Commercial realities of the proposed LNG import terminals on the east coast of Australia
Nicholas MumfordMumford Commercial Consulting, 167 Flinders Street, Adealaide, SA 5000, Australia.Email: nicholas@mumfordcommercial.com.au
The APPEA Journal 59(2) 663-666 https://doi.org/10.1071/AJ18175
Accepted: 12 March 2019 Published: 17 June 2019
Abstract
Recent government intervention in the East Australian Gas Market (EAGM) may have temporarily settled short-term supply availability concerns; however, gas prices in the EAGM now inevitably trend with the spot LNG Netback Price. Notwithstanding, supply remains tight, due to lack of upstream investment from overhang of some state government policies restricting exploration and development, and the lack of investment stemming from the recent period of low oil prices. Save further government intervention to retrospectively reserve already contractually committed export supply from the three Queensland LNG export projects, there is no ‘quick fix’ solution to fully address market tightness in the short to medium term from indigenous sources of gas supply. The only real solution to ensure security of supply over a reasonable tenure is to import LNG into the EAGM. However, the clear commercial reality of gas supply sourced from an LNG import terminal is that it can only be supported by high gas prices, albeit also providing other market benefits such as peaking capacity and storage. Without a solution to the EAGM supply–demand issue, there will be demand destruction as industrial users and electricity power generators seek alternatives to gas supply or simply cease operations. Most indigenous gas supply alternatives to LNG imports stem from the northern states and may provide solutions over the longer term (e.g. Beetaloo Basin), but do not solve the immediate need for gas supply in the southern states by 2020/21. New supply from the north is in any event physically pipeline-constrained over this timeframe.
Keywords: ACCC, demand destruction, domestic market, Eastern Australian Gas Market, gas, gas prices, gas storage, gas supply, government intervention, NEM, New South Wales, peaking capacity, South Australia, southern states, supply–demand, Victoria.
Since 2015, Nicholas Mumford has been the Principal Consultant and Managing Director of Mumford Commercial Consulting, a small but successfully established consulting firm focusing on commercial dealings in the energy and resources sectors. Prior to 2015, Nicholas had almost 20 years of industry experience, largely with Santos, Shell, ElectraNet and Zonge Geophysics, spanning the oil and gas, electricity and resources sectors – most recently with Santos as Commercial Manager Eastern Australia, including responsibilities for gas marketing, third party processing and gas storage. Graduating with a Bachelor of Science (Honours Geophysics) in 1997 from the University of Adelaide, Nicholas’ formal qualifications include an MBA and he is an active member of the Australian Institute of Energy and Australian Institute of Co. Directors. Nicholas is a seasoned commercial professional with a strong technical background. Various Australian and international postings have provided Nicholas with a wealth of expertise in commercial structures and contracts, commercial and MandA transaction negotiations, commercial due diligence, business strategy development and product marketing (e.g. natural gas) supporting large-scale capital-intensive energy projects. He has significant experience in leading and managing technical and commercial teams, including a focus on client delivery in these areas as a consultant to industry since 2015. Nicholas has a career history of technical-commercial energy project assessments, including developing strategies that support new energy market entry and/or investment decisions such as the development of the Queensland LNG export projects. Nicholas’ experience from the commercial assessment of energy assets provides a robust understanding of the key drivers required for sound investment decision making. |
References
ACCC (2018). Gas inquiry 2017–2020. Interim report. Australian Competition and Consumer CommissionAIG (2018). From worse to bad: Eastern Australian energy prices. Australian Industry Group
