The last 12 months has witnessed significant export of “domestic gas” as LNG via processing at the Karratha Gas Plant. BrightSource estimates around 32 PJ of gas, initially contracted to domestic gas users, was “swapped” to Beach and Mitsui for export to be returned at a future date post the start-up of the Waitsia Gas Plant. This swap behaviour reflects a change in the gas market where supply has exceeded demand in the short term, while future return swaps delivered in an uncertain supply future, are attractive to existing domestic gas buyers.
Supply
In December, the market operator (AEMO) changed its gas outlook to a gas supply surplus to 2027. Additional supply from Woodside following the Inquiry into the Domestic Gas Policy and incremental production from Varanus Island have increased available volume for supply in 2025 and 2026. Most supply contracts continue to be short term arrangements given the supply uncertainty beyond 2027. Since the AEMO forecast, the West Erregulla Project has slipped past a proposed FID creating a greater gas supply shortfall beyond 2027.
Demand
Demand remains flat following the announced closure of Alcoa’s Kwinana refinery and suspension of Nickel mining and processing operations. New demand projects may be delayed (Perdaman) but demand remains strong in the mining sector. An emerging feature of gas demand is the increasing volatility in both seasonal and daily demand. Gas demand for power generation fluctuates reflecting the changing role of gas fired generation, particularly in the SWIS. This means that demand peaks are likely to occasionally exceed aggregate gas production requiring an increased reliance on gas storage and flexible gas pipeline services.
Prices
Gas prices declined through 2024 as more supply entered the market. Gas prices for 1 – 2-year contracts were in the low $7’s/GJ in Q1. Gas contracts that extend beyond 2 years (supply in 2027 and beyond) are priced significantly higher, explaining gas buyers’ reluctance to contract in that period. Spot gas prices (1 – 3) months are at similar levels to short term contracts.
BrightSource Support
BrightSource has been actively supporting key clients with gas procurement over the past 5 years. Current gas prices (under contract) enjoyed by these clients are significantly lower than the average realised WA gas prices published by Santos and Woodside in their quarterly reports. A good knowledge of the market, extensive relationships with all suppliers and structured processes managed by BrightSource provides the advantage to achieve a better gas market outcome.