QUPEX Presentation
9 April 2024
ASX:EXR
1. Gas Market
Overview
Macro Overview
1.
The desired energy
transition is very hard
- A wide variety of challenges - physical, economic and political - to the desired energy transition
- Increasingly being recognised by various (but not all) parties
- Gas is not optional - demand will in fact grow
2.
LNG demand forecast
to rise
- Multiple industry and Government parties forecast growing LNG demand
- Asian demand particularly strong
- Australian security of supply increasingly valued
3.
East Coast Australia
gas supply crisis
- The long recognised supply crunch is nearly upon us
- To date Govt actions and inactions have arguably increased risks
- Current prices of >A$12 expected to be a long term floor
3
The Reality of the Energy Transition
The reality of the energy transition is that it is very hard and long dated - gas demand will grow not fall
The Uber-realists
Vaclav Smil:
"Since Kyoto in 1997, there has been no absolute worldwide
ATP 2044
decarbonization. In fact the very opposite is the case….
In 2022 the world consumed nearly 55% more energy locked in fossil carbon than it did in 1997….
In that quarter century, the world has substantially increased its dependence on
fossil carbon….
Responsible analyses must acknowledge existing energy, material, engineering, managerial, economic and
political realities".
Jeremy Grantham:
"Indeed, the long-term correlation between energy use and GDP growth is over 0.95 (see Exhibit 1).
That is the equivalent of saying that since the industrial revolution - which was really based on the introduction of fossil fuels into our economy - almost all our gains have been dependent on increased resource use.
Without new sources of effective energy, cheap and in vast quantities,
there would have been very little science, and very little productivity".
4
Growing Demand for LNG
Multi decade growth - with an increasing focus on security of supply
Shell LNG Outlook 2024:
- The global LNG market will continue growing
into the 2040s | |
• | ATP 2044 |
Rising demand for LNG expected to keep pace | |
with new supply |
- Renewables, supported by gas, erode coal's role in Asia
Security of Supply in Cold War 2.0
- Choke-pointanxiety growing
- Qatar concentration concerns growing given Iran adjacency
- Impact of US politics on US (and Mexican) LNG
- Australia is the only Western LNG supply source with liquefaction ullage
5
Current East Asian LNG Market Dynamics
Australia still the best located supplier to East Asian LNG Markets:
• Lower transportation costs than USA or Qatar
• No choke points like Panama Canal, Red Sea, Malacca Straits
• Geo-political ally of traditional buyers Japan and South Korea
• Still largest supplier of LNG to the PRC
• Strong history of reliability over many decades
6
Upcoming East Coast Gas Supply Crunch
Is it even worse than feared?
• The now imminent East Coast gas supply crunch has been forecast for some time
• It is almost upon us - a cold winter and
falling Gippsland supplies could hit this year
ATP 2044
- Demand destruction has happened but cannot keep pace with falling supply
- Only one FSRU project FID'ed (but with an unpredictable owner) - the others face material political and financing challenges
- Any new gas material gas supplies from NSW and Victoria seem highly unlikely
- Although multiple constraints on more supply from Queensland - physical capacity, State politics, geo-politics, sovereign risk, etc - there are very few alternatives
Source: ACCC
7
2. The Grandis Gas
Project in the Taroom Trough
The Taroom Trough - An Advantaged Location
The prolific Bowen Basin is now set to deliver another energy source | • The Grandis Gas Project is very well |
located in the Taroom Trough in the | |
Southern Bowen Basin | |
• Australia's premier physical and | |
commercial gas hub - Wallumbilla | |
- is immediately adjacent | |
• Market factors are now driving new | |
rounds of drilling in the Taroom | |
Trough - including by Majors | |
• Pipeline costs minimal - material | |
savings per GJ - as well as | |
avoidance of financing concerns | |
over new transmission pipelines | |
• Long term community acceptance | |
of oil and gas in the region | |
• Australia's onshore oilfield service | |
sector is centred in the region |
9
Gladstone LNG Plants Have Growing Ullage
The 3 LNG Plants at Gladstone need more gas
- The three LNG plants (6 trains in total) at Gladstone have never operated at full capacity (and well constructed LNG plants should generally operate above nameplate capacity)
- Current supplies - primarily gas feedstock from Queensland CSG - have arguably irreversibly peaked
- Brownfield economics therefore should favour decisions to develop gas for these existing plants versus pursuing global greenfields options
- Gas from the Taroom Trough is very well placed to fill this gap
- Various Operators are actively pursuing multiple gas appraisal targets in the Taroom at present - media coverage is behind this reality
Source: EnergyQuest report for Elixir Energy
10
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Disclaimer
Elixir Energy Limited published this content on 08 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 April 2024 22:29:04 UTC.