East coast gas market a business perspective NSW gas supply must be - - PowerPoint PPT Presentation

East coast gas market – a business perspective NSW gas supply must be facilitated

Gas Masterclass| April 2014| AGL External

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» Presentation Title » February 2008 » AGL Internal

East coast gas market due to face significant changes

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East coast gas market

• There will soon be a significant increase in gas demand on the east

coast with development of LNG export facilities in Qld:

• Total domestic gas demand is currently approx 700PJ/a
• Total annual demand of the 3 LNG terminals (6 trains) in

Gladstone (expected to be complete in around 3 years) approx 1440PJ/a (around 240PJ/a each). => this represents a three-fold increase in total demand and a 2.4 times increase in Winter peak demand

» Gas Masterclass » April 2014 » AGL External

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Current demand

Demand is largely industrial with some power generation - Residential is relatively small

» Gas Masterclass » April 2014 » AGL External

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Enter LNG exporting facilities ...

» Gas Masterclass » April 2014 » AGL External

694 973 1,468 2,100 500 1,000 1,500 2,000 2,500 East Coast Gas Demand (PJ/a) QLD LNG TAS QLD NSW SA VIC

3x increase in aggregate demand

• ver a three-year window

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Reserves...

» Gas Masterclass » April 2014 » AGL External

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 QGC Origin APLNG Arrow Energy Santos GLNG Other Santos BHP Exxon Mobil AGL Origin Proven & Probable Reserves (PJ) Export focus Domestic focus

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» Presentation Title » February 2008 » AGL Internal

The most dramatic impact

• f any gas supply

shortage will be felt in NSW

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Current NSW gas market

• Heavily dependent on gas imports out of South Australia and

Victoria (see graph on page 9)

• Long term contracts will soon expire leading to demand being

significantly greater than supply (see graph on page 10)

• Existing contracts out of South Australia are unlikely to be rolled
• ver given that most of this gas is committed to LNG export

facilities

• Victoria does not provide a viable substitute source of gas in the

event that SA supply is removed (see graph on page 11)

» Gas Masterclass » April 2014 » AGL External

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Regional gas production vs. regional gas consumption - 2012

» Gas Masterclass » April 2014 » AGL External

140% 124% 90% 4%

• 50

100 150 200 250 300 350

VIC QLD SA NSW

Gas Quantity (PJ/a) 2012 Aggregate Demand (PJ/a) 2012 Aggregate Production (PJ/a)

Source: EnergyQuest, AGL Energy Ltd

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NSW contracted supply vs demand

» Gas Masterclass » April 2014 » AGL External

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40 60 80 100 120 140 160 180 200 20 40 60 80 100 120 140 160 180 200 NSW Gas Supply (PJ)

NSW Supply Contracts NSW Aggregate Demand

Smithfield Tallawarra CCGT Plant commissioned

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Existing pipelines cannot supply full NSW market out of Victoria (if MSP is removed)

» Gas Masterclass » April 2014 » AGL External

• ­‑200
• ­‑100

100 200 300 400 500 600 700 TJ/d Eastern ¡Gas ¡Pipeline Moomba ¡Sydney ¡Pipeline NSW-­‑VIC ¡Interconnector Total Capacity ¡EGP ¡+I'con

Implies EGP expansion from 294 TJ/d to at least 475 TJ/d Data Source: National Gas Market Bulletin Board

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» Presentation Title » February 2008 » AGL Internal

AGL modelling has taken a different approach to most: We have used daily rather than annualised supply and demand data which delivers much more powerful results

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» Presentation Title » February 2008 » AGL Internal

Practical implications of temporary gas supply shortage

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Businesses will be most affected

• Gas-intensive industrial users will have 3 options, if their gas supply

contracts expire over 2016/17:

• Cease trading,
• Pay much higher prices, or
• Reduce production.
• However, irrespective of binding contracts, large industrial

businesses still face potential curtailment if NSW Govt needs to exercise emergency powers.

