2013.09.04 LNG Report PDF

Projections of Gas Demand for
LNG Export from Eastern and

South Eastern Australia
July 2013
AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export Terms of Use
I \ July 2013
Terms of Use
This document has been prepared by Core Energy Group Pty Limited, A.C.N. 110 347 085, holder of AFSL 307740
(Core) for the sole purpose of providing the Australian Energy Market Operator (AEMO) with an analysis of gas
demand for Liqueed Natural Gas (LNG) export from eastern and south eastern Australian states over the 2013 to
2033 period.
This document has been prepared on the basis of a specic scope and does not purport to contain all the information
that a particular party may require. The information contained in this document is general in nature and may not
be appropriate for all persons and it is not possible for Core to have regard to the investment objectives, nancial
situation and particular needs of each party who reads or uses this document. This document should not be relied
upon in any way to make any form of investment decision.
Core believes that the information contained in this document has been obtained from sources that are materially
accurate at the time of issue, but Core makes no representation or warranty as to the accuracy, reliability,
completeness or suitability of the information contained within this document. To the extent permitted by law,
Core, its employees, agents and consultants accept no liability for any statements, opinions, information or matter
(expressed or implied) arising out of the information contained within this document.
Core Energy Group All material in this document is subject to copyright under the Copyright Act 1968
(Commonwealth) and international law and permission to use the information in any form of document or report by
any party other than AEMO, must be obtained in advance and in writing from Core.
/ II Core Energy Group
Table of Contents AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
Contents
1. Introduction .................................................................................................................................................. 1
1.1. Terms of Reference........................................................................................................................... 1
1.2. Defnitions ......................................................................................................................................... 1
2. Methodology ................................................................................................................................................ 3
2.1. Core GSOO LNG Scenarios ............................................................................................................. 3
3. Key Information Sources and Assumptions .............................................................................................. 6
3.1. Information Sources......................................................................................................................... 6
3.2. Assumptions ..................................................................................................................................... 6
4. Summary ...................................................................................................................................................... 8
4.1. Eastern and South Eastern Australia LNG Demand versus Supply ............................................. 8
4.2. Global LNG Demand ........................................................................................................................ 9
5. Global LNG Sector ....................................................................................................................................... 11
5.1. Overview .......................................................................................................................................... 11
5.2. Demand ............................................................................................................................................ 12
5.3. Supply Capacity ................................................................................................................................ 14
6. Global LNG Demand Outlook ..................................................................................................................... 16
6.1. Demand Projection ........................................................................................................................... 16
6.2. LNG Demand Drivers ....................................................................................................................... 16
6.3. LNG Demand Scenario .................................................................................................................... 16
6.4. Global LNG Demand Sensitivities .................................................................................................. 18
7. Global LNG Supply Outlook ....................................................................................................................... 19
7.1. Overview ........................................................................................................................................... 19
7.2. Global Contract Profle ..................................................................................................................... 19
7.3. Expected Decline of Existing Supply Capacity .............................................................................. 20
7.4. Expected Addition of New Supply Capacity .................................................................................. 20
7.5. Proposed/Likely Future Global LNG Supply Sources .................................................................... 20
7.6. Competing Sources of Supply ....................................................................................................... 22
8. Eastern and South Eastern Australia LNG Demand ................................................................................. 25
8.1. Overview ........................................................................................................................................... 25
8.2. Committed Projects .......................................................................................................................... 25
8.3. Proposed Projects ............................................................................................................................. 26
8.4. Key Drivers for New Eastern and South Eastern Australian LNG Supply ................................... 26
8.5. Projected Gas Demand Eastern and South Eastern Australia LNG ........................................... 27
AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export Table of Contents
III \\ July 2013
9. Key Issues, Risks and Uncertainties ........................................................................................................... 30
9.1. Ramp Gas .......................................................................................................................................... 30
9.2. CSG Water Production ..................................................................................................................... 31
9.3. Development Schedule .................................................................................................................... 31
9.4. Infrastructure .................................................................................................................................... 31
10. Key Future Events/Signposts ...................................................................................................................... 32
10.1. Signposts Relating to Asia Pacifc LNG Demand and Supply ...................................................... 32
10.2. Signposts Relating to Eastern and South Eastern Australian LNG .............................................. 32
11. Validation ..................................................................................................................................................... 34
11.1. Comparison with 2012 GSOO - Eastern and South Eastern Australia LNG ................................. 34
11.2. Comparison with Third Party Sources - Global LNG Demand and Supply .................................. 35
12. Summary and Conclusion .......................................................................................................................... 36
References .......................................................................................................................................................... 38
Acronyms ........................................................................................................................................................... 40
Attachment 1: Terms of Reference .................................................................................................................... 41
// IV Core Energy Group
List of Figures AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
List of Figures
Figure 2.1 | Core Project Methodology - AEMO GSOO LNG Demand ..................................................... 4
Figure 2.2 | Core Energy Model Architecture LNG Demand and Supply .............................................. 5
Figure 4.1 | Eastern and South Eastern Gas Demand for LNG Export, PJ p.a. ........................................ 8
Figure 4.2 | Gas Demand Sensitivities for LNG, PJ ................................................................................... 9
Figure 4.3 | Global LNG Demand versus Contracted LNG Supply ........................................................... 9
Figure 5.1 | Major LNG Importers, Mt ......................................................................................................... 12
Figure 5.2 | LNG Demand by Consuming Asia Pacifc Region/Country, 2012 .......................................... 12
Figure 5.3 | Historic Global LNG Supply ..................................................................................................... 14
Figure 5.4 | Major LNG Liquefaction Capacity, Mt ..................................................................................... 14
Figure 5.5 | LNG Shipping Routes ............................................................................................................... 15
Figure 6.1 | Global LNG Demand (Global LNG Reference Scenario) ....................................................... 16
Figure 6.2 | Global LNG Demand Sensitivity Analysis .............................................................................. 18
Figure 7.1 | Location of Existing LNG Production (Liquefaction) Facilities ............................................... 19
Figure 7.2 | Global LNG Demand - Contracted and Not Yet Contracted ................................................... 19
Figure 7.3 | Global LNG Reference Scenario Liquefaction Capacity, Mt ................................................... 21
Figure 7.4 | Global LNG Reference Scenario Demand-Supply Balance, Mt ............................................. 21
Figure 7.5 | Global LNG Reference Scenario Demand-Supply Balance, Mt ............................................. 21
Figure 7.6 | LNG Supply Cost Estimates for New Developments ............................................................. 24
Figure 8.1 | Eastern and South Eastern Gas Demand for LNG Export, PJ p.a. ........................................ 28
Figure 8.2 | Eastern and South Eastern Australia Gas Demand Sensitivities for LNG, PJ ..................... 29
Figure 11.1 | 2013 Projections versus 2012 GSOO ...................................................................................... 34
Figure 11.2 | 2013 Projections versus 2012 GSOO (with 2013 methodology) ........................................... 35
Figure 11.3 | Core Global LNG Reference Demand Scenario versus Third Party Sources, Mt ................ 35
Figure 12.1 | Eastern and South Eastern Gas Demand for LNG Export, PJ p.a. ...................................... 37
Figure TOR | AEMO RFP Projections of Gas Demand for Liquefed Natural Gas (LNG) Export .......... 41
AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export List of Tables
V \ July 2013
List of Tables
Table 1.1 | Report Defnitions ....................................................................................................................... 1
Table 5.1 | Major Global LNG Importing Countries - Existing and Planned ............................................. 11
Table 5.2 | Global LNG Consumption (Descending Volume Order), Mtpa ............................................... 13
Table 7.1 | Global LNG Projects Under Construction ................................................................................. 20
Table 8.1 | Planning and 7 Train Scenario Summary.................................................................................. 28
1. Introduction AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
| 1 Core Energy Group
1. Introduction
1.1. Terms of Reference
The objective of this report is to present an independent assessment of the most likely gas demand
1
for LNG
production
2
, in eastern and south eastern Australia
3
, during the 20-year period to 2033.
This Report is based on a detailed analysis of the outlook for global LNG demand and supply, including, in particular,
the Asia Pacic importing region (as dened in Sections 1.2), which is assessed as the most likely end market for
Australian LNG.
The Request For Proposal (RFP) provided by AEMO for this engagement is presented as Attachment 1 to this
report.
1.2. Defnitions
Unless otherwise stated, the following denitions will apply throughout this report:
Table 1.1 | Report Defnitions
$ or dollars or United States of
America Dollar (USD)
USD, in 2013 real terms.
AEMO Planning Scenario A scenario developed by AEMO for the 2013 National Electricity Forecasting
Report (NEFR) and used consistently in the 2013 Gas Statement of
Opportunities (GSOO). This Scenario assumes only committed projects as at
January 2013 (6 trains) come online over the projection period. It is noteworthy
that at the time of this Report, there remained 6 committed trains in eastern
and south eastern Australia.
4
Asia Pacic Importing Region A broad geographical region including China, Japan, India, South Korea, Taiwan,
Other south east (SE) Asia.
Atlantic Importing Region A broad geographic region including the United States of America (USA),
Central and South America and Europe.
Coal Seam Gas (CSG) Natural gas contained in coal deposits. Generally high proportion of methane,
but may be produced with variable amounts of inert or non-inert gases.
Conventional Gas Natural gas that is extracted from underground reservoirs using traditional
exploration and production methods.
Core Global LNG Reference
Scenario
A scenario developed by Core which is estimated to represent the most likely
scenario of global LNG demand.
Core 7 Train Scenario A scenario developed by Core based on assessment of the committed and
proposed projects in eastern and south eastern Australia, and global LNG
market dynamics. Core assesses this scenario to have a high probability (>50%)
of likelihood. It differs from the AEMO Planning Scenario in that it considers
proposed projects as well as committed projects.
De-water (a well) To remove water from coals to enable gas to be produced.
Eastern and South Eastern
Australia
The states and territories of Queensland, New South Wales, the Australian
Capital Territory, Victoria, South Australia and Tasmania.
