PERTH (miningweekly.com) – New research by advisory Wood Mackenzie (WoodMac) has highlighted the need for additional liquefied natural gas (LNG) resources in Australia, stating that the proposed Narrabri project, in New South Wales, could assist with a looming shortage.

While Narrabri has stalled since its discovery in 1993 due to strong opposition, the state government has recently voiced support for its development, at a reduced scope.

“Looking at first gas from 2023, we are forecasting about 36 PJ per annum of gas production with potential of up to 73 PJ per annum when it becomes fully operational,” WoodMac research director Nicholas Browne said.

“This is timely as we expect a lower Gippsland basin supply through the 2020s. Narrabri would have a significant impact on the balance of the southern gas markets and particularly New South Wales, which would become increasingly self-reliant. Given how short the market will become, any additional sources of gas will have a significant impact.”

Browne said that there was little doubt that LNG imports would be needed by Australia’s east coast by at least 2025. But given the tight supply-demand balance, a regasification terminal needs to be in place, in the event seasonal shortfalls materialise even earlier.

“We believe that a terminal in Victoria is more urgently required and would see higher utilisation than a terminal in New South Wales. But ultimately, if a terminal in New South Wales moves ahead first, this could also supply Victoria, so there is a clear first mover advantage.”

Brown noted that higher gas-powered generation demand forecast in Victoria in particular, will amplify the risk of gas shortages longer-term. There is also potential downside risk to industrial demand in the long run as prices rise.

“The east coast will need the development of contingent reserves. The Australian Energy Market Operator does not see supply shortage before 2030 and is reliant on contingent resources from as soon as 2021. In contrast, we think the shortfall could come as early as 2023 and forecast that much of this contingent gas is unlikely to be developed and hence third party and equity LNG gas will be at risk.

“2023 is also around the same time as when the global LNG market starts to tighten, and international prices are likely to rise. As such, with the east coast market still contractually short of gas, there will be a call on gas contracted to or owned by the LNG projects. In turn, this could impact domestic prices,” Brown said.