extracts only !! AFR todayAngela Macdonald-Smith Citigroup is...

extracts only !!

AFR today

Angela Macdonald-Smith


Citigroup is now forecasting a shortfall in needed gas supplies for 12 months from the fourth quarter of 2015, when all six LNG production units at the three projects are in operation. That is likely to limit the rate that the second LNG train at each site can reach full production, analyst Dale Koenders advised clients in a report.


BG’s QCLNG venture and Santos’s GLNG project have already committed to buying in some third-party gas to help meet the rapid increase in supplies necessary to feed their plants. However, Citigroup calculates that Origin Energy’s Australia Pacific LNG project will also face some difficulties.


Citigroup said the short-term shortages in coal seam gas supplies for the Gladstone projects means wholesale prices may spike to $10-$12 per gigajoule for 12 months before returning to about $8 longer term.

Upstream facilities hit


It based its findings on a well-by-well model at the GLNG, APLNG and QCLNG projects using guidance from the operators on assumptions on peak well production rates, numbers of wells drilled and timing. It said that over the last 12 months delays in upstream facilities have been suffered by all projects that limited the rate production could ramp up from coal seam gas wells.

Citigroup calculates that QCLNG will be between 4 and 15 per cent short of its requirements from the September quarter of 2015 until the March quarter of 2016. GLNG will be about 18 per cent short of gas supplies in the first quarter of 2016, while APLNG will be about 5 per cent short in the December quarter 2015-January quarter of 2016 period when its second LNG unit starts up.

“We think all three projects are looking for short-term gas, and will remain in market longer term,” Mr Koenders said in the note, saying the ventures would look to maximise the efficiency of capital spending by buying gas on long-term supply if it was cheaper than developing their own resources.

“We think such a decision should be seen as a prudent use of capital, but may disappoint some,” he said.