1 Petajoules per annum (PJ p.a.).
2 Gas demand as at the front of a transmission line (excluding losses at the eld).
3 Comprising the states and territories of Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania.
4 The AEMO Planning Scenario is based on AEMOs best guess of the future direction of major drivers; desgined to include any policy or other changes that can
be predicted with reasonable certainty; designed as a central growth scenario; includes currently legislated carbon policies, based on the Treasury core scenario and
currently estimated rates of development of new technologies.
1. Introduction AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
2 | July 2013
Effective Annual Output Core has assumed that effective annual output of an LNG plant is 93% of its
name plate capacity, based on a typical operating capacity factor for existing
LNG plants which accounts for periods of maintenance and other non-
productive times.
Gas Demand Gas eld production to meet LNG production requirements measured at the
entry to the transmission line, which excludes an assumed 4% of produced gas
lost due to processing.
Gas Production Gas eld production to meet LNG production requirements, measured at the
well-head, before any subsequent use or losses.
Global LNG Reference Scenario A scenario developed by Core representing Cores view of the most likely
scenario of global LNG demand.
LNG Demand Demand for nal LNG production, after any use and/ or losses incurred from the
processing of gas to point of export.
Unconventional Gas Natural gas that is not found in permeable sandstone reservoirs as is the case
for conventional gas (eg tight gas, shale gas).
Year A reference to a year is a calendar year unless otherwise stated.
2. Methodology AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
2. Methodology
Core has developed a tailored LNG forecasting methodology to meet the specic requirements of AEMO for the 2013
GSOO.
This methodology has been designed with three objectives in mind:
To dene the expected volume and timing of gas consumption associated with existing, committed LNG projects in
eastern and south eastern Australia.
To determine projected global and Asia Pacic LNG demand relative to existing, contracted global and Asia Pacic
LNG demand, to derive a best estimate (Reference Scenario) of the volume and timing of projected LNG demand
which is yet to be contracted.
Determine what portion of projected Asia Pacic demand (the most likely market for Australian LNG generally),
which is yet to be contracted, is likely to be supplied by eastern and south eastern Australian LNG projects versus
competitive supply sources.
Section 2.1.1 presents the methodology used by Core to derive a Global LNG Reference Scenario of LNG demand and
supply.
2.1. Core GSOO LNG Scenarios
Core has developed a systematic approach to deriving scenarios of future LNG demand and supply, utilising a
proprietary database and modelling system. This enables feasible demand and supply scenarios to be developed at an
international level, with a view to evaluating implications for the Australian LNG sector, and more specically from the
perspective of this Study, implications for eastern and south eastern Australia gas supply.
In addition, Core has assessed the conversion factor and losses associated with the production of LNG (see Section 1
for details) and the likely ramp-up prole for each of the trains.
As described in Section 1, AEMOs Planning Scenario consists of committed projects - that is 6 trains. Core has
completed an assessment of current market conditions, company announcements and project progress to date,
to assess the most-likely start-up and ramp prole of these facilities - giving rise to the AEMO Planning Scenario
projections.
In addition to the Planning Scenario, Core has developed a 7 Train Scenario, which is Cores view of a probable
(>50% likelihood) forward trajectory having consideration to committed and proposed projects. The methodology for
developing this Scenario is discussed in Section 2.1.1.
2.1.1. Core 7 Train Scenario: Gas Demand for LNG in Eastern and South Eastern Australia
The Core system has been tailored to meet the specic needs of AEMO for the 2013 GSOO. The six step process
adopted is summarised in Figure 2.1.
4 | July 2013
Figure 2.1 | Core Project Methodology - AEMO GSOO LNG Demand
1. Global Demand Outlook: 2. LNG Supply: 3. Uncontracted Demand:
6. Validation: 5. Eastern and South Eastern
Australia LNG:
4. Gas Demand for Committed
Eastern and South Eastern
Australia LNG Projects:
Derive historical and projected
primary energy use for each
country/region
Derive historical and projected gas
share of total primary energy use
for each country/region
Derive historical and projected LNG
share of total gas demand for each
country/region
Define existing global liquefaction
and regasification capacity
Define contract profile by country/
region
Define all potential new LNG
sources and cost of production
Define LNG demand scenarios by
country/ region - based on 1
Define expected contracted supply
scenarios to meet projected
demand - based on 2
Derive projected demand which is
not yet contracted and thus
available to new LNG supply
Define committed projects
Define other potential projects
Analyse cost of LNG production
Define gas requirement on annual
basis based on liquefaction capacity,
LNG contracts and gas requirement
for own use
Analyse global cost competitiveness
of potential new east and south east
Australian supply
Define Reference Scenario of gas
demand for LNG projects and
undertake sensitivity analysis
Compare global LNG supply and
demand findings and assessment of
eastern and south eastern Australia
LNG growth potential against third
party sources
Explain any variance with view to
validation of findings
Source: Core Energy Group; June 2013.
The Core approach to assessing the market for eastern and south eastern Australian LNG comprises four primary
elements:
Demand Outlook | dene economic growth and Government policy scenarios for importing countries as a basis
for deriving projections of total primary energy demand and expected gas demand relative to alternative energy
sources.
Energy Cost and Price Analysis | develop scenarios of future energy supply costs and prices from the perspective
of importing countries, including consideration of technological advances, as a basis for deriving future gas and LNG
costs and price paths relative to alternative energy sources.
Natural Gas Supply Options Analysis | analyse total gas demand and alternative gas sourcing options, by
importing country, as a basis for deriving projections of LNG demand.
LNG Supply Options Analysis | global LNG supply is modelled by project to derive the full universe of supply
options. Preferred supply options are derived for each importing country, having regard to specic volume, cost/
price, timing, foreign policy and other considerations.
In simple terms Total Gas Demand is derived for each country/region by reference to economic growth, policy and
price outlook. In order to derive projected LNG imports, the level of domestic gas production and international pipeline
gas
5
is deducted from Total Gas Demand.
Figure 2.2 illustrates Cores approach to global LNG scenario modelling.
Figure 2.2 | Core Energy Model Architecture LNG Demand and Supply
Total Gas Demand
Domestic Gas
Production
less
International Pipeline
Gas Purchases
LNG Imports
less
equals
Energy & Environment
Policy
Economic Growth
Substitution from Coal
to Gas, Nuclear and
Renewable Technologies
Conventional and
Unconventional Gas
Foreign Policy and
Import Economics
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LNG Supply Availability
LNG Demand (mtpa) 2013 2014 2035
Country 1
Country 2
Country x
Total Regional Demand
LNG Supply (mtpa) 2013 2014 2035
LNG 1
LNG 2
LNG x
Total Supply Capacity
T
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Realities and Economics
Source: Core Energy Group, 2013.
5 Gas ows via pipelines from other countries.
3. Key Information Sources and Assumptions AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
6 | July 2013
3. Key Information Sources and Assumptions
To develop projections of eastern and south eastern Australia LNG demand and associated gas supply, Core has relied
upon a wide range of publicly disclosed information and made a series of key assumptions which are referenced
below.
3.1. Information Sources
A wide range of source documents have been reviewed, relating to estimates of international and domestic gas and
LNG demand, liquefaction capacity, project timing, and other factors (refer to the References Section at the end of this
report), including but not limited to:
Government plans, budget and policy documents.
Third party economic analysis and projections.
Third party energy, gas and LNG demand, supply, cost and price analysis.
Bloomberg LNG and international gas and economic analysis.
Websites of major Australian and international energy, gas and LNG industry participants.
3.2. Assumptions
Core has made the following assumptions to develop projections of gas demand for LNG production:
Core has assumed that 14.5%
6
of produced gas is consumed in production, transmission and liquefaction activities.
Details are as follows:
> Cores assumption of this 14.5% own consumption is derived from:
- A 3 to 5% loss and use in relation to eld and processing facilities
7
.
- A 1 to 2% loss and use in relation to the transmission network.
- An 8 to 10% loss and use in relation to the liquefaction process.
> Core acknowledges that losses vary from project to project.
Core has assumed that gas demand for LNG includes, in addition to the gas liqueed, all gas lost or used to
transport and power the LNG facility (10.5% of gas produced) but excluding gas lost in production (4% of gas
produced).
Core has assumed that there is no electrication of any of the liquefaction facilities, as instructed by AEMO, which
is consistent with the NEFR.
Core has assumed that effective annual output of an LNG plant is 93% of its nameplate capacity, based on a
typical operating capacity factor for existing LNG plants which accounts for periods of maintenance and other non-
productive times. For example an Australia Pacic LNG (APLNG) train with a nameplate capacity of 4.5 Million
tonnes per annum (Mtpa) is expected to produce and sell 4.2 Mtpa.
The objective of this Report is to forecast gas demand for LNG production and therefore does not include any
demand from domestic activities associated with LNG production. For example, Core projections would not include
any gas demand associated with manufacturing activities associated with fabricating the LNG trains et al.
Core has assumed that 1 Mt of LNG is equivalent to 55 PJ of gas
8
.
Core has had regard to key drivers dened in AEMOs Planning Scenario
9
as a basis for developing projections
included in this report. Furthermore, Core has relied upon the assumption that the AEMO Planning Scenario
6 14.5% is derived from the midpoint of the total ranges of each of the assumed liquefaction, transmission and processing losses.
7 Consistent with historic data such as publicly available statistics from the Queensland Department of Energy which suggest that from 1 January 2005
through 30 June 2010, approximately 654 PJ of CSG was produced in Queensland (QLD), with approximately 4% used in production and approximately 2% ared
or vented. Core has assume that vented or ared gas has historically been a function of pilot testing and will be minimal in the production phase but additional energy
requirements for water desalination is expected to increase processing losses to 5%. Note that the specic breakdown of the 14.5% of total gas lost is not considered
in Cores reporting/calculation of demand.
8 According to Sempra LNG, 1 tonne of LNG is equivalent to 54.7 gigajoules (GJ) of energy. Therefore 1 Mt is equivalent to approximately 55 PJ.
9 AEMO has developed a central Planning Scenario that represents their best estimate of how the future will develop given the currently known and well advanced
and anticipated changes having regard to a number of key drivers. These include economic growth, policy, gas and oil prices and generation technology and development.
