Joachim Tan

Senior Analyst, System Capacity

7 October 2013

2013 July Gas Statement of Opportunities – Stakeholder Briefing

Agenda

• WA’s Gas Market Characteristics

• Domestic Gas Demand Characteristics

• Domestic Gas Supply Characteristics

• Domestic Gas Demand Projections 2013 to 2022

• WA’s LNG Markets

• Domestic Gas Supply Projections 2013 to 2022

Why are we here ?The GSOO is a periodic statement the primary purpose of which is to include gas information and assessments relating to medium and long term natural gas supply and demand and natural transmission and storage capacity in the State.

IMO assigned GISP role in June 2012, GSOO published July 2013. To promote the long term interests of consumers of natural gas in relation to:

Supplythe security, reliability and availability of gas supply

Efficiencyefficient operation and use of natural gas services

Investmentthe efficient investment in natural gas services in the State

Competitionthe facilitation of competition in the use of natural gas services

What do we forecast for the GSOO ?

• Domestic Gas Demand (excluding oil and gas processing use, domestic demand FID only, reported in TJ/day)

• Total Gas Demand (Domestic Gas Demand – FID only that includes gas consumption relating to oil and gas processing by applying assumptions, reported in PJ/annum)

• Potential Gas Supply available to the domestic gas consuming market (reported in TJ/day)

• Gas Supply Processing Capacity (reported in TJ/day)

• Reserves (reported in number of years remaining)

WA Gas Market Characteristics

Source: ERA (2010)

Western Australia’s Consumption of Energy by Fuel Source, 2003-2004 to 2010-2011

Source: BREE (2012), Australian Energy Statistics Update 2012, Table C

53% 54% 54% 54% 54% 56% 57% 55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Pro

po

rtio

n

Financial year

Coal Petroleum Products Natural Gas Others

Australia’s Gas Market (Domestic Gas and LNG) 2003-2004 to 2010-2012

Source: BREE (2012-2013), Energy in Australia, Table 21, Australia’s gas production, by state.

811936 975

1130 1143 12351371 1439 1458

59.4%62.0% 60.9%

69.4%66.5%

70.7%68.7% 68.8%

62.0%

0%

15%

30%

45%

60%

75%

0

500

1,000

1,500

2,000

2,500

2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Sh

are

Gas

pro

du

cti

on

(P

J)

Financial year

WA SA VIC NSW NT QLD WA's Share of Total

Total Gas Production, 1984 – 2012

Source: BREE (2012), Australian Energy Statistics Update 2012, Table C

0

200

400

600

800

1,000

1,200

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

PJ

Year

Domestic Gas Sales LNG Exports

40%

13%

8%

52%

7%

25%

21% 31%51%

31%

10%

31%

53%

12%

26%

47%

60%

85%

2%

8%

36%

14%

1%

1%

3% 5%

13%8%

1%1%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

WA SA VIC NSW NT QLD TAS

Pro

po

rtio

n

State

Mining Manufacturing Electricity Residential Others

Gas Demand, Australian States 2010-11

Source: BREE (2012), Australian Energy Statistics Update 2012, Table F

Western Australian Average Natural Gas Prices, 1990 – 2012

Source: DMP (2011) and DMP (2013d).

0

2

4

6

8

10

12

14

16

0

2

4

6

8

10

12

14

16

Pri

ce (

US

$/G

J)

Pri

ce (

A$/G

J)

Year

WA domestic gas price (left axis) Contracts (left axis) WA domestic gas price (right axis)

Domestic Gas Demand

Characteristics

Source: DMP (1983-2012), calculated using domestic gas sales, 1983-2011.

1984-1990 1991-2000 2001-2010 2007-2012

Annual compounded

growth15.71% 5.84% 1.24% 0.69%

1984-1990 1991-2000 2001-2010 2007-2012

Annual compounded

growth15.71% 5.84% 1.24% 0.69%

1984-

1990

1991-

2000

2001-

2010

2007-

2012

Annual

compounded

growth 15.71% 5.84% 1.24% 0.69%

Annual domestic gas consumption growth, 1984-2011

Estimated Proportions of Gas Demand in WA (PJ), 2011

Source: SKM-MMA (2011).

