What does the future hold for gas markets?

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Australia’s domestic gas markets have been a critical focus area for the industry over the past 12 months, as we look to new supply sources for the market. Ahead of the Australian Domestic Gas Outlook Conference, being held in Sydney from 4-7 March 2019, Phaedra Deckart, General Manager, Energy Supply and Origination, AGL Energy; Sam Bartholomaeus, Head of Energy, BHP Australia; and Johanna Boothey, Commercial Director, ExxonMobil Australia, share their perspectives on some of the critical issues affecting the sector.

What do you see as the biggest challenges right now for the domestic gas sector?

Phaedra Deckart: There’s no silver bullet to solve this complex issue. That’s why we need governments, policy makers, producers, infrastructure providers and buyers working together. The biggest challenge then is achieving this alignment, so we focus on what needs to be done – more exploration and development to bring in new sources of gas and drive down prices for customers. And building the infrastructure to move gas where families and businesses need it most. Of course, that takes time, and in the meantime, we see LNG imports playing a key role in providing a new source of supply to put downward pressure on prices and provide much needed gas supply security in the southern states.

Sam Bartholomaeus: The east coast domestic gas market is adjusting to a new paradigm following connection to international energy drivers through Queensland LNG exports. Coupled with the natural decline of traditional supply sources and an evolving electricity supply mix, the market has experienced a period of rapid change. The challenge for the domestic gas sector is how we address this change; as at times it has been adversarial. Opportunities exist for parties to create shared value through transparent communication of value drivers and constraints. BHP acknowledges market concern on energy reliability and affordability and is actively investing across its Australian petroleum portfolio to bring new supply to the market.

Johanna Boothey: The biggest challenge we face is getting our policy settings right. On the east-coast we have a flurry of activity right now as many producers – including Esso – compete to fill the forecast supply needs of the market. We need to ensure that our policies validate and confirm the free-market principles that are driving this activity.

As a result, what priority policy and regulatory steps do you support for addressing the east coast gas “crisis”?

Phaedra Deckart: I believe the number one priority is policy certainty – that’s what allows clear signals for investment and ultimately leads to lower prices for customers. In addition to that, I think we’d see real benefits from governments and regulators working together to streamline the approval processes. We’d see improvements through removing the repetition and red tape that currently exists and bring in new gas for customers in a much quicker timeframe. Regulation should support the market responding to market signals – through further exploration and development and infrastructure development.

Sam Bartholomaeus: A clear, consistent and objective regulatory framework that supports investment and provides clear information for all market participants to make informed decisions. This is enabled through aligned State/Federal energy vision and commitment by industry participants to positively support market reform. BHP supports the continued investment in the short term market hub framework and recent regulatory efforts to enhance pipeline liquidity. The provision of clear demand and supply information is also a key enabler for market evolution, BHP is committed to this endeavour albeit encourages the regulatory apparatus to streamline information gathering/coordination efforts.

Johanna Boothey: We need a comprehensive energy policy that promotes alignment and provides a clear roadmap to our agreed destination. This will help establish the stable, consistent investment environment that will attract the huge capital we will need for new resource developments.

What infrastructure developments do you feel would be the most likely to bring long-term gas security?

Phaedra Deckart: Long-term gas security comes from an increase in supply through domestic gas development and LNG import.

Sam Bartholomaeus: BHP supports market-driven solutions. Energy security will be driven in an environment with unconstrained exploration and development opportunities for new indigenous supply and a pipeline network that expands to meet the call of the market. To supplement infrastructure investment is a more dynamic tool box for the market to transact including; a diversity of market services to meet various gas supply time horizons and reliability requirements, a growing pool of intermediaries and the ongoing evolution of domestic and international trading indexes.

Johanna Boothey: We already have a vast and expanding pipeline network connecting plants and fields across the eastern seaboard. I believe our long-term security will lie in a multitude of supply sources feeding into this network. Advancing technology is opening up opportunities for new exploration, improved recovery from our discovered fields and it’s reducing the costs associated with LNG imports.