A denition of AEMOs Planning Scenario is available here.
3. Key Information Sources and Assumptions AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
consists only of committed projects, consistent with AEMOs NEFR publication.
4. Summary AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
8 | July 2013
4. Summary
4.1. Eastern and South Eastern Australia LNG Demand versus Supply
This report presents projections of gas demand for LNG production from eastern and south eastern Australia under
two scenarios: The AEMO Planning Scenario, which consists of the 6 committed trains, and the Core 7 Train Scenario,
which comprises the 6 committed projects as well as one additional LNG train. Details for each of these facilities are
provided below.
Two Queensland Curtis LNG (QCLNG) trains starting LNG production in 2014 and reaching full capacity in 2016,
with maximum gas demand
10
of approximately 486 PJ per annum (p.a.) thereafter. This is a committed project.
Two APLNG trains - starting LNG production in 2015 and reaching full capacity in 2017, with maximum gas demand
of approximately 514 PJ p.a. thereafter. This is a committed project.
Two Gladstone LNG (GLNG) trains starting LNG production in 2015 and reaching full capacity in 2019, with
maximum gas demand of approximately 446 PJ p.a. thereafter. This is a committed project.
One additional LNG train, Train 7, likely using Arrow LNG gas, requiring maximum annual gas demand of
approximately 229 PJ p.a.
11
In addition there is scope for further spot sales; representing the level of gas required to utilise the balance of LNG
liquefaction capacity (difference between practical total plant capacity and contracted production capacity). However
the following Figure excludes such sales, which are expected to be relatively immaterial for the purpose of this Study.
Figure 4.1 summarises projected gas demand for LNG production under the AEMO Planning and Core 7 Train
Scenario.
Figure 4.1 | Eastern and South Eastern Gas Demand for LNG Export, PJ p.a.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Eastern and South Eastern Australia Gas
Demand for LNG | PJ
QCLNG GLNG
APLNG Train 7
AEMO 2013 - Planning Scenario
Source: Core Energy; June 2013.
Core has undertaken sensitivity analyses to determine the impact of a movement of one or more key assumptions
on projected gas demand. Resultant high and low sensitivity scenarios are presented below based on changes in key
assumptions regarding the number and timing of LNG developments and associated ramp up of production.
The High Demand Sensitivity assumes an additional 229 PJ p.a. of LNG gas demand from 2023:
Core 7 Train Scenario; plus
An additional train developed via one of the above listed projects (QCLNG, APLNG, GLNG), requiring additional gas
feed at full capacity of approximately 229 PJ p.a., from 2023; plus
An accelerated commencement of Train 7 gas production to 2019.
The Low Demand Sensitivity involves a slower ramp up through to utilisation of two train plant capacity of each
10 Calculation of gas demand for LNG ignores an assumed 4% of produced gas lost in processing activities, and assumes 10.5% of produced gas is lost in
transmission and liquefaction activities. See Section 3.2 for further detail regarding this assumption.
11 It is noteworthy that Arrow LNG has approximately 9,500 PJ of reserves at the date of this report and that the assumed train would require approximately
half of this reserve, leaving additional capacity to feed into LNG or domestic markets.
Gas Demand for LNG, PJ
Project 2015 2017 2019 2021-33
QCLNG 430 486 486 486
GLNG 55 320 446 446
APLNG 138 514 514 514
Train 7 0 0 0 229
Total 624 1,320 1,446 1,675
AEMO 2013
Planning
Scenario
624 1,320 1,446 1,446
project and a permanent deferral of 229 PJ p.a. of capacity:
Train 7 does not proceed, with the 229 PJ p.a. of gas production used to service the other six trains (and some
portion going to the domestic market).
Figure 4.2 | Gas Demand Sensitivities for LNG, PJ
0
500
1,000
1,500
2,000
2,500
3,000
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Eastern & South Eastern Australia Gas Demand
for LNG | PJ
Core - 7 Trains Low Sensitivity
High Sensitivity 2012 GSOO - Planning
GSOO 2012 - Decentralised World 2012 GSOO - Slow Rate of Change
Source: Core Energy Group; 2013.
4.2. Global LNG Demand
To determine the potential for future LNG production from eastern and south eastern Australia to 2033, Core has
undertaken an assessment of future global LNG demand and supply. The objective of this element of the study is two-
fold:
To dene the level of future Asia Pacic demand which is not yet contracted.
To determine whether eastern and south eastern Australia LNG sources are expected to meet any part of demand
which is yet to be contracted.
The following graph presents Cores projection of demand and demand not yet contracted under Cores Global LNG
Reference Scenario.
Figure 4.3 | Global LNG Demand versus Contracted LNG Supply
250 Mt
280 Mt
240 Mt
185 Mt
143 Mt
32 Mt
41 Mt
110 Mt
198 Mt
260 Mt
0
50
100
150
200
250
300
350
400
450
2015 2020 2025 2030 2033
Global LNG Demand versus Contracted LNG Supply
Contracted Supply Demand - Not Yet Contracted (Reference Scenario)
Core analysis indicates that well over 210 Mt of competitive LNG supply through projects currently proposed or in
Front End Engineering and Design (FEED) is available to meet this uncontracted demand over the period to 2033.
In addition, Core estimates that there are a range of potential projects with additional capacity of over 150 Mt. As
10 | July 2013
a result, Core is of the opinion that there is limited scope for eastern or south eastern Australia LNG demand to
effectively compete in this market given expectations of an uncompetitive cost structure under current and expected
market conditions.
5. Global LNG Sector AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
5. Global LNG Sector
This Section of the Report provides an overview of the history and current realities of the global LNG market. In
particular, this includes the Asia Pacic market, which is considered to be the most likely market for any additional
LNG supply from east and south eastern Australia, due largely to proximity and associated transport cost advantage.
5.1. Overview
LNG export commenced in 1965 with a cargo shipped from Algeria to the United Kingdom (UK), followed by
cargoes from Alaska to Japan in 1969. There are now 17 LNG exporting countries and 27 countries globally either
importing today or with import terminals under construction.
Australia began exporting LNG from the North West Shelf (NWS) project in Western Australia (WA) in 1989.
For the purpose of this Report, Core considers global LNG markets to comprise two primary regions - Asia Pacic and
Atlantic.
Table 5.1 | Major Global LNG Importing Countries - Existing and Planned
Asia Pacic Atlantic
Asia Pacic North America
South & Central
America
Europe Middle East
Japan
South Korea
Taiwan
China
India
Singapore
1
Thailand
1
Malaysia
1
Indonesia
1
USA
Canada
Argentina
Chile
Brazil
Mexico
Puerto Rico
France
Italy
Spain
UK
Netherlands
Turkey
Greece
Portugal
Belgium
Kuwait
United Arab Emirates
Note
1
: Imports to begin in 2012-2014.
12 | July 2013
5.2. Demand
Over the 20-year period ending 2012, LNG trade has increased approximately four-fold, from 60 Mt in 1992 to 241 Mt
in 2012.
12
As at the end of 2012, LNG accounted for approximately 10% of global natural gas consumption.
12
Figure 5.1 | Major LNG Importers, Mt
0 30 60 90 120 150 30 60 90 120 150
74
114
0
50
100
150
2012 2033
Turkey
Japan
South Korea
India
China
Indonesia
Vietnam
Singapore
Major Established LNG Importers Rapidly Emerging LNG Importers
United Kingdom
Spain
Taiwan
South East Asia
Total Atlantic*
Asia-Pacic
0
50
100
150
200
250
300
2012 2033
Total Asia Pacic
0 120 240 360 480 600
2012
2033
Total World
167
289
241
403
Growth | 40 Mt
Greece
Growth | 121 Mt
Portugal
Belgium
Note: The statistics refer to total demand in Cores GLobal LNG Reference Scenario. *Includes Middle East.
During 2012 an estimated 167 Mt
12
of LNG was consumed across the Asia Pacic region. The distribution of
consumption between major consuming countries is presented in Figure 5.2.
Figure 5.2 | LNG Demand by Consuming Asia Pacifc Region/Country, 2012
India
9%
South Korea
22%
Japan
52%
Thailand
1%
LNG Demand by
Consuming Asia
Pacific Region/Country
% of Total
Taiwan
7%
China
9%
Source: Core Energy Group; BP Statistical Review of World Energy 2013.
12 Core Energy analysis and BP Statistical Review of World Energy 2013 data.
In 2012 Global LNG demand was 241 Mt. Major importers are presented in the following Table.
Table 5.2 | Global LNG Consumption (Descending Volume Order), Mtpa
Country/Region
2012 LNG
Demand
LNG % Share of Total
Regional Gas Demand
Core Comment/Analysis
Japan 87 Mt 99% Increased by 19 Mt over 2010 level as
a result of nuclear capacity shutdown.
This is approaching the practical limit of
Japanese import capacity.
Europe 51 Mt 14% Weaker economic performance is limiting
LNG demand.
South Korea 37 Mt 100% Government stated objective of reducing
level of gas dependency.
North and South America 20 Mt 14% Including 4 Mt in the USA which is
expected to fall away as the USA begins
LNG exports after 2015.
India 15 Mt 37% Government plan includes increased gas
use but high cost of LNG expected to
be a limiting factor and level of growth in
local production uncertain.
China 15 Mt 14% Government plan includes increased gas
use but high cost of LNG expected to
be a limiting factor and level of growth in
local production and pipeline imports is
uncertain.
Taiwan 12 Mt 100% Targeting 20 Mt by 2025.
Thailand 1 Mt 3% First imports in 2012.
Total World 241 Mt 10%
Source: Core Energy analysis, data from BP Statistical Review of World Energy 2013. Total may not add due to rounding.
Over the Study period to 2033, the following countries are expected to begin importing LNG:
Malaysia | Commissioning of the LNG import terminal in 2013.
Indonesia | First imports scheduled for second half 2013.
Singapore | First imports scheduled for second half 2013.
Pakistan, Bangladesh, Sri Lanka,Vietnam, Philippines | No rm start dates.
14 | July 2013
5.3. Supply Capacity
As illustrated in Figure 5.3, the Middle East and Asia Pacic together account for the majority of LNG supply over
recent years.