71.0%

29.0%

SWIS Outside of SWIS

Energy Generation by Fuel Type (SWIS), 2007 – 2012

Source: IMO

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2007 2008 2009 2010 2011 2012

En

erg

y (G

Wh

)

Year

Coal

Gas

Gas/Coal

Renewable

Gas/Diesel

Diesel

Gas Demand for Electricity Generation in WA (GWh), 2008-2009 to 2010-2011

Source: DMP (2012), Average domestic gas prices and domestic gas sales (by volume).

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

2008-2009

2009-2010

2010-2011

Electricty produced by gas (GWh)

Fin

an

cia

l yea

r

SWIS Non-SWIS

Estimated Market Shares of Major Domestic Demand (excluding LNG industry)

Source: Allen Consulting (2009) and EISC (2010)

Gas Purchaser/Consumer Estimated Market Share

Alcoa ~25%

BHP Billiton and its JVs ~15%

Verve Energy ~20%

Yara Pilbara (formerly Burrup Fertilisers) ~10%

Alinta Energy ~13%

Newcrest Mining ~1 to 5%

Rio Tinto and its JVs Unreported

Wesfarmers (including subsidiaries) ~1 to 5%

Total ~90%

Comparison of Domestic Gas Demand against Average Domestic Gas Prices, 1990 – 2012

Source: DMP (2012), Average domestic gas prices and domestic gas sales (by volume)

0

50

100

150

200

250

300

350

400

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

PJ/a

nn

um

Pri

ce (

A$/G

J)

Year

WA average domestic gas price Gas Sales

Domestic Gas Supply

Characteristics

Western Australia Domestic Gas Sales by Operator, 1990 – 2012

Source: APPEA Quarterly Production Data (1990-2012).

0

50

100

150

200

250

300

350

400

Pro

du

cti

on

(P

J)

Year

Chevron - Carnarvon Basin BHP Billiton - Carnarvon Basin AWE/ARC Energy - Perth Basin

Origin Energy - Perth Basin Apache Energy - Carnarvon Basin Woodside - Carnarvon Basin

Proportion of Domestic Gas Sales (by Operator), 2012

Source: APPEA 2012 Quarterly Production data, http://appea.com.au/oil-a-gas-in-australia/statistics.html

1.7%

55.5%

42.8%

Origin/AWE Woodside Apache

Gas Demand

Projections

NIEIR’s Gas Forecasting Methodology

Source: IMO’s GSOO

SWIS / non-SWIS Gas Demand Modelling

SWIS / non-SWIS Economic Projections

WA State Economic Projection

National Economic Environment Projection

Gas Demand Projection Methodology

Source: IMO’s GSOO

Estimated Domestic

Consumption

Economic Growth in SWIS and non-SWIS

Residential

Commercial

Small industry

SWIS Electricity Demand Growth

Major Industrial Loads

Individual Gas Loads

Pipelines

Projects

Power Stations

Mines

Commodity Prices and Production Outlook

Gold

Iron Ore

Copper

Nickel

SWIS Electricity Energy Forecasts 2007-2008 to 2023-2024

Source: NIEIR Forecasts 2013-2022

16,000

18,000

20,000

22,000

24,000

26,000

28,000

Actu

al/fo

rec

as

t en

erg

y (

GW

h)

Year

Actual High Expected Low

Comparison of Forecasts of Constrained Gas Demand against other Demand Forecasts, 2014 – 2023

Source: NIEIR Forecasts 2013-2022

900

950

1000

1050

1100

1150

1200

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Qu

an

tity

(T

J/d

ay)

Year

Low Scenario Base Scenario High Scenario

Low Scenario (Constrained) Base Scenario (Constrained) High Scenario (Constrained)

Demand suppression due to Forecast Prices on SWIS and non-SWIS Demand 2013 – 2022

Source: NIEIR Forecasts 2013-2022

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

0

2

4

6

8

10

12

14

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Pri

ce

Qu

an

tity

(P

J/a

nn

um

)

