The second gas statement of opportunities has been released by the Independent Market Operator outlining trends and developments in the Western Australian gas industry.

The second GSOO builds upon the initial GSOO published in July 2013, providing forecasts of WA domestic gas demand and supply for the 2014 to 2023 period, an early view of gas flow data from the IMO’s Gas Bulletin Board as well as addressing some of the feedback raised at the stakeholder forum in October 2013.

Additional topics examined include:

  • an investigation into the capability of the North West Shelf Joint Venture to continue to supply to the domestic market;
  • an investigation of the quantum of reserves supporting each production facility; and
  • modelling assumptions that underpin of gas supply and demand.

Key findings for the 2014 to 2023 period include:

• there is likely to be adequate potential gas supply to meet existing contracted gas demand and expected growth in gas demand in the domestic market for the 2014 to 2020 period assuming that commercially acceptable terms can be agreed between suppliers and customers;

• for the 2021 to 2023 period, the availability of gas to the WA domestic market is likely to be sufficient if the North West Shelf (NWS) Joint Ventures (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 (as reflected in the Lower potential supply forecasts);

• estimates suggest while the NWS has sufficient 2P 2 reserves for the forecast period, 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:

  1. the outcomes of ongoing discussions between the WA Government and the NWS JVs that relate to the status of remaining NWS reserves;
  2.  investment decisions required by the NWS JVs to access remaining undeveloped reserves;
  3. 2 Proven and probable gas reserves. 2P is an estimate of reserves with medium confidence, also referred to as ‘P50’;
  4. investment required to extend the life of the aging (30-year old) domestic gas production facility the Karratha Gas Plant (KGP), each of which will involve consideration of the commerciality and profitability of ongoing operations at the KGP;

• the average annual growth in WA’s potential domestic gas supply is forecast to be between -0.8% and 1.7% per annum, dependent on the availability of gas from the NWS, while the average annual growth in WA’s domestic gas demand for existing and sanctioned projects is forecast to be 0.4% per annum;

• consistent with the July 2013 GSOO, gas production capacity is anticipated to be almost double the forecast level of domestic gas demand by the end of 2023;

• gas demand growth is anticipated to be higher in areas located outside the South West interconnected system (SWIS) compared to within the SWIS;

• total gas demand in WA, including both LNG and floating LNG (FLNG) production (feedstock and processing) and domestic demand, is forecast to grow at approximately 9.5% per annum until 2023 as a result of the expected commencement of production at the Gorgon and Wheatstone LNG and Prelude FLNG projects during the 2014 to 2023 period;

• existing gas resources are forecast to be sufficient to meet forecast domestic, LNG and FLNG demand levels for the forecast period, however longer-term supplies rely heavily on WA’s unconventional gas resources (tight and shale resources), which have not yet been verified;

• WA is highly reliant on the Carnarvon Basin for gas reserves and resources and more consideration may be warranted to encourage the diversity of gas supply from other gas basins (e.g. the Browse and Canning Basins) within WA; and

• there are several medium to long-term growth challenges confronting the WA LNG market which may have an impact into the future, but are not expected to affect the domestic natural gas sector in the forecast period, such as:

  1. the potential end of premium Asia Pacific LNG pricing;
  2. a move toward shorter-term LNG contracts in the Asia Pacific region;
  3. the high relative cost of LNG production in Australia; and  o the threat of unconventional gas entering the international gas market.

The full report can be viewed here.

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