Figure 5.3 | Historic Global LNG Supply
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012
Historical GlobalLNG Supply | Mt
Asia Pacific Europe Africa Middle East North America South America

Source: Core Energy Group with data from BP Statistical Review of World Energy 2013.
Australias 2012 production of 20.7 Mt, represents approximately 9% of global LNG supply in that year.
The following Figure illustrates the potential level of growth in LNG liquefaction capacity by major potential exporter
from 2012 to 2033. Of particular note is Cores projected growth in LNG supply capacity from North America, Australia,
Russia, Nigeria and Mozambique.
Figure 5.4 | Major LNG Liquefaction Capacity, Mt
0 30 60 90 120 150 30 60 90 120 150
United Arab Emirates
Major Established LNG Exporters Rapidly Emerging LNG Exporters
United States
of America
Canada
Indonesia
Australia
Qatar
Malaysia
Russia
Algeria
0
25
50
75
100
2012 2033
2012
0
25
2033
0
25
50
2012 2033
0
25
2012 2033
0
25
2012 2033
0
25
50
2012 2033
0 120 240 360 480 600
2012
2033
Total World
0
25
50
75
100
2012 2033
77.5 77.5
17.5
26.3
0
20
0
85.6
269.9
575.9
25.5
22.1
25.4 25.4
9.6
48.9
Growth | 97 Mt
Reduction| 3.4 Mt
Minimal Change
Growth | 39.3 Mt
Minimal Change
0
25
2012 2033
5 5
Minimal Change
Growth | 8.8 Mt
Growth | 20 Mt
Growth | 85.6 Mt
Growth | 306 Mt
Nigeria
21.9
39.9
0
25
50
2012 2033
Mozambique
0
20
0
25
2012 2033
Growth | 18.0 Mt
Growth | 20.0 Mt
23.1
120.2
0
25
50
75
100
125
2012 2033
5.3.1. LNG Shipping
The following Figure presents a series of major LNG shipping routes together with a high level guide to the cost of
shipping to Asia from those locations.
Figure 5.5 | LNG Shipping Routes
0 30 60 90 120 150 30 60 90 120 150
United States
of America
Canada
Australia
Mozambique
China
Existing LNG Shipping Routes Indicative LNG Shipping Routes
2.70
0.80
0.70
0.80
0.80
USD per MMBtu
1.00
Note: Million British Thermal Units (MMBtu). One MMBtu is approximately equal to 1.055 GJ.
6. Global LNG Demand Outlook AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
16 | July 2013
6. Global LNG Demand Outlook
6.1. Demand Projection
Growth in global LNG demand

is projected to be concentrated in the Asia Pacic region as shown in Figure 6.1. This is
attributable primarily to continuing growth in LNG demand in China and India and new demand in Malaysia, Singapore,
Thailand and Indonesia.
Figure 6.1 | Global LNG Demand (Global LNG Reference Scenario)
0
50
100
150
200
250
300
350
400
450
2005 2010 2015 2020 2025 2030
Asia Pacific Europe Middle East North America South America

Global LNG Demand (Reference Scenario) | Mt

Historic
Source: History - BP Statistical Review of World Energy; Projections - Core Energy Group.
6.2. LNG Demand Drivers
Growth in global LNG demand is a largely a function of the following factors:
Population growth.
Growth in economic activity.
Growth in primary energy demand.
Gas share of primary energy demand.
Competitiveness of LNG relative to alternative gas sources.
Although this report makes generic references to LNG demand, the demand and supply drivers vary signicantly
between regions. For this reason, Core has completed analyses on each of these factors on a region-by-region basis
to develop a Reference LNG Demand Scenario.
6.3. LNG Demand Scenario
The Global LNG Reference Scenario presented in Figure 6.1 represents Cores view of most likely outlook for global
LNG demand. This scenario has been developed following consideration and modelling of the factors listed in Section
6.2.
This Section contains specic comments on the Asia Pacic and Atlantic Region elements of the Global LNG
Reference Scenario.
6.3.1. Asia Pacifc Region
Japan:
Japan is currently the largest importer of LNG, sourcing approximately 87 Mt in 2012.
Although Japan is the largest importer, historic growth in LNG demand was relatively slow until the 2011 Fukushima
disaster resulted in the shutdown of nuclear reactors, placing increased pressure on gas-red power stations and
an increase in LNG demand of 18 Mt (2012 year compared to 2010 year).
Projected LNG demand in Japan is primarily dependent on the countrys stance on nuclear power. Cores Global
LNG Reference Scenario assumes that over the 2013 to 2033 period, LNG demand grows at a rate of 0.5% p.a.
South Korea:
The National Energy Plan in Korea, also known as Green Korea focuses on an increase in renewable and nuclear
fuelled power. As such, gas/LNG is not expected to increase its market share materially.
Cores Global LNG Reference Scenario reects these plans, with LNG consumption growing at 0.8% p.a. over the
period to 2033.
Taiwan:
The Taiwanese Bureau of Energy has stated that it intends to increase Taiwans energy security and ensure
environmental protection.
The Taiwanese Bureau of Energy has also stated that the country has an LNG supply target of 20 Mt by 2025.
Cores Global LNG Reference Scenario is consistent with this trajectory, growing at a rate of 2.6% p.a.
China:
Gas consumption in China is expected to increase signicantly over the period to 2033 as a result of increasing
primary energy demand and as the country targets lower energy emissions consistent with their twelfth ve-year
plan spanning the 2011-2015 period.
There is a high level of uncertainty regarding the source of this gas supply as China has access to locally-sourced
(indigenous) gas, pipeline gas from adjacent countries and imported LNG.
Cores Global LNG Reference Scenario models growth from 2013 levels at a rate of 5.9% p.a.
India:
Gas is expected to increase its share of primary energy in India over the period to 2033.
Similar to China, India has access to indigenous gas, resulting in high levels of uncertainty over the source(s) of
future supply.
Indias indigenous gas supply is currently priced well below international LNG pricing, and Core expects that India
will seek to minimise reliance on higher-cost LNG imports by accessing pipeline supply and new indigenous gas
sources. As a result, Cores Global LNG Reference Scenario models growth from 2012 levels at a rate of 4.9% p.a.
Other Asia:
LNG import terminals have been, or are being, constructed in Singapore, Malaysia, Indonesia and Thailand. The
Global LNG Reference Scenario assumes LNG consumption grows to increase market share.
Analysis of plans for new LNG import terminals and LNG demand projections published by relevant authorities
combined with consideration of Gross Domestic Product (GDP) growth projections were used to derive demand
projections.
6.3.2. Atlantic Region
Europe:
LNG forms an important component of Europes gas supply with a 14% market share in 2012. The remainder is
supplied by indigenous production and pipeline gas. Core has assumed that LNG will maintain this market share.
18 | July 2013
Americas:
Total LNG consumption in the Americas in 2012 was 20 Mt, with 5 Mt in the USA and Canada. LNG Demand in the
USA and Canada is expected to decline as those countries become LNG exporters.
Other countries consuming LNG include Brazil, Argentina, Chile and Mexico (east coast). These countries have
signicant domestic gas resources and LNG is used to meet short term imbalances or to supply areas not
connected to indigenous supply. It is therefore not projected to increase signicantly.
6.4. Global LNG Demand Sensitivities
Core has undertaken sensitivity analyses to determine the potential for higher or lower LNG demand than represented
by the Global LNG Reference Scenario. The results are presented in the following Figure.
Figure 6.2 | Global LNG Demand Sensitivity Analysis
0
100
200
300
400
500
600
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Global LNG Demand Sensitivity
Mt | 2008-2033
Scenarios

High | 461

Reference | 403

Low | 347
Source; Core Energy Group; 2013
The major factors inuencing the level of sensitivity analysis include:
The level of projected economic growth in major importing countries.
The projected share of gas in the energy mix of major importing countries.
The level of alternatives to LNG to meet the gas demand of major importing countries.
7. Global LNG Supply Outlook AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
7. Global LNG Supply Outlook
7.1. Overview
There are currently 17 countries exporting LNG, with the largest supplier being Qatar, followed by Indonesia and
Malaysia.
Australia began exporting LNG from the NWS project in 1989, followed by Darwin LNG in 2006 and Pluto in 2011.
Core data indicates global liquefaction capacity in 2012 was approximately 270 Mt.
Figure 7.1 shows the location of major global liquefaction plants.
Figure 7.1 | Location of Existing LNG Production (Liquefaction) Facilities
0 30 60 90 120 150 30 60 90 120 150
Algeria LNG
Damietta LNG
EG LNG
Egyptian LNG
Nigeria LNG
Yemen LNG
Adgas LNG
Kenai LNG
Oman & Qalhat LNG
Qatargas LNG
Rasgas LNG
Darwin LNG
North West Shelf LNG
Pluto LNG
Sakhalin LNG
Snohvit LNG
Tangguh LNG
Arun LNG
Bontang LNG
Brunei LNG
MLNG
Atlantic LNG
Peru LNG
7.2. Global Contract Profle
Core maintains a data book containing all LNG contracts available from public disclosures. This data has been used to
derive a prole of contracted demand over time and by deduction, the level of projected demand which is remaining
to be contracted, as shown in the following Figure.
Figure 7.2 | Global LNG Demand - Contracted and Not Yet Contracted
250 Mt
280 Mt
240 Mt
185 Mt
143 Mt
32 Mt
41 Mt
110 Mt
198 Mt
260 Mt
0
50
100
150
200
250
300
350
400
450
2015 2020 2025 2030 2033
Global LNG Demand versus Contracted LNG Supply
Contracted Supply Demand - Not Yet Contracted (Reference Scenario)
20 | July 2013
7.3. Expected Decline of Existing Supply Capacity
Indonesias Arun plant is expected to cease operation in 2014 and several plants have been producing below capacity
due to insufcient gas production. These include the Bontang LNG plant in Indonesia and trains in Algeria and Egypt.
Bontang output has been in decline for some years, falling from peak capacity of 22 Mt to 16.5 Mt in 2011 and is
expected to decline further over the next 10 years as reserves are depleted.
