Gas markets – a bridge too far?

Abstract

The energy market is becoming more globalised and renewables are changing the supply and demand balance. Gas has been suggested as the bridging fuel to the new energy world – but is it a bridge too far? This presentation examines the global gas context and its impact on the Australian east coast gas markets, trends in energy supply options and sign posts for new directions. When the first liquefied natural gas (LNG) train started on Curtis Island, the gas producers had access to more than just the domestic market. The new overseas markets are also interconnected, so the Henry Hub, Brent oil and Chinese gas demand all have an influence on Australia’s east coast gas market. Potential LNG import terminals and net back pricing are changing the domestic gas market. The energy market is moving to renewables. This is not just an anomaly that will correct itself, but is based on lower renewable costs and distribution challenges. Moving relatively small amounts of energy long distances is a major challenge for Australia. Infrastructure, market hubs and sourcing strategies need to compensate for these challenges, and investment is needed to keep pace with the changes. Capital is a global commodity seeking the optimum return for the risk, but unconventionals, such as coal seam gas, are capital hungry. Government policies and support can be the key determinant for not only new investment but sustaining investment to meet existing gas supply contracts. Smart gas buyers will need to be agile and use deeper portfolio approaches for gas supply.