source: IMO’s Gas Statements of Opportunities, July 2013 and January 2014

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Qua

ntity

(TJ/

day)

YearBase Supply Scenario - July 2013 Lower Potential Supply Forecasts - January 2014

Processing Capacity Upper Potential Supply Forecasts - January 2014

WA’s Gas Bulletin Board (GBB) •  Public website that displays near-term information about gas

production, storage, transportation and demand:

•  Forecasts of daily gas production, storage and transmission capacity, gas flows (pipeline and storage)

•  12 month ahead forecasts of changes to the capacity of production, transmission and storage facilities (maintenance reports)

•  Daily actuals of: •  gas production by facility •  pipeline and storage gas flows •  gas consumption by large user facilities

•  Emergency Management Facility – restricted access part of the GBB activated in an emergency

•  January 2014 GSOO includes GBB actuals from 1 August 2013

GBB – Facility Production – 1 August to 31 December 2013

Source: IMO Gas Bulletin Board

0

200

400

600

800

1,000

1,200

1,400

1,600

Qua

ntity

(TJ/

day)

Gas Day

Dongara Beharra Springs Devil CreekMacedon Varanus Island NWSRed Gully Total Production Capacity (LHS)

GBB – DBNGP Gas Flows (by Zone) – 1 August to 31 December 2013

Source: IMO Gas Bulletin Board

0

200

400

600

800

1,000

1,200

Qua

ntity

(TJ/

day)

Gas Day

South West Metro Dampier

GBB – Mondarra Injection/Withdrawal – 1 August to 31 December 2013

Source: IMO Gas Bulletin Board

0

10

20

30

40

50

60

70

80

90

100

Qua

ntity

(TJ/

day)

Gas Day

Quantity of Gas Injected Quantity of Gas Withdrawn

GBB – Gas Consumption by Industry – 1 August to 31 December 2013

Source: IMO Gas Bulletin Board

31%

7%

13%6%

25%

19%

Electricity Generation

Gas Distribution Network

Industrial

Petroleum, LPG & Domestic LNG (noexports) Processing

Minerals Processing

Mining

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