From an Australian perspective, the NWS LNG project has contracts maturing throughout the Study period and
longest standing contracts extend beyond 2030. Contracts for the Darwin LNG project mature by the mid-2020s and
Pluto contracts extend beyond the Study period.
7.4. Expected Addition of New Supply Capacity
There are a number of LNG plants under construction as at the date of this Report, mainly in Australia but also in
Papua New Guinea (PNG), Algeria, Indonesia and USA. These account for total expected additional capacity of 82
Mt by 2017. These projects are expected to begin production between 2013 and 2017 taking total global liquefaction
capacity to 431 Mt in 2017.
Table 7.1 provides further details of LNG projects under construction at the date of this Report.
Table 7.1 | Global LNG Projects Under Construction
Name Country Number of Trains Total Capacity, Mt Expected Start Date
Arzew Algeria 1 4.7 1-Jan-2014
Gorgon LNG Australia (west) 3 15.0 1-Jan-2014
Wheatstone LNG Australia (west) 2 8.9 1-Jul-2016
Ichthys LNG Australia (west) 2 8.4 1-Jan-2017
GLNG Australia (east) 2 7.2 1-Jan-2015
QCLNG Australia (east) 3 8.0 1-Jan-2014
APLNG Australia (east) 2 8.5 1-Jul-2015
Prelude FLNG Australia (west) 1 3.6 1-Jan-2017
Donggi-Senoro Indonesia 1 2.0 1-Jan-2015
PNG LNG PNG 2 6.6 1-Jul-2014
Sabine Pass USA 2 9.0 1-Jan-2015
Total 21 82.0
Source: Core Energy Group, 2013.
7.5. Proposed/Likely Future Global LNG Supply Sources
Core has undertaken an analysis of projects which have entered FEED and other Proposed/Likely LNG projects. In
doing so, Core has taken account of the reserve or resource base, technical challenges, economic viability and political
or regulatory hurdles. The combined capacity of projects Core has assessed to be likely is 210 Mt.
The primary hurdle for each of these projects to proceed to commercialisation and construction is the ability to
execute sales contracts (at a competitive price), as this a prerequisite for funding approvals.
Figure 7.3 illustrates potential global liquefaction capacity based on existing projects and Cores assessment of most
likely proposed projects.
Figure 7.3 | Global LNG Reference Scenario Liquefaction Capacity, Mt
0
100
200
300
400
500
600
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Liquefaction Capacity
Mt, 2008-2033
Producing In Construction In FEED Core Proposed/Likely
Historic
Figure 7.4 compares the level of potential liquefaction capacity to Cores Reference Scenario to illustrate the demand-
supply balance.
Figure 7.4 | Global LNG Reference Scenario Demand-Supply Balance, Mt
0
100
200
300
400
500
600
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Global LNG Demand versus Liquefaction
Capacity | Mt, 2008-2033
Producing In Construction
In FEED Core Proposed/Likely
Projected Global demand
Historic
As this chart shows, if all projects currently under consideration were to proceed, the entire market for the planning
period would be satised.
Figure 7.5 extends this analysis to the high and low Global Demand sensitivities to illustrate that projected LNG
liquefaction capacity is sufcient to meet even the high sensitivity.
Figure 7.5 | Global LNG Reference Scenario Demand-Supply Balance, Mt
0
100
200
300
400
500
600
2008 2011 2014 2017 2020 2023 2026 2029 2032
Projected Global LNG Supply and Demand
Mt, 2008-2033
Producing In Construction
In FEED Core Proposed/ Likely
Projected Global Demand Low Scenario Projected Global Demand - High Scenario
Reference Scenario
Scenarios

High | 461
Reference | 403
Low | 347
Scenarios

High | 461
Reference | 403
Low | 347
22 | July 2013
7.6. Competing Sources of Supply
Core has undertaken an analysis of potential new export projects globally to determine the most likely sources of
supply. An overview of the most likely supply sub regions is presented below.
USA/East Coast of North America:
> Once an LNG importer, the discovery and production of large volumes of unconventional gas has resulted in
numerous liquefaction facility proposals. One is under construction and one is approved to begin construction
later this year.
> A series of LNG import terminals exist (legacy of period where LNG import was expected to grow), with
signicant storage and ofoading infrastructure which will now be used for LNG export. This will signicantly
reduce the cost of liquefaction compared to greeneld projects as this infrastructure can form up to one third of
the total cost of a liquefaction plant.
> The cost of LNG feed gas
13
is set by the USA Gas Market (Henry Hub) pricing, which has averaged USD4.00
per GJ during 2012-13 and is assumed to remain below USD6.00 per GJ for the Study period.
> All existing LNG import terminals which are proposed for conversion to liquefaction facilities are located on the
east coast and will thus incur a higher transport cost to ship to Asia (see Figure 5.5). Shipping costs are expected
to be in the range of USD2.50-3.00 per GJ. This compares to USD0.80 to 1.00 for shipping from Australia to Asia.
> Over 80 Mt of liquefaction capacity is planned or proposed for the existing LNG import facilities on the Gulf or
east coast of the USA.
> Core analysis indicates that LNG volumes from the USA can be delivered to Asia at lower overall cost than most
competitors, including eastern Australian-based LNG, and is expected to supply a material portion of the Asian
market during the Study period. Asian buyers are attracted to LNG which is indexed to Henry Hub as opposed
to being indexed to oil (existing contracts) to provide diversity and to benet from lower pricing resulting from
increasing unconventional gas supply.
> A number of the proposed projects, including expansion at Sabine Pass, already have conditional supply
contracts and are expected to proceed once regulatory approvals are received.
Canada/West Coast North America:
> Canada, once an exporter of gas to the USA, is now proposing to export LNG to Asia.
> There are two signicant projects being progressed in Canada, one by Shell and the other by Chevron. These
projects are targeting 10 Mt each by 2018. There is also a less advanced project in Oregon, USA.
> FEED studies are underway for the Kitimat project.
> In general, the west coast has substantially lower transportation costs than east coast USA projects at
approximately USD0.80-1.00 per GJ. However, liquefaction costs are expected to be higher as they are greeneld
projects in environmentally sensitive areas and also require high cost pipeline infrastructure.
Mozambique:
> Over 100,000 PJ of resources have been reportedly discovered in recent years in waters off Mozambique. As
these discoveries are close to shore, development costs are expected to be at the lower end of the global supply
curve, making the region one of most competitive LNG supply sources for Asia.
> There are estimated to be sufcient resources for in excess of 50 Mt of liquefaction capacity. This project is
currently in pre-FEED and is targeting the rst two 5 Mt trains for start up in 2018.
Tanzania:
> 10,000 PJ of gas has been reportedly discovered off Tanzania and BG Group (BG) has recently signalled that
it will continue to actively explore in the region to increase the resource base and to actively progress an LNG
project to supply its global portfolio.
Russia:
> Russia currently has one operational liquefaction project (Sakhalin-2) and four proposed projects (Sakhalin-3,
Shtokman LNG, Vladivostok and Yamal LNG).
13 LNG feed gas refers to the gas feedstock supplying the LNG facillity.
> The combination of large volumes of gas resources for Vladivostok and Sakhalin-3 and close proximity to the Asia
Pacic region mean that these projects will be competing with Australia for Asian customers.
> Developments in Russia have been somewhat hindered by harsh locations of some of the gas elds, joint
venture issues and competing priorities within Gazprom. Russia is also considering commercialisation of gas
resources via pipeline supply.
PNG:
> PNG currently hosts one committed project (with potential expansion) and one proposed project.
> Whilst the committed project is fully contracted, the gas elds supporting proposed projects still require further
appraisal.
> Location and proximity to market are advantageous as are liquid yields, which improve project economics.
However, perceived risk and timing may impact their competitiveness.
Western Australia (WA) and the Northern Territory (NT):
> WA and the NT host Australias three existing liquefaction facilities (NWS, Darwin LNG and Pluto LNG), as well
as four projects under construction (Gorgon, Wheatstone, Prelude and Ichthys) and another seven proposed
projects/project expansions.
> Some of these proposed projects have associated liquids production; however, these are still not considered
economically viable, primarily due to the high prevailing cost environment in Australia. This is evidenced by the
Browse LNG joint venture decision not to proceed with the onshore LNG project and to evaluate an alternative
Floating LNG (FLNG) project. Core expects these cost pressures to decline to some extent post-2018, when
high existing levels of development activity begin to reduce materially.
Qatar:
> Qatar has no plans for additional trains having stated they will monitor the performance of reservoirs before
committing to further developments.
> Qatar reserves are in excess of one million PJ of liquids-rich gas and total production is in excess of 7,700 PJ p.a.
representing a 130 year reserves-to-production ratio. Qatar therefore would appear to have adequate capacity to
expand its LNG production at a globally competitive cost.
> Qatars strategy would appear to involve positioning itself as a price leader to maximise value of its existing 78
Mt production. It is not expected to expand without strong unmet global demand signals.
Figure 7.6 compares the approximate current cost to deliver LNG to the Asia Pacic region for a selected group of
competing regions and compares it to the estimated cost of LNG delivered from Australia. This Figure highlights that
Australian LNG production costs, and greeneld eastern Australia LNG in particular, are expected to be materially
higher than competitive LNG supply sources.
24 | July 2013
Figure 7.6 | LNG Supply Cost Estimates for New Developments
8.00
8.00
8.00
6.00
6.00
5.00
5.00
5.00
4.00
4.00
4.00
3.00
0.80
0.70
0.80
1.00
0.80
2.70
0 2 4 6 8 10 12 14 16
Eastern Australia (Greenfield)
Browse Basin
Eastern Australia (Brownfield)
Canada (20 Mt)
Mozambique (50 Mt)
US Gulf Coast (50 Mt)
LNG Supply Costs for New Developments
USD per MMBtu
Upstream Liquefaction Shipping
Total 12.80
Total 11.00
Total 10.80
Total 10.70
Total 13.80
Total 13.70
Source: Core Energy Group analysis; 2013.
Note: One MMBtu is approximately equal to 1.055 GJ.
