East coast gas market a business perspective NSW gas supply must be - PowerPoint PPT Presentation

East coast gas market – a business perspective NSW gas supply must be facilitated Gas Masterclass| April 2014| AGL External

2 East coast gas market due to face significant changes » Presentation Title » February 2008 » AGL Internal

3 East coast gas market - There will soon be a significant increase in gas demand on the east coast with development of LNG export facilities in Qld: - Total domestic gas demand is currently approx 700PJ/a - Total annual demand of the 3 LNG terminals (6 trains) in Gladstone (expected to be complete in around 3 years) approx 1440PJ/a (around 240PJ/a each). => this represents a three-fold increase in total demand and a 2.4 times increase in Winter peak demand » Gas Masterclass » April 2014 » AGL External

Current demand 4 Demand is largely industrial with some power generation - Residential is relatively small » Gas Masterclass » April 2014 » AGL External

Enter LNG exporting facilities ... 5 East Coast Gas 3x increase in aggregate demand Demand (PJ/a) over a three-year window 2,500 QLD LNG TAS 2,100 QLD 2,000 NSW SA 1,468 VIC 1,500 973 1,000 694 500 0 » Gas Masterclass » April 2014 » AGL External

Reserves... 6 Proven & Probable Reserves (PJ) 14,000 Export focus Domestic focus 12,000 10,000 8,000 6,000 4,000 2,000 - QGC Origin Arrow Santos Other Santos BHP Exxon AGL Origin APLNG Energy GLNG Mobil » Gas Masterclass » April 2014 » AGL External

7 The most dramatic impact of any gas supply shortage will be felt in NSW » Presentation Title » February 2008 » AGL Internal

8 Current NSW gas market - Heavily dependent on gas imports out of South Australia and Victoria (see