East coast LNG imports: absurd or inevitable?

This paper will evaluate the need for and impact of liquefied natural gas (LNG) imports into the East Coast Gas Market at a time when production in offshore Victoria continues to trend downwards, taking with it the flexibility crucial to that region’s highly seasonal demand profile. We will evaluate the case for LNG imports via our monthly-level supply demand balance model for the key demand centres of Victoria, Tasmania, and New South Wales, quantifying the lost ‘gas supply reserve margin’ with the sharp decline of Gippsland production, particularly as the National Electricity Market (NEM) faces the exit of several large coal power facilities within this decade. As all four import facilities continue to compete for approval, we evaluate how many terminals would lead to an optimal outcome for a region balancing its relationship with LNG exports and domestic demand. We present case studies from other LNG exporter–importer markets such as the US and the UAE. We will also present our view of global LNG fundamentals later this decade with the market set to grow from 430 million tonnes in 2025 to over 600 million tonnes in 2030, with large growth from Qatar and the US. Therefore, the East Coast Market’s requirements are likely to coincide with a buyers market for LNG, and we will evaluate the impact of imports on domestic gas prices. We conclude by studying what confluence of events could stave off LNG imports – namely additional pipeline capacity, additional storage, delays in coal retirements, and more Victorian production.