South East Gas Study, page-3

AEMO puts out an annual Gas Statement of Opportunities (may have posted the link before) which IMO is required reading for a COE investor. It encapsulates both the opportunities and the risks for us

https://www.aemo.com.au/-/media/Fil.../2017/2017-Gas-Statement-of-Opportunities.pdf

It was also updated in Sept

At the time of publication of the AEMO report, COE Sole project is 2C.

I just want to draw our attention to a few items in the report (the bolding is me) such as:

"Building the Northern Gas Pipeline (NGP). The NGP, planned to commence construction in 2017, will link Northern Territory gas supply with the eastern and south-eastern Australia gas market via a connection at Mount Isa. If sufficient gas supply can be sourced to fill pipeline capacity, an extra 30 PJ/a of gas could flow east. Assuming operation from 2018, this would reduce total domestic shortfalls to 10 PJ across 2019 to 2024 (down from a total of 156 PJ currently projected)."

"Developing the proposed Narrabri Gas Project. This New South Wales gas field development could provide extra supply into the domestic market. Assuming first production in 2020, AEMO’s modelling shows this project has the potential to remove all domestic gas shortfalls from 2020 to 2024."

"... As the cost of sourcing new gas supply is higher, additional gas in the market may not translate to lower gas prices ... Price increases could threaten the financial viability of some industrial and commercial loads, and reduce demand from forecast levels."

"Geological challenges of gas extraction are reducing gas well productivity and driving production costs higher, while low cost reserves in eastern Australia are in decline. The increased cost of sourcing new gas supply means additional gas in the market may not translate to lower prices....For industrial and large commercial customers, sensitivity to gas price rise varies across industry sectors, depending on customers’ ability to fuel switch, how much of their operational cost structure is made up by gas costs, and their relative profit margin."

Even in COE presentations the COST OF SUPPLY for Sole/Manta is up around $7.25/GJ.  Buyers must understand that cheap gas to replace previously produced gas DOES NOT EXIST!

IMO we are in a bit of race to get our long term GSA up to the level of 80-90% of total 2P. Might be a bit of a poker game (liar's poker no doubt). With the amount of Gov't interference with supply little wonder buyers seem willing to wait for "better deals".

Make no mistake, gas producers have be set up as the "greedy evil companies" gouging consumers. No one is looking out for COE and no one cares how much it costs to find and bring the gas to market, just as long as it is a cheaper price than it was (productivity and all you know...).

So David, keep your eye on the prize. Get those GSA's completed, drill safely, get Sole done and producing on time & budget as the really big prize is Phase 2 & Manta and we don't want to lose that opportunity to others!!