Outlook for the WA Gas

Market

March 2016

Approach:1. Reserves

2. Plant capacity

3. Supply

4. Demand

5. Prices

Location – the Big Picture

Gas resources

WA Reserves and resources – conventional gas

How much do we use?

900TJ/d

3,800TJ/d

2,900TJ/d

How long will it last?

At the current rate pre-Gorgon/Wheatstone

about 50 years.

For domestic use only

about 190 years

Plus non-conventional and new discoveries

We have a lot of gas

Resources are not a constraint on availability

Domestic gas plant processing capacity

Utilisation -2014

Potential Supply factors

Gas supply is not an issue and nor is

processing plant capacity

Supply could be even further enhanced

by Perth Basin, non-conventional, Pluto

and maybe Browse Basin

We have very large reserves and excess

capacity

Demand – historical growth

4%/year

1.75%/year

Gas consumers

Demand changes:Alumina (30%)

Closure more likely than expansion

Grid electricity (30%)

excess generation capacity for 10 years

possible retirements

DSM may be scaled back

Mine site electricity (20%)

Only gold has medium term growth outlook

Nickel could see closures -40TJ/day

Gas processing (Ammonia/LNG/LPG) (12%)

Transport use of LNG has long term potential

Commercial and residential (5%) – slow growth

Demand

Historic industries

Alumina and nickel more negative than plus

Grid electricity limited growth

Blue sky potential

Transport fuels

Methanol

Fertilisers

Coal generation replacement

0.1%pa

0.9%pa

Gas demand forecast

Supply, demand and capacity

How will the market adjust:

No new contracts other than renewals

Capacity idled

Supply diverted to other markets

LNG

Processing

LNG netback value

IMO price forecast

Price outlook Reserve and capacity overhang for at least 5 years and

probably 10

LNG oversupply for a similar duration

LNG producers likely to idle processing capacity and defer

production

LNG suppliers reluctant to make low price domestic sales

The government can pressure some sales “if commercial”

Lack of joint selling and new suppliers will increase sale

potential

New demand will only come as a result of low prices

Domestic gas price rises appear unlikely for medium term

outlook – less than $6 at plant gate is best guess

Economics Consulting Services33 Ventnor Avenue, West PerthWestern Australia

www.econs.com.au