gas rises as generators run dry

Good news for SGL and BUL and other gas companies
Angers

Gas rises as generators run dry
Nigel Wilson, Energy writer
May 25, 2007

GAS prices in the eastern states are beginning to rise as water shortages restrict output from coal-fired power stations.
Graeme Bethune of Energy Quest said yesterday that gas production in eastern Australia jumped 20.1 per cent in the March quarter compared with the same period last year.

This reflected growth in gas-fired electricity of 67 per cent at a time when generation from hydro fell by 18 per cent and the total coal-fired generation had been flat - constrained in Queensland and Victoria by water restrictions.

Dr Bethune said strong demand for gas had pushed up wholesale gas prices, with average Victorian spot prices up 27 per cent to $3.38 a gigajoule on the 2006 March quarter.

Gas prices have also been on the move in Western Australia where gas is sold on long-term contracts.

After years of hovering around $2.23 a GJ, recent sales have been as high as $5.50 a GJ.

The rise spells good news for AGL and Origin which have long-term contracts at lower prices with the main gas producers but are able to sell to the generators at higher prices.

Dr Bethune said gas-fired power stations in South Australia, southern Queensland and Sydney and Melbourne were running flat out because of the problems affecting hydro systems in the southeast and cooling water for large, coal-fired operations particularly in Queensland.

In April, the Energy Users Association, which represents major industrial electricity consumers, warned of big increases in wholesale electricity prices.

The EUA said wholesale prices had surged 80 per cent in 12 months as generators passed on higher water and maintenance costs and future carbon prices.

Queensland is the worst-affected state, with water consumption for the Swanbank and Tarong power stations being curbed by the state Government.

Industry sources say Tarong's output has been cut by 350MW since February while the Snowy Mountains hydro-electric scheme is down 100MW on its supplies from a year ago.

Energy Quest's quarterly report shows that petroleum production for the March quarter was 112 million barrels of oil equivalent, up 15.4 per cent compared with the same period last year.

Production of both natural gas and LNG grew, lifting total gas production 13.9 per cent to 397 petajoules.

Oil production jumped 26.4 per cent year-on-year to 30.2 million barrels mainly because of output from Woodside's Enfield operation on the North West Shelf and Roc's offshore Cliff Head field near Dongara, as well as the Gippsland Basin's Basker Manta field in Bass Strait.

The Energy Quest report said Australia's proved and probable (2P) gas reserves increased 15.3 per in the year to December to 40,454 PJ, split 14,199 PJ on the east coast and 26,254 on the west coast.

Reserves of oil liquids continued to trend down by 1.9 per cent to 1944 million barrels, equivalent to 10.4 years of imports.