What do you expect to happen to the market between now and 2025?

Phaedra Deckart: We know that by 2025 we will see some coal fired power exit the market. We see gas playing a key role in managing the transition until at least 2030. I believe that prices will begin to normalise as the energy supply mix beyond 2020 becomes the new normal. Gas fired peaking will need to compete with other alternatives such as hydro & battery projects and the potential for the orchestration of home batteries to be utilised to meet this volatility need as well. I expect to continue to see innovation transform the way energy is delivered to customers.

Sam Bartholomaeus: We expect Natural Gas to continue to play a key role in Australia’s energy mix. We believe across the market there is now a good level of awareness of evolving demand and supply dynamics, including our connection to international commodity markets. Efforts to move towards a more liquid and transparent market are underway and will continue to mature with the support of a more harmonious industry/regulatory apparatus.

Johanna Boothey: I’m confident that the market is working to find solutions to bring competitively priced gas to the market to meet gas demand needs.  Increasing exploration activity and a number of the new developments – including LNG import terminals – that are currently under consideration will create a more diverse, competitive gas market.

Do you support LNG imports to east coast?

Phaedra Deckart: I certainly do – LNG imports will provide a new source of flexible supply to meet the diverse needs of the market during this energy supply transition. It is one of the few supply options that are available today to meet the needs of the market by 2021.

Sam Bartholomaeus: Yes, BHP supports enhanced market liquidity and transparency which is underpinned by diversity in supply sources and clear market price signals. We see LNG imports supplementing indigenous supply and providing security of supply to meet peak seasonal demand requirements.

Johanna Boothey: Esso is committed to find solutions to meet the ongoing needs of our gas customers. Our preference would be to find new fields and to get more supplies from our existing fields, nevertheless, we are continuing to explore the option of also using an LNG import terminal.

Phaedra, Sam and Johanna will be speaking at the Australian Domestic Gas Outlook Conference, click here to find out more.

What does the future hold for gas markets?

Australia’s domestic gas markets have been a critical focus area for the industry over the past 12 months, as we look to new supply sources for the market. Ahead of the Australian Domestic Gas Outlook Conference, being held in Sydney from 4-7 March 2019, Phaedra Deckart, General Manager, Energy Supply and Origination, AGL Energy; Sam Bartholomaeus, Head of Energy, BHP Australia; and Johanna Boothey, Commercial Director, ExxonMobil Australia, share their perspective on some of the critical issues affecting the sector.

What do you see as the biggest challenges right now for the domestic gas sector?

Phaedra Deckart: There’s no silver bullet to solve this complex issue. That’s why we need governments, policy makers, producers, infrastructure providers and buyers working together. The biggest challenge then is achieving this alignment, so we focus on what needs to be done – more exploration and development to bring in new sources of gas and drive down prices for customers. And building the infrastructure to move gas where families and businesses need it most. Of course, that takes time, and in the meantime, we see LNG imports playing a key role in providing a new source of supply to put downward pressure on prices and provide much needed gas supply security in the southern states.

Sam Bartholomaeus: The east coast domestic gas market is adjusting to a new paradigm following connection to international energy drivers through Queensland LNG exports. Coupled with the natural decline of traditional supply sources and an evolving electricity supply mix, the market has experienced a period of rapid change. The challenge for the domestic gas sector is how we address this change; as at times it has been adversarial. Opportunities exist for parties to create shared value through transparent communication of value drivers and constraints. BHP acknowledges market concern on energy reliability and affordability and is actively investing across its Australian petroleum portfolio to bring new supply to the market.

Johanna Boothey: The biggest challenge we face is getting our policy settings right. On the east-coast we have a flurry of activity right now as many producers – including Esso – compete to fill the forecast supply needs of the market. We need to ensure that our policies validate and confirm the free-market principles that are driving this activity.

As a result, what priority policy and regulatory steps do you support for addressing the east coast gas “crisis”?

