A major theme of this report (by EnergyQuest) is the federal government’s proposed takeover of the east coast gas market, throwing out the OECD gas market rule book with a move to cost-based pricing.
Just as the government was implementing its gas price cap, east coast prices were coming down anyway with the summer season surge in solar generation. The federal government interventions are covered in detail in this report.
There are also increasing warnings about botched decarbonisation: fossil fuel generators closing more quickly than they can be replaced with renewables. Australia has also had its share of freak weather, namely the widespread flooding, which has affected east coast gas production and prices.
However, the good news on the east coast is the 121% 2P gas reserves replacement ratio in 2022. Reserves increased by more than production, in the Surat Basin by 635 PJ and in the Bowen Basin by 186 PJ. Despite the dire predictions, east coast conventional gas production reached a five-year high in 2022. There are certainly green shoots appearing but with the risk that they will be killed by the government intervention.
The report is not only about the east coast. Gas prices are rising in Western Australia and recent disruptions have raised concerns about gas supply security. At the same time, a drilling boom is underway in the Perth Basin, which is also experiencing an M&A boom.
LNG exports (some of which the government is threatening to block) earned Australia an eye-watering $91 billion in export revenue in 2022, despite lower Chinese LNG demand.
With the reforms proposed by the Albanese Government to the Safeguard Mechanism, Australia may finally get an emissions trading scheme. However, reaching net zero is a daunting task. The IMF estimates that a carbon price of $260 per tonne, not $75, would be needed for Australia to reach its 2030 emissions reduction target.
Other highlights include:
- National petroleum production set a new record for the ninth consecutive year in 2022, but the winning streak could be about to end. Total petroleum production increased by 1.5% yoy to 1,098 MMboe.
- Gorgon was Australia’s single largest petroleum producer and a key contributor to the 2022 national record.
- Short-term east coast gas prices averaged $17.78/GJ in Q4, up by 68.8% qoq from an average $10.53/GJ in Q4 2021 but down 31.5% from the Q3 2022 average of $25.97/GJ.
- In Q4 2022, Woodside retained the title of Australia’s largest producer of conventional domestic gas, which it claimed from Santos for the first time in Q3 2022.
- During Q4 2022, NEM gas-fired generation averaged 905 MW, 9% lower than Q4 2021. This was the lowest quarterly output since Q1 2004, and the lowest Q4 since 2000.
- NEM coal generation (CPG) was down by 2.1 TWh qoq (7%), to 56.0% market share in Q4, from 60.4% in Q4 2021.
- Record LNG shipments combined with strong growth in domestic production from the east and west coast markets lifted total natural gas and ethane production to a record 5,492 PJ in 2022, up 2.4% yoy.
- National oil production in 2022 continued its long slow decline.
- Chevron, Shell and Woodside dominated Australian petroleum production, accounting for 54.2% of Australian output in 2022 and 46.5% of output in Q4 2022.