PERTH (miningweekly.com) – Australia’s East Coast gas prices are forecast to rise up to 30% to between A$10/GJ and A$13/GJ by the mid-2020s, as cheap gas supply continues to decline, advisory firm Wood Mackenzie has reported.

Speaking at the Australian Petroleum Production and Exploration Association (Appea) conference, in Adelaide, Woodmac principal analyst Saul Kavonic said that new gas supply sources were also proving more expensive to develop than the cheap legacy supply sources that have maintained Australian gas supply for decades.

Meanwhile, gas demand is in flux as power generation competes with industrial users for gas supply. Kavonic on Tuesday warned that the larger industrial plants that are major gas buyers, representing about 12% of domestic gas demand, are at most risk of closure as gas prices continue to rise.

"The current high prices are only going to continue to get higher next decade as liquefied natural gas (LNG) prices increase and transport infrastructure becomes increasingly congested," said Kavonic.

“A major new development in the market will be how gas flows and pricing change become increasingly seasonal and complex, and thus opening up new opportunities for gas trading and infrastructure investment.”

The East Coast presents a new high value opportunity for emerging gas storage, trading and optimisation operations, he said. Importing LNG into an interconnected grid from which gas is also exported, alongside new investment in gas supply, transport and storage infrastructure, are all being pursued to capitalise on the increasing prices and seasonality in gas flows.

“While the cost of importing and delivering gas to Melbourne, Sydney or Adelaide is marginal compared to diversions from the Queensland coal seam gas to LNG projects, the former presents strategic options and supply diversity sought by gas buyers. The West-East pipeline, however, proves to be the most costly option of the three.

“Ultimately, the new price signal will incentivise new supply from various sources to be brought on line both in the near and longer term. This will impact internal gas flow dynamics within Australia, which are set to become more complex and seasonal in both flows and pricing,” Kavonic said.

In the longer term, as costs of renewables decline and battery technology improves, these alternative energy sources could become a viable option to mitigate East Coast gas demand, he added.

Meanwhile, the federal government on Tuesday announced the 2018 Offshore Petroleum Exploration Acreage release covering Western Australia, South Australia, Victoria, and the Ashmore and Cartier Islands.

Minister for Resources and Northern Australia Matthew Canavan said the areas would provide a wide range of options for the oil and gas industry, from well-known, petroleum-producing basins to frontier basins that are among the most prospective in the world.

“The Australian government is committed to the safe and responsible development of oil and gas resources,” Canavan said to delegates at the Appea conference.

“Offshore oil and gas exploration is vital to meeting Australia’s future energy needs. The annual Offshore Petroleum Exploration Acreage release is a key part of our plan to promote investment in new offshore exploration.”

The 2018 release is made up of 21 areas located across six basins.

Meanwhile, Canavan noted that the government is now consulting on acreage release reform for future releases, with the Minister encouraging all stakeholders to have their say.

“The proposed reform will make future acreage releases more responsive to market demand, improve transparency of the consultation processes, and simplify bidding rounds,” said Canavan.