8. Eastern and South Eastern Australia LNG Demand AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
8. Eastern and South Eastern Australia LNG
Demand
This Section of the Report provides a summary of projected eastern and south eastern Australia gas demand for LNG
export to 2033.
8.1. Overview
To determine projected gas demand for eastern and south eastern Australian LNG export, Core has considered the
following:
The status of proposed projects including:
> Reserves and resource base.
> Status of exploration or appraisal activity.
> Technical capacity of proposed operators to execute an LNG project.
> Financial capacity to fund the project.
> Political factors.
The level of projected global LNG demand which is yet to be contracted, particularly in the Asia Pacic region.
The volume and timing of competing sources of supply.
8.2. Committed Projects
There are three committed projects, each with two LNG trains under development at Gladstone in Queensland. These
three committed projects form AEMOs Planning Scenario in its entirety and part of Cores 7 Train Scenario. Analysis of
the start-up, ramp prole and capacity of these projects is based on publicly available documents and Core analysis.
8.2.1. QCLNG
The QCLNG project is operated by QGC, a subsidiary of BG and is partnered by the Chinese National Oil Company
(CNOOC). This project has two trains with expected annual output
14
of 7.9 Mt.
QCLNG forms part of BGs global LNG supply portfolio and will be used to underpin long term supply contracts with
customers in China, Japan, Chile and Singapore.
As at May 2013, BG stated the project was on schedule for rst LNG production in the second half of 2014, ramping
up to full production by 2016. According to BG, it is expected to produce approximately 2 Mt in 2014.
Total annual gas demand at peak production is expected to be 486 PJ p.a. including project fuel usage and
transmission losses.
8.2.2. GLNG
The GLNG project is joint venture between Santos, Total, Petronas and Kogas. It has two trains under construction
with expected annual output of 7.2 Mt and 20-year supply contracts with Petronas of Malaysia and Kogas of Korea
for a substantial proportion of the full output of the project.
The project is scheduled to begin production in 2015, ramping to full production by 2019. Total estimated annual gas
demand at peak production is 446 PJ p.a., including project fuel usage and transmission losses.
8.2.3. APLNG
APLNG is a joint venture between Origin Energy, ConocoPhillips and Sinopec. This project has two trains under
construction with expected annual output of 8.4 Mt and 20 year contracts with Sinopec of China for annual volumes
up to 7.6 Mtpa and Kansai Electric of Japan for approximately 1 Mtpa.
14 Expected annual output is 93% of plant capacity as dened in Section 4.
26 | July 2013
The project is scheduled to being production in 2015. Total annual gas production at peak production is expected to
be 514 PJ p.a., including project fuel usage and transmission losses.
8.3. Proposed Projects
Arrow LNG
> Arrow Energy is a 50/50 joint venture between Shell and Petrochina, which announced in 2013 that it held
over 9,500 PJ of Proved and Probable (2P) reserves and was progressing toward making a Final Investment
Decision (FID) in 2013 whether to proceed with a LNG project.
> The proposed project is a two train 8 Mt capacity liquefaction facility at Gladstone.
> After taking into account domestic sales contracts, ramp gas and tail gas, the 2P reserve is considered
insufcient to underpin a production for 20 years. Although the LNG plant will operate well beyond 20 years, this
is considered the minimum requirement to underpin long term contracts.
> Core assumes that this greeneld project will not proceed beyond FID as a standalone project, as Cores analysis
suggests it is unlikely to meet the economic hurdles of one or both of its owners, and may instead be developed
as a third train via the QCLNG/APLNG/GLNG trains.
> Based on recent announcements by Shell executives and Cores independent analysis, Cores 7 Train Scenario
assumes one additional train of 4 Mt is constructed on the site of an existing project with rst supply from
Arrows gas reserves in 2020. Core has considered this possibility of more than one additional train in its
sensitivity analysis set out in Section 8.5.1.
The 2012 GSOO discussed a number of other proposed projects including:
> LNG Newcastle.
- This was proposed by Eastern Star Gas to use its resource base in the Gunnedah Basin in New South Wales.
Eastern Star has since been taken over by Santos and EnergyAustralia. Santos have announced that current
plans for those reserves and resources will be targeted at the domestic market rather than LNG.
> Projects at concept stage (Fishermans Landing, Southern Cross, Icon Energy, Beach Energy, Abbot Point).
- These projects are not associated with a specic reserve or resource base and have not proceeded beyond
the concept stage. No signicant progress has been made since 2012 in terms of rming up the concept or
proving up a resource base. Core does not believe these projects are likely to be commercialised in the 7 Train
Scenario within the timeframe of this Study, as they are assessed by Core to be uncompetitive.
Existing project expansions.
> Each of the committed LNG projects has the capacity to accommodate an additional train without the need to
expand tank or jetty capacity. Both APLNG and QCLNG have announced they will look to explore for additional
reserves to feed an additional train once the existing plants are in operation. Assuming approximately 5,000 PJ
15

are required for an additional train, it is considered unlikely that rst production associated with any additional
train would commence prior to 2020.
8.4. Key Drivers for New Eastern and South Eastern Australian LNG Supply
There are two key drivers that will dictate the level of further liquefaction capacity in eastern and south eastern
Australia to improve global competitiveness: reserve additions (to provide a base for future production to feed
liquefaction) and lower production costs.
8.4.1. Reserves Additions
With the exception of Arrow LNG reserves, Cores analysis indicates that there are insufcient 2P reserves held by
any single party to underpin an LNG development. Any future eastern and south eastern Australian LNG projects will
therefore require new exploration and development, most likely involving CSG or unconventional gas.
Current gas exploration activity is focused on Cooper Basin unconventional, and to a lesser extent CSG and tight gas
in the Bowen Basin. For example:
15 Core assumes 250PJ p.a. for twenty years.
Beach Energy has recently been partnered with Chevron, to explore its permits in the Cooper Basin for
unconventional gas. The rst stage of exploration will be completed in 2015 and if the results are positive they will
continue to a second phase.
BG, through its subsidiary QGC, has recently conducted exploration for tight gas in the Bowen Basin.
8.4.2. Future Gas Production Costs
Core expects any future eastern and south eastern Australian LNG projects to be underpinned by CSG or
unconventional gas.
The three committed LNG projects will be supplied by CSG, which is of variable quality and associated cost. The
higher quality areas of Fairview/Spring Gully in the Bowen Basin and the Undulla nose area in the Surat Basin have
demonstrated initial rates exceeding 1 terajoule (TJ) per day. However, CSG areas which are geologically removed
from these sweet spots are likely to produce gas at much lower rates or will be accessed with higher cost
horizontal wells. Core estimates that development costs for future, lower quality/productivity CSG will be in excess
of AUD7.00 per GJ. When combined with transportation costs, the gas costs at the inlet to the LNG plant will be
approximately AUD8.00 per GJ.
Similarly for unconventional gas, which is being actively explored for in the Cooper Basin and other areas, Core
estimates that the cost of would be no less that AUD8.00-9.00 per GJ delivered to Gladstone.
These estimated costs place future eastern and south eastern Australian LNG projects at the high end of the range of
supply costs for all competing global LNG projects. Marked improvements in well productivity and development cost
will be required to change this position.
8.5. Projected Gas Demand Eastern and South Eastern Australia LNG
As referred to in Section 3, Core has derived a 7 Train Scenario for eastern and south eastern Australia LNG demand.
This compares with the AEMO Planning Scenario, which consists of six trains and is based on the three currently
committed LNG projects in eastern and south eastern Australia.
AEMO Planning Scenario
> Two QCLNG trains starting 2014 reaching full capacity in 2016 with maximum annual gas demand of
> Two APLNG trains - starting 2015 reaching full capacity in 2017 with maximum gas production of approximately
514 PJ p.a.
> Two GLNG trains - starting 2015 reaching full capacity in 2019 with maximum annual gas production of
Core 7 Train Scenario
> 6 committed trains, as listed above.
> A seventh LNG train (likely to be developed as a third train via one of the above listed projects), starting 2020
reaching full capacity in 2021 with maximum annual gas production of approximately 229 PJ p.a.
These assumptions are broadly consistent with company announcements, with the exception of certain delays which
have been assumed by Core.
28 | July 2013
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Demand for LNG | PJ
QCLNG GLNG
APLNG Train 7
Source: Core Energy Group; June 2013.
Table 8.1 | Planning and 7 Train Scenario Summary
Scenario Summary
Project Train Effective
Annual
Output
(Mt)
Gas
Demand
Equiva-
lent (PJ)
Online Full Pro-
duction
2015 2020 2025 2030
QCLNG 1 4.0 243 2014 2015 243 243 243 243
QCLNG 2 4.0 243 2015 2016 187 243 243 243
GLNG 1 3.6 223 2015 2017 55 223 223 223
GLNG 2 3.6 223 2017 2019 0 223 223 223
APLNG 1 4.2 257 2015 2016 138 257 257 257
APLNG 2 4.2 257 2016 2017 0 257 257 257
Train 7 1 3.7 229 2020 2021 0 123 229 229
Total 7 27.2 1,675 624 1,569 1,675 1,675
AEMO 2013
Planning
Scenario
6 23.5 1,446 624 1,446 1,446 1,446
8.5.1. High and Low Demand Sensitivities
The High Demand Sensitivity assumes an additional 229 PJ p.a. of LNG demand from 2023:
An additional LNG train of 3.7 Mt expected annual output requiring additional gas production at full capacity of
approximately 229 PJ p.a. from 2023; plus
An acceleration of Train 7
16
production to 2019.
The Low Demand Sensitivity involves a slower ramp to utilisation of full capacity of each two-train project and a
permanent deferral of 229 PJ p.a. of capacity:
Train 7 does not proceed, with the 229 PJ p.a. of gas production used to service the other six trains (and some
portion going to the domestic market).
16 Note: Train 7 refers to an additional train sourced from either (i) Arrow LNG (noting this may be developed as an additional third train under the QCLNG/ APLNG/
GLNG trains) or (ii) as a separate additional train from the QCLNG/ APLNG/ GLNG trains.