Year

Impact of Prices on Forecast non-SWIS Demand Impact of Prices on Forecast SWIS Demand

Forecast Domestic Gas Prices

Forecasted Total Gas Demand (Domestic and LNG), 2013-2022

Source: NIEIR Forecasts 2013-2022

LNG Markets

Committed and Speculative LNG Capacity in WA, 2013 – 2022

Source: DSD, BREE (2013) and public announcements

0

10

20

30

40

50

60

70

80

90

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Mtp

a

Year

Abadi

PTTEP Cash Maple FLNG

Bonaparte FLNG

Sunrise

Scarborough

Browse

Prelude FLNG

Wheatstone

Gorgon

Pluto Train 1

North West Shelf

Committed Capacity - WA

Estimates of WA LNG Exports by Country, 2012

Source: IMO Estimates

76%

2%

16%

1%

5%

Japan Korea China Malaysia Spot Sales

Gas

Supply

Projections

Estimated Gas Processing Capacity of the WA Domestic Gas Market, 2013 – 2022

Source: IMO and respective corporate websites

0

500

1000

1500

2000

2500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Ca

pa

cit

y (T

J/d

ay)

Year

North West Shelf

Varanus Island

Devil Creek

Macedon

Gorgon

Wheatstone

Dongara

Beharra Springs

Empire Oil and Gas

Gas Supply Price Modelling

Oil Prices • Forecasted Oil Prices

LNG Prices

• An estimated relationship between oil and LNG prices

LNG Netback

• LNG less cost of liquefaction and shipping

WA Domestic

Price

• Weighted average that trades between LNG netback and estimated production cost

Gas Supply Modelling

Figure 4.7: Schematic of state-wide supply forecasting process

International demand conditions for LNG and Western Australian supply

capacity

Western Australian LNG demand and capacity utilisation (WA)

Metres drilled Estimated

remaining reserves

Exchange rate

Discovery rate State wide supply

estimate

Price of international

crude oil

Identified remaining reserves

Demand Response

including lagged response to

previous new contracts and

adjustment factor to target domestic

gas price

LNG net back

price

New contract

price on domestic gas

Forecast Gas Prices for Domestic Market, 2013 – 2022

0

2

4

6

8

10

12

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Pri

ce (

$/G

J)

Year

Low Supply Scenario Base Supply Scenario High Supply Scenario

Source: NIEIR’s Forecasts 2013-2022.

Potential Domestic Supply Forecasts, 2013 – 2022

Source: NIEIR’s Forecasts 2013-2022.

0

500

1000

1500

2000

2500

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Qu

an

tity

(T

J/d

ay)

Year

Low Supply Scenario Base Supply Scenario High Supply Scenario Processing Capacity

Estimated Remaining Years based on Production for Western Australia, 2012 and 2022

Source: IMO Estimates.

Reserves McKelvey’s

Economic

and Sub-

Economic

Reserves +

EIA (2013)

Shale

Reserves

(PJ)

2011-2012

Production

(PJ)

Remaining

Years

beyond

2012

(based on

2012

production

)

Forecasted

2022 Total

Gas Demand

(PJ)

Remaining

Years

beyond

2022 (based

on 2022

Forecasts)

443,080* 1,458 304 3,395 131

Gas Supply and Demand Assessment

Comparison of Forecast Base Demand and Base Supply Scenarios, 2013 – 2022

Source: NIEIR’s Forecasts 2013-2022.

800

1000

1200

1400

1600

1800

2000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Qu

an

tity

(T

J/d

ay)

Year

Base Demand Scenario - Constrained Base Demand Scenario - Unconstrained Base Supply Scenario

What next ?

• Canvassing views/improvements from stakeholders for 2nd GSOO

• Revising of GDP/GSP forecasts for the 2014-2023 – underway

• IMO requesting gas flow data from pipeline companies and GBB for modelling early October

• 1st pass forecasts early November – checked/reviewed

• Publication of GSOO – 31 December 2013

Questions ?