» Gas Masterclass » April 2014 » AGL Internal

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Proportion of manufacturing jobs and gas consuming sites by location in NSW

» Gas Masterclass » April 2014 » AGL External

2 4 6 8 10 12 14 16 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Smithfield East Hills Auburn Toongabbie Menai Campbelltown Lakemba Londonderry Heffron Blacktown Riverstone Wyong Macquarie Fields Maroubra Fairfield Hornsby Lane Cove Cronulla Marrickville Miranda Penrith Bankstown Gosford Lake Macquarie Mount Druitt Port Stephens Manly Castle Hill Oatley The Entrance Wakehurst Orange Cessnock Camden Monaro Murrumbidgee Rockdale Wagga Wagga Bathurst Pittwater Lismore Coffs Harbour Granville Tamworth Wollongong Baulkham Hills Ballina Wollondilly Drummoyne Burrinjuck Hawkesbury Maitland Parramatta Clarence Dubbo Albury Goulburn Kogarah Ryde Tweed Kiama Terrigal South Coast Myall Lakes Bega Upper Hunter Swansea Charlestown Keira Pt Macquarie Strathfield Mulgoa Ntn Tablelands Cabramatta Murray-Darling Canterbury Oxley Willoughby Shellharbour Newcastle Davidson Balmain Liverpool Ku-ring-gai Barwon Epping Heathcote Blue Mountains Wallsend Coogee North Shore Sydney Vaucluse

Large Gas Consumers (Number of Sites) Manufacturing Jobs (% of total) Number of Large Gas Consuming Sites (RHS) Manufacturing Jobs as % of total (LHS)

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» Presentation Title » February 2008 » AGL Internal

What does AGL’s modelling show?

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Aggregate gas load forecast for the east coast 2012-2018

» Gas Masterclass » April 2014 » AGL External

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2012 2013 2014 2015 2016 2017 2018 Aggregate Gas Demand (TJ/d)

Residential & SME Commercial & Industrial Power Generation LNG Train6 LNG Train5 LNG Train4 LNG Train3 LNG Train2 LNG Train1 Residential Commercial & Industrial Power Generation

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Base case for 2014 - 2018: current market conditions

» Gas Masterclass » April 2014 » AGL External

• 1,000.0

2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 7,000.0

2014 2015 2016 2017 2018 Aggregate Demand (TJ/d) Unserved Load Aggregate System Load Served

The first substantive gas supply shortages occur in April 2016 (export volume shortages at the LNG terminals). The domestic market experiences shortages from May 2016 (in NSW and in the ACT).

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Profound impact on LNG export terminals

» Gas Masterclass » April 2014 » AGL External

• 1,000

2,000 3,000 4,000 5,000 2014 2015 2016 2017 2018 Aggregate LNG Load (TJ/d) Unserved Load LNG Load Served

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Base case scenario: devastating impacts in NSW – up to 118 days of gas shortages

» Gas Masterclass » April 2014 » AGL External

• 100.0

200.0 300.0 400.0 500.0 600.0 700.0 2016 2017 2018 Aggregate Demand (TJ/d) Unserved Load NSW+ACT System Load Served

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Expand the EGP and Culcairn interconnect

» Gas Masterclass » April 2014 » AGL External

• 100.0

200.0 300.0 400.0 500.0 600.0 700.0 2016 2017 2018 Aggregate Demand (TJ/d) Unserved Load NSW+ACT System Load Served

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Add Newcastle Gas Storage

» Gas Masterclass » April 2014 » AGL External

• 100.0

200.0 300.0 400.0 500.0 600.0 700.0 2016 2017 2018 Aggregate Demand (TJ/d) Unserved Load NSW+ACT System Load Served

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Add new sources of gas supply into NSW

» Gas Masterclass » April 2014 » AGL External

• 100.0

200.0 300.0 400.0 500.0 600.0 700.0 2016 2017 2018 Aggregate Demand (TJ/d) Unserved Load NSW System Load Served

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» Presentation Title » February 2008 » AGL Internal

What needs to be done to avert this crisis?

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Response options

» There are adequate gas reserves (in the form of CSG) in the ground in NSW » Therefore there are three possible options: ▪ Divert supply – domestic reservation policy – would be ineffective ▪ Restrict demand – National Benefits Test for future LNG export developments – may be worth considering ▪ Expand supply within NSW within framework of community engagement and environmental protection – most logical solution Above all, it has become vital that action is prompt.

» Gas Masterclass » April 2014 » AGL External

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» Presentation Title » February 2008 » AGL Internal

What needs to be done to avoid this crisis? East coast gas market – a business perspective NSW gas supply must be facilitated

Gas Masterclass| April 2014| AGL External