Phaedra Deckart: I believe the number one priority is policy certainty – that’s what allows clear signals for investment and ultimately leads to lower prices for customers. In addition to that, I think we’d see real benefits from governments and regulators working together to streamline the approval processes. We’d see improvements through removing the repetition and red tape that currently exists and bring in new gas for customers in a much quicker timeframe. Regulation should support the market responding to market signals – through further exploration and development and infrastructure development.

Sam Bartholomaeus:: A clear, consistent and objective regulatory framework that supports investment and provides clear information for all market participants to make informed decisions. This is enabled through aligned State/Federal energy vision and commitment by industry participants to positively support market reform. BHP supports the continued investment in the short term market hub framework and recent regulatory efforts to enhance pipeline liquidity. The provision of clear demand and supply information is also a key enabler for market evolution, BHP is committed to this endeavour albeit encourages the regulatory apparatus to streamline information gathering/coordination efforts.

Johanna Boothey: We need a comprehensive energy policy that promotes alignment and provides a clear roadmap to our agreed destination. This will help establish the stable, consistent investment environment that will attract the huge capital we will need for new resource developments.

What infrastructure developments do you feel would be the most likely to bring long-term gas security?

Phaedra Deckart: Long-term gas security comes from an increase in supply through domestic gas development and LNG import.

Sam Bartholomaeus: BHP supports market-driven solutions. Energy security will be driven in an environment with unconstrained exploration and development opportunities for new indigenous supply and a pipeline network that expands to meet the call of the market. To supplement infrastructure investment is a more dynamic tool box for the market to transact including; a diversity of market services to meet various gas supply time horizons and reliability requirements, a growing pool of intermediaries and the ongoing evolution of domestic and international trading indexes.

Johanna Boothey: We already have a vast and expanding pipeline network connecting plants and fields across the eastern seaboard. I believe our long-term security will lie in a multitude of supply sources feeding into this network. Advancing technology is opening up opportunities for new exploration, improved recovery from our discovered fields and it’s reducing the costs associated with LNG imports.

What do you expect to happen to the market between now and 2025?

Phaedra Deckart: We know that by 2025 we will see some coal fired power exit the market. We see gas playing a key role in managing the transition until at least 2030. I believe that prices will begin to normalise as the energy supply mix beyond 2020 becomes the new normal. Gas fired peaking will need to compete with other alternatives such as hydro & battery projects and the potential for the orchestration of home batteries to be utilised to meet this volatility need as well. I expect to continue to see innovation transform the way energy is delivered to customers.

Sam Bartholomaeus: We expect Natural Gas to continue to play a key role in Australia’s energy mix. We believe across the market there is now a good level of awareness of evolving demand and supply dynamics, including our connection to international commodity markets. Efforts to move towards a more liquid and transparent market are underway and will continue to mature with the support of a more harmonious industry/regulatory apparatus.

Johanna Boothey: I’m confident that the market is working to find solutions to bring competitively priced gas to the market to meet gas demand needs.  Increasing exploration activity and a number of the new developments – including LNG import terminals – that are currently under consideration will create a more diverse, competitive gas market.

Do you support LNG imports to east coast?

Phaedra Deckart: I certainly do – LNG imports will provide a new source of flexible supply to meet the diverse needs of the market during this energy supply transition. It is one of the few supply options that are available today to meet the needs of the market by 2021.

Sam Bartholomaeus: Yes, BHP supports enhanced market liquidity and transparency which is underpinned by diversity in supply sources and clear market price signals. We see LNG imports supplementing indigenous supply and providing security of supply to meet peak seasonal demand requirements.

Johanna Boothey: Esso is committed to find solutions to meet the ongoing needs of our gas customers. Our preference would be to find new fields and to get more supplies from our existing fields, nevertheless, we are continuing to explore the option of also using an LNG import terminal.

Each year, the Australian Domestic Gas Outlook (ADGO) conference brings together the who’s who of the industry, for high-level discussions that will set out the future direction of the industry, to debate policy imperatives and discuss how commercial opportunities can be seized.To find out more visit https://www.adgoconference.com.au/

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