Project 2015 2017 2019 2021-33
QCLNG 430 486 486 486
GLNG 55 320 446 446
APLNG 138 514 514 514
Train 7 0 0 0 229
Total 624 1,320 1,446 1,675
AEMO 2013
Planning
Scenario
624 1,320 1,446 1,446
Figure 8.2 | Eastern and South Eastern Australia Gas Demand Sensitivities for LNG, PJ
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Eastern & South Eastern Australia Gas Demand
for LNG | PJ
Core - 7 Trains Low Sensitivity
High Sensitivity AEMO 2013 - Planning Scenario
Gas Demand Sensitivities for LNG, PJ
Scenario 2015 2017 2019 2021 2023-33
Core 7 Train 624 1,320 1,446 1,675 1,675
Low 501 1,168 1,400 1,446 1,446
High 624 1,443 1,675 1,675 1,903
AEMO 2013
Planning
Scenario
624 1,320 1,446 1,446 1,446
9. Key Issues, Risks and Uncertainties AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
30 | July 2013
9. Key Issues, Risks and Uncertainties
This Section of the Report provides a summary of key issues, risks and uncertainties associated with gas demand for
LNG production in eastern and south eastern Australia. For the purpose of this Study:
Risk is the chance of a given outcome taking place.
Uncertainty is reference to the range of possible outcomes.
Key issues are matters of importance.
9.1. Ramp Gas
Ramp gas production is the term used to describe the volume of gas produced ahead of the start up of an LNG
project based on CSG i.e. gas production which is below the minimum level for plant commissioning.
CSG wells typically take a number of months (or even years) to dewater completely and for gas production to reach a
peak production rate.
To develop sufcient deliverability from CSG acreage to supply the requirements of an LNG facility, a large number of
wells are required, and most will require dewatering. During the process of dewatering, a material cumulative volume
of ramp gas will be produced.
Core expects that the development drilling for a CSG-to-LNG project would take place over a number of years, and
therefore these wells will be brought online and dewatered progressively over a period of three to ve years. The
result is that, in the absence of any other means of dealing with this issue, gas production is expected to increase
each year until the start up of the LNG project.
Should ramp gas volumes be produced into the domestic market, downward pressure on contract gas demand
and spot gas prices could result; however, Core notes that companies have been employing various techniques to
safeguard against surplus gas being supplied to the market. These techniques include:
Portfolio management.
Gas storage.
Third party contracts.
The choking back of wells.
Examples include:
Production ramp up:
> Each plant in Gladstone used ConocoPhillips Cascade process which can operate at low capacity factors.
> BG has stated that the QCLNG project will take 18 months to match the build-up in CSG production.
> Santos has stated that it will take Train 2 at GLNG 2 to 3 years to reach full production.
Third party purchases:
> Santos will supply 50 PJ p.a. of conventional gas to Train 1 at GLNG representing 20% of requirement for Train 1.
> QCLNG has bought back gas from AGL that they are contracted to sell to them in years 2014-16.
> APLNG will supply gas to QCLNG in 2014 and 2015 prior to the start up of their LNG plant in late 2015.
Storage:
> GLNG is currently reinjecting gas into a storage facility at Roma which should have a production capacity in
excess of 100 TJ per day.
> AGL is constructing a storage facility near Roma which will used by QCLNG to inject their ramp gas and withdraw
once the LNG plant is operational.
As a result of the investment in mitigation techniques, Core does not expect signicant volumes of ramp gas to be
produced into the domestic market.
9. Key Issues, Risks and Uncertainties AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
9.2. CSG Water Production
In 2013 the Federal Government introduced an amendment to Australias National Environment Law, such that water
resources are a deemed a matter of national environmental signicance, which must be considered as part of CSG
developments.
There is a risk a signicant impact on water resources may be caused by one or more CSG-based LNG developments.
Factors which may directly or indirectly bring about a signicant impact on water resources could include:
A change in the quantity, quality or availability of surface or ground water.
Impact on ground water pressure and/or water table levels.
There is scope for such factors to cause delays and cost increases, the extent to which is uncertain.
9.3. Development Schedule
Cores LNG demand projections are based on announcements by the project proponents regarding rst production
and time expected to reach full production.
Core understands that Bechtel (the construction contractor for all three LNG plants) is on schedule for completion of
QCLNG in 2014 and GLNG and APLNG in 2015.
There have been some delays in the upstream (gas production) component due to:
Land access due to ooding.
Delays in negotiating access agreements with landholders.
Greater number of wells required than initially forecast.
The Low Demand Sensitivity scenario assumes a slow ramp up of gas production such that it takes longer for the
projects to reach full production.
As the combined production rate to supply all projects at peak production in 2018 is greater than four times the 2012
production from CSG wells, there is a risk that this targeted aggregate production rate will not be met. Risk and
uncertainty factors include:
Initial rates are consistently lower than currently estimated.
Well decline rates are higher than currently estimated.
Additional approvals delay drilling.
These risks could be mitigated by:
Increase in the drilling rate by increasing the number of drilling rigs.
Purchases of gas such as gas from the Cooper Basin.
9.4. Infrastructure
Core Energy recognises that there is scope to physically deliver gas from southern production facilities such as
Gippsland Basin to the north to meet LNG demand. However this involves signicant transport costs and in many
cases there are capacity restrictions on orderly ow and/or will require enhancement to infrastructure to facilitate
ow of large volumes. Core considers it more likely that contractual arrangements will be entered into as between
parties to bring about effective swap of gas volumes, to achieve the same outcome with lower transportation cost.
Nevertheless history has demonstrated that economic infrastructure will be developed when required. Further the
existing market sees a large number of willing investors to fund quality infrastructure projects.
10. Key Future Events/ Signposts AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
32 | July 2013
10. Key Future Events/Signposts
The objective of this Section of the Report is to summarise key future events or signposts that will provide further
clarity or certainty in relation to the Asia Pacic LNG sector, and the east and south eastern Australian gas demand for
LNG export market in particular.
10.1. Signposts Relating to Asia Pacifc LNG Demand and Supply
The Asia Pacic gas market is entering a period of signicant growth in demand, which is being targeted by new and
existing LNG projects globally. Factors of particular interest include:
The success of indigenous gas exploration campaigns in the Asia Pacic region. Gas exploration programs are
currently underway in both China and India. Should these projects be successful, LNG demand from these regions
would be reduced. For example, China is undertaking an extensive unconventional exploration program but it is
expected to take at least ve years to understand the potential of this resource.
The success of cross-border pipeline proposals in the Asia Pacic region. Countries such as China and India
are continuing to investigate the potential of importing gas from bordering countries via pipelines. Should these
projects be successful, LNG demand from these regions may be reduced.
The speed of development of new liquefaction proposals, in particular those in North America and East Africa.
The rate of development and size of emerging markets, particularly China and India but also SE Asia, including
the transition of historic exporters such as Malaysia and Indonesia to importers.
Evolution of global energy policy, in particular any move away from nuclear or coal.
The rate of advancement of FLNG. Successful development of FLNG could be a game changer by improving
supply side economics.
10.2. Signposts Relating to Eastern and South Eastern Australian LNG
As the three LNG projects under construction have long term contracts for the vast majority of their output, Core
expects these projects to produce those contract volumes at a minimum, with potential for spot sales above this
level. Recent announcements indicate LNG plant construction for all three projects is in line with the Core 7 Train and
AEMO Planning Scenarios and any unforeseen delays are unlikely to be longer than six months.
Key future events and signposts relating to the development of this sector include:
FID decision for Arrow LNG.
> Arrow LNG continues to advance its project with a target to present an FID recommendation to its owners (Shell
and Petrochina) by the end of 2013.
> Shell has indicated that Arrow is in discussions with the other three projects in regard to developing one train in
collaboration as an alternative to constructing their own facility. They have not commented on their preference for
either.
> For its 7 Train Scenario, Core has assumed that a standalone project is not economically viable and will not
proceed and that Arrow will construct one train of 3.7 Mt expected annual output on the site of one of the
existing projects to reduce costs by sharing marine facility and storage tank infrastructure.
Discovery of additional reserves to underwrite expansion.
> With the exception of the 9,500 PJ of reserves held by Arrow LNG, Core believes there to be insufcient
reserves held by any individual project proponent to feed an additional or new LNG train. The reserves required to
underpin a new LNG train for a 20-year contract is at least 5,000 PJ.
> Based on Santos announcements regarding reserves and resources, Core has assumed the GLNG project has
insufcient 2P reserves to supply LNG for 20 years. As a result, it is seeking to both purchase reserves from third
parties and continue to explore its own acreage to increase its reserve base to underpin its existing and future
contract commitments.
> As the LNG plants have a life signicantly in excess of the initial 20-year contract, it is expected that future
exploration and appraisal will be prioritised to prove up reserves for LNG production beyond the forecast period.
10. Key Future Events/ Signposts AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
> Signicant gas exploration is currently limited to unconventional gas but this is unlikely to prove sufcient 2P
reserves to underwrite a new LNG project for at least 10 years. Based on Cores independent analysis of the
costs of developing unconventional resources in Australia, such an LNG project is not expected to be competitive
in a global context.
Domestic energy and environment policy. Increasing environmental regulation may cause delays to existing and
future projects and/or contribute to deteriorating competitiveness by increasing costs.
Cost structure. Australian costs have become high by world standards, making LNG production less competitive.
These costs should decline as the current contracted projects come to an end after 2017. The rate and level to which
these costs fall will have a signicant impact on improving the competitiveness of committed and future projects.
11. Validation AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
34 | July 2013
11. Validation
The following Section of the Report compares the Core 7 Train Scenario and the AEMO Planning Scenario to the
results presented in the 2012 GSOO.
11.1. Comparison with 2012 GSOO - Eastern and South Eastern Australia LNG
A comparison between 2012 and 2013 projections highlights a difference in plateau production due to the assumption
of the development of six LNG trains in the Planning Scenario, which is two less than the eight LNG trains in the 2012
GSOO. The primary reason for the difference is that the 2013 Planning Scenario only considers committed projects,
whilst the 2012 Scenario considered committed and proposed projects.
