EnergyQuest has released its September 2024 EnergyQuarterly report with comprehensive analysis and data for the June Quarter, 2024 together with comments and data of breaking news.
Peak Angst
The east coast is rapidly losing not just annual gas supply but also peak capacity, especially with decreasing Longford production (which dropped 18.2% this quarter). We have already seen peak supply shortfalls in 2022 and then again for the 2024 winter period just passed. Shortfalls are happening already. We conclude that time has run out, and only a few options are available which will make an impact. Truly a time of peak angst.
There is now a consistent pattern around Australia where domestic gas supply runs short, and all eyes turn to LNG producers to make up the shortfall. Often blamed unjustly for domestic gas shortfalls, we find that in current days it is more often LNG to the rescue of domestic gas markets.
We note that the world keeps setting new records for fossil fuel consumption. Coal and oil had record years in 2023. Gas only just missed out with lower demand in Europe after the outbreak of the Ukraine war. Turning the fossil fuel powered ship is still an enormous challenge.
At EnergyQuest we like to ‘follow the money’ to where companies are investing their capital. Woodside has announced $5.4 billion of major investments in LNG processing and green ammonia projects – both in the USA. If in general, capital continues to be redeployed overseas, then we may suffer the New Zealand fate of under investment in energy assets, and escalating energy costs.
A wind drought, lower hydro and a colder winter saw NEM electricity prices jump 75% in Q2 compared to Q1 2024, reminding us that the genie which was supposedly put back in the bottle at the end of the 2022 energy crisis, is never far away when supply falls and demand peaks. More peak angst.
The Western Australia Parliamentary Domestic Gas Policy Inquiry report was finalised. It called for potentially more gas reservation, and more transparency of gas trades amongst other items. If the east is any indication, then the industry should listen carefully and address the issues raised, before a politician is compelled to act.
Key Statistics
- Total petroleum production decreased in Q2 2024 to its lowest level in more than two years, driven by below-average results from several liquefied natural gas (LNG) projects in WA and the ongoing decline of gas production from Bass Strait. The industry produced a total of 267.4 MMboe in Q2 2024, down 7.1 MMboe (-2.6%) compared to Q2 2023 and significantly below the March quarterly record of 279.1 MMboe at the start of 2024. It was the lowest quarterly result since Q1 2022, when a dip in national LNG shipments coincided with lower oil and condensate production.
- Australia’s LNG industry delivered its weakest quarter since the Gorgon cooling kettle saga, which required rolling shutdowns across all three trains in 2020/21. The industry shipped 19.6 Mt in Q2 2024, down 0.7 Mt (-3.4%) from Q2 2023 and 1.6 Mt (-7.7%) from the record 21.3 Mt achieved in Q1 2024. Shipments in Q2 2024 represented 89% of nameplate capacity of 88.6 Mtpa, down from 96% in Q1 2024.
- Total shipments from WA decreased to 11.5 Mt from 12.1 Mt in Q2 2023, an annual rate of 46.1 Mtpa and 92% of nameplate capacity of 49.9 Mtpa. Shipments decreased at the NWS and Wheatstone but increased at Gorgon and Pluto. East coast shipments of 5.9 Mt in Q2 2024 were steady compared to Q2 2023 but down significantly from the record 6.2 Mt in Q1 2024. Shipments were 91% of nameplate capacity of 26.1 Mtpa.
- With lower volumes of Australian LNG shipped in Q2 2024 and weaker contract and spot prices compared to Q2 2023, LNG export revenue decreased to $16.0 billion in Q2 2024, down from $17.2 billion in Q2 2023 and significantly down by 11.9% from the $18.2 billion recorded in Q1 2024.
- The headline story in national conventional gas production continues to be the decline in volumes from the Gippsland Basin Joint Venture (GBJV) and its impact on the east coast market. GBJV production fell in Q2 2024 by 10.1 PJ (-18.2%) to 45.5 PJ, marking the sixth consecutive quarter of double-digit decreases in percentage terms. This decline dragged down east coast production by 7.9 PJ (-8.1%) qoq to 89.7 PJ – a record low for a June quarter.
- In contrast, conventional gas production in WA increased in Q2 2024, largely due to Woodside’s decision to double the volumes of Pluto gas processed through the NWS for the domestic market. WA production increased by 7.6 PJ (+7.7%) qoq to 107.3 PJ.
- Short-term east coast gas prices averaged $13.71/GJ in Q2, 4.6% lower qoq. Average WA spot prices published by gasTrading were 6% lower qoq in Q2 2024 at $8.63/GJ. The WA spot price has fallen in each quarter since September 2023 but remains well above historical levels. Santos’ west coast gas price was up 11% qoq to $8.09/GJ – an equal record high for Santos (Q1 2024 was also $8.09/GJ). Woodside’s average WA domestic gas price in Q2 was up 6.6% qoq to $6.50/GJ.
- National oil production increased in Q2 2024 on a qoq basis, primarily due to Australia’s largest oil project, Greater Enfield, being offline last year for a major turnaround. National production increased to 7.0 MMbbl in Q2 2024, up 573 kbbl (+8.8%) qoq. The long-term decline in national production passed another milestone with the end of production from the Halibut field in Bass Strait.
- National condensate production decreased in Q2 2024 to 21.3 MMbbl, down 1.5 MMbbl (-6.5%) compared to Q2 2023. The decrease reflected lower production from the liquids-rich LNG projects, including Prelude floating liquefied natural gas (FLNG) and North West Shelf (NWS), in line with lower LNG production.
- Chevron retained its position as Australia’s largest petroleum producer in Q2 2024, despite challenges at Gorgon and Wheatstone. The US supermajor recorded equity production of 44.8 MMboe in Q2 2024, down 2.1 MMboe (-4.6%) qoq. Shell, which overtook Woodside earlier this year to become the second-largest producer, was close behind Chevron, but its equity production decreased in Q2 2024 to 41.4 MMboe, down 1.7 MMboe (-4.0%). Woodside achieved an increase in production to 36.8 MMboe, up 0.4 MMboe (+1.0%), with a very strong performance by Pluto, which operated at 128% of nameplate capacity, offsetting weakening volumes from the NWS and Bass Strait.
Information about the EnergyQuarterly is available by clicking here.