Could CNG imports be the cheap gas everyone wants?
Link copied to
As East Coast industrials grapple with rising gas prices, the time may be right for a new type of import to slide into the gap: compressed natural gas.
Global Energy Ventures’ (ASX:GEV) plan to import compressed natural gas, or CNG, into Queensland has moved slightly further ahead after the American Bureau of Shipping cleared its revamped CNG carriers for use.
The move is another step towards offering a mid-price gas into the East Coast market: cheaper than domestic gas now priced at LNG-export levels or imported LNG.
Filling the gap
The problem GEV is looking to solve is a shortage of cheap gas on the East Coast.
Industrial companies in the east are squealing over gas prices that have risen to hit parity with prices being paid by buyers of LNG from the three big plants at Gladstone, Queensland.
Gas users such as fertiliser and explosives maker Incitec Pivot have grown up on gas priced around $3-5 a gigajoule (GJ), a price that made any kind of imported gas uneconomic.
They’re now struggling to cope with gas priced at $10/GJ, a level GEV Executive Chairman Maurice Brand says his company can beat.
The four proposed East Coast LNG import terminals have delivery start dates from 2021, but are unlikely to provide cheaper gas.
The government’s quarterly Resources and Energy report in July found that at current prices, US gas could be delivered to Asia for $10.10/GJ.
That’s a new one
CNG is already used in Australia but it is domestically produced, not imported.
Now that GEV has an official nod for its revamped ships — which also concludes a shift from gas producer to transporter after GEV bought Calgary-based SeaNG Corp a year ago — Mr Brand expects to move on a plan to buy gas from Twinza Oil’s Pasca A field in the Gulf of Papua in early 2019, and start talks with potential customers.
They want to ship 100m cubic feet per day (cf/d) to Townsville or Gladstone in Queensland over a decade starting in 2022.
“Until we had all our shipping designs approved and the testing required as to the unique way in which we are actually storing the gas on the ship [within pipes rather than a large chamber]… that gives us the opportunity to offer CNG as an alternative,” Mr Brand said.
CNG is compressed gas, rather than liquified like LNG which allows greater volumes to be transported.
Mr Brand says CNG is useful for transporting small amounts of gas over distances up to 2500km, and is considerably cheaper than LNG which also requires docking and regasification infrastructure.
No shortages yet
Without new discoveries gas is expected to start getting hard to find in the east by the mid-2020s, which is why proposals for billion-dollar LNG import terminals and less efficient CNG imports are beginning to capture people’s imaginations.
Energy Quest CEO Graeme Bethune said in his latest quarterly report in early December, the three LNG projects were producing gas at record levels and “are not sucking gas out of the east coast market”. Queensland was also able to export 8.4 petajoules (PJ) to the southern states in the September quarter.
But in the future, without new gas discoveries, the market is expected to get tighter.
“Our detailed analysis of Queensland gas reserves has found that the state is unlikely to have sufficient gas reserves to make up for gas shortfalls in southern states,” Mr Bethune said.
“This increases the urgency of other southern supply initiatives such as LNG imports into Melbourne and Sydney.”
While it may not cost as much as an LNG terminal, CNG imports, as yet untried in Australia, come with their own hurdles.
John Phillips, energy expert and managing director of gas producer Blue Energy (ASX:BUL), says the cost of delivery, the gas itself and compressing technology will add up.
“It’s less complex in terms of regasification, but the volumes you’re shipping need to make sense and the price needs to make sense,” he told Stockhead.
Under GEV’s proposal, they will be shipping a cargo every second day.
Mr Brand says 80-90 per cent of their capital costs are in the ships, for which this week they shortlisted four shipyards to build.
The company has finished a study into possible gas markets and a pre-feasibility study for Twinza Oil.