Both the Core 7 Train Scenario and 2012 GSOO Scenario consider proposed and committed projects. The Core 7 Train
Scenario projects one less train comes online over the period than what was projected in the 2012 GSOO. The main
reason for this movement is an assumption regarding an increase in development costs, which makes the eighth train
uneconomic. Differences in initial production proles is attributable to a better understanding of completion times for
each of the projects and greater clarity regarding the likely ramp-up of CSG production.
There has also been a slight change in methodology/assumption used to derive projections in 2013. In the 2012 year
gas demand included all gas produced and used or lost during processing from the well-head onward. In 2013 we
have more clearly differentiated between total gas production for LNG and LNG demand. Total gas production for LNG
includes all eld, transmission and liquefaction use and losses and was the basis used for the 2012 projection. LNG
gas demand is the demand for gas measured at the entrance to the LNG transmission line i.e. after an assumed 4%
eld gas use or loss. LNG gas demand comprises gas required to fuel the LNG train and transmission and plant uses
and losses.
Figure 11.1 shows the movement between the 2012 Planning Scenario and the 2013 LNG demand projections and
Figure 11.2 presents the comparison on a basis which is consistent with the revised 2013 methodology.
Figure 11.1 | 2013 Projections versus 2012 GSOO
0
500
1,000
1,500
2,000
2,500
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Eastern and South Eastern Australia Gas Demand
for LNG | PJ
2013 Core - 7 Trains 2013 Low Sensitivity
2013 High Sensitivity 2012 GSOO - Planning Scenario
Source: Core Energy Group 2013; AEMO 2012 GSOO.
11. Validation AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
Figure 11.2 | 2013 Projections versus 2012 GSOO (with 2013 methodology)
0
500
1,000
1,500
2,000
2,500
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Projected Eastern and South Eastern Australia Gas Demand
for LNG | PJ
2013 Core - 7 Trains 2013 Low Sensitivity
2013 High Sensitivity 2012 GSOO - Planning Scenario
Source: Core Energy Group 2013; AEMO 2012 GSOO.
11.2. Comparison with Third Party Sources - Global LNG Demand and Supply
The following Figure presents a comparison of Core estimates with publicly released third party estimates.
Figure 11.3 | Core Global LNG Reference Demand Scenario versus Third Party Sources, Mt
200
250
300
350
400
450
500
550
2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033
Core Global LNG Demand Reference Scenario versus
Third Party Sources | Mt
Wood Mackenzie Ernst & Young Core - Reference
Source: Core Energy Group, Ernst & Young, Wood Mackenzie; 2013.
Core makes the following observations regarding third party estimates:
Ernst & Youngs projections were published in April 2013 and relied on assessment of data from multiple sources. A
description of the methodology followed and key assumptions used was not disclosed.
Wood Mackenzies projections were published in May 2013 and sourced from Wood Mackenzies LNG Tool Q1 2013,
proprietary database maintained by Wood Mackenzie. Wood Mackenzies demand projection tracks higher than
Cores projections from 2017, largely due to higher demand growth from Asian countries, in particular China. Wood
Mackenzie expect Chinas LNG demand to grow from circa 28 Mt in 2015 to 60 Mt in 2020 driven as a result of
gas price reform encouraging increased LNG demand. Core believes China will experience a lower growth in LNG
demand over this timeframe.
To the extent that future LNG demand attracts the higher projections of Wood Mackenzie and Ernst and Young,
Core continues to be of the view that eastern Australian LNG demand will not exceed Cores High Demand
Sensitivity Scenario. This view is based on Cores analysis that there would be adequate supply available form more
competitive international sources.
12. Summary and Conclusion AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
36 | July 2013
12. Summary and Conclusion
Core makes the following summary remarks and conclusions based on the analysis set out in this Report:
Eastern and south eastern Australia gas demand projections for LNG were developed considering existing projects
under construction and future potential projects.
Projections were based on the following assumptions:
> In its 7 Train Scenario, Core assumes seven trains in eastern and south eastern Australia to be rm; two from
QCLNG, two from GLNG, two from APLNG and a seventh LNG train likely to be developed as a third train via
one of the other three LNG projects. This compares with the Planning Scenario which consists of six trains,
consistent with the six trains already committed in Gladstone.
> Beyond these committed and likely trains, any further development will be contingent on the discovery of
new gas reserves of sufcient size to underpin an LNG development and the ability to which they can be cost
competitive with other proposed LNG projects.
> Based on todays cost structure in eastern and south eastern Australia, Core considers any new eastern and
south eastern Australia project supplied by CSG or unconventional gas to be less competitive against most other
proposed projects globally for supply to the Asia Pacic LNG markets. This situation may change depending on
the future downward movement of Australian cost structures, if any.
The Asia Pacic region is expected to continue to be the primary market for new LNG developments in eastern and
south eastern Australia over the period to 2033, particularly given a transport cost advantage. The Atlantic region is
expected to be characterised by limited demand growth and abundant supply during the period to 2033.
Core assumes that Asia Pacic demand for LNG will grow at a rate of approximately 2.4% p.a. over the 2013 to
2033 period. China, India and south eastern Asia consumers are expected to experience the highest growth, whilst
Japan remains the largest importer.
Projected LNG growth in Asia is a function of increasing total primary energy demand (linked to population and
GDP) and an increasing share of gas generally, and LNG specically, in the global energy mix.
The ability for projects in eastern and south eastern Australia to successfully compete in this market will drive LNG
production beyond the currently committed and likely level of seven trains.
The primary regions competing against eastern and south eastern Australia to supply the unfullled market are:
the USA, Canada, Mozambique, Tanzania, Russia, PNG, Qatar, and Northern and Western Australia. These regions
have vast gas resources and a competitive position via either, or a combination of: relatively cheap gas production,
access to liquids which enhance project economics, and/or proximity to market.
Eastern and south eastern Australias ability to compete with the above mentioned regions is a function of:
> The relative cost of LNG supply (considering work force costs, cost of feed gas, shipping costs, and any
associated liquids production).
> Perceived risk (sovereign and other).
> Timing and volumes which projects have a development timeline and scale which can satisfy demand.
> Portfolio management LNG purchases may wish to diversify supply.
> Existing relationships/upstream equity investments by LNG consumers.
12. Summary and Conclusion AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2014 2016 2018 2020 2022 2024 2026 2028 2030 2032
Demand for LNG | PJ
QCLNG GLNG
APLNG Train 7
Source: Core Energy; June 2013
Project 2015 2017 2019 2021-33
QCLNG 430 486 486 486
GLNG 55 320 446 446
APLNG 138 514 514 514
Train 7 0 0 0 229
Total 624 1,320 1,446 1,675
AEMO 2013
Planning
Scenario
624 1,320 1,446 1,446
References AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
38 | July 2013
References
ABARES: Resources and Energy Quarterly.
ACIL Tasman: Fuel Cost Projections Report, 28 June 2012.
AEMO GSOO: 2012.
AEMO: Various reports and website, accessed 2012 and 2013.
ANZ: ANZ Australian Major Project Update Gladstone Region, April 2013.
APLNG: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
APPEA: Various Reports, Website, 2012 and 2013.
Arrow Energy: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Bloomberg various elements of on-line service, accessed 2013.
BG: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
BP: Statistical Review of World Energy 2002-2013, Website accessed June 2013.
BREE: Website, Company Reports and Presentations, 2012 and 2013.
Cheniere: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Chevron: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
CLP: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
CNOOC: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
CNPC: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Core Energy Group: Databases, Research, Energy Outlook studies, 2012 and 2013.
Downstream Today: Various Articles, accessed June 2013.
Enrst & Young: Global Natural Gas and LNG Demand 2013 and other Research Papers.
ExxonMobil: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Gazprom: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
GIIGNL: LNG Industry Reports, 2012 and 2013.
GLNG: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Government of China: 12th Five Year Plan, 2010.
Government of India Planning Commission: An Approach to the Twelfth Five Year Plan, October 2011.
Icon Energy: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
ICRA: India Downstream Report; 2011.
IEA: International Energy Outlook 2011, Research Papers, Website accessed June 2013.
IEEJ: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Inpex: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
InterOil: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
JP Morgan: Global LNG research, 2012 and 2013.
Kogas: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Korea Energy Economics Institute, 2012 and 2013.
NRSET: Resourcing The Future National Resources Sector Employment Taskforce. July 2010.
NWS LNG: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
References AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
Origin Energy: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Petronas: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Petronet: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Platts: Various Articles, 2012 and 2013.
POSCO: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Qatargas: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
QGC: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
RasGas: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Reuters: Various Articles, 2012 and 2013.
Santos Limited: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Shell: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Sinopec: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Skills Australia: Report On Resources Sector Skill Needs, 2012.
Taiwanese Bureau of Energy: Website, Presentations and Publications, 2012 and 2013.
TEPCO: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Tokyo Gas: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Total: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Wood Mackenzie: Presentation: Changing Asian Gas Markets, 2013.
Woodside: Website, Announcements, Company Reports and Presentations, 2012 and 2013.
Acronyms AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
40 | July 2013
Acronyms
2P Proved and Probable Reserves
AEMO Australian Energy Market Operator
APLNG Australia Pacic LNG
AUD Australian Dollars
Core Core Energy Group
CSG Coal Seam Gas
FEED Front End Engineering and Design
FID Final Investment Decision
GDP Gross Domestic Product
GJ Gigajoule
GLNG Gladstone LNG
JCC Japanese Customs Cleared Crude
LNG Liqueed Natural Gas
MMBtu Million British Thermal Units
Mt Million Tonnes
Mtpa Million Tonnes per Annum
NEFR
NT
National Electricity Forecasting Report
Northern Territory
NWS North West Shelf
p.a. Per Annum
PJ Petajoule
PNG Papua New Guinea
QCLNG Queensland Curtis LNG
TJ Terajoule
USA United States of America
USD
WA
United States Dollar
Western Australia
Terms of Reference AEMO 2013 GSOO | Eastern & South Eastern Australia: Projections of Gas Demand for LNG Export
Attachment 1: Terms of Reference
Figure TOR | AEMO RFP Projections of Gas Demand for Liquefed Natural Gas (LNG) Export
42 | July 2013
44 | July 2013

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