Still a coin toss whether small gas producers will win or lose from Labor’s QLD gas policy
Small cap gas players in Queensland could be the big winners of the Labor party’s proposal to introduce a permanent gas export control trigger.
It all depends on how big the stick is that any future Labor government may want to use against the three gas export consortiums in Queensland.
In September last year, Labor said it would make the Australia Domestic Gas Security Mechanism (ADGSM) permanent and able to be used when gas prices are too high, not just when a gas shortfall is forecast.
Right now, the ADGSM has a sunset clause in 2023. It was set up in 2017 to ensure there is a sufficient supply to meet the forecast needs of Australian energy users.
It was targeting the three export terminals in Queensland.
Analysts worry about the impact on investment in new gas developments.
“This can actually place additional uncertainty on future investments in new supply, so counter-intuitively it could actually lead to less gas being available to the domestic market longer term,” says Wood Mackenzie analyst Andrew Harwood.
Graeme Bethune, chief of consultancy Energy Quest, said the Labor policy was still too vague to make much of: the details could run from the extreme of stopping exports from Queensland altogether through to a much more moderate strategy.
A Labor spokesperson confirmed to Stockhead no further details have been released about the policy.
Currently, the 16-odd listed gas companies working in and around Queensland are hoping that 2019 may be the year when things finally start to happen for them.
They’re building small but, they hope significant enough, reserves to be tempting to the majors which control the majority of the Queensland, and therefore east coast, gas market.
Most are developing areas that have been earmarked strictly for domestic use.
Working in their favour are numbers suggesting major shortages on the east coast in the 2020s, meaning their gas will be in demand from industry as well as potentially from the exporters looking for ways to maintain local supply as well as meet export contracts.
Bethune’s consultancy is forecasting a large gas shortage on the east coast. A report by the company in February suggests there are only sufficient Proved and Probable (2P) gas reserves and production to meet east coast domestic demand until around 2026.
Further, the report suggested there was increasing uncertainty about the commerciality of coal seam gas reserves, with about 3,000 petajoules (PJ) of 2P reserves in Queensland written off in the last year.
“From around 2025, production from Queensland’s coal seam gas fields is expected to fall by more than 100 PJ per annum in deliverability – the equivalent of an LNG import terminal every year,” the report said.
Bethune told Stockhead they believe the shortage is so significant Labor could shut down one of the export trains at Gladstone, support LNG import terminals in Sydney and Melbourne, and still there’d be “plenty of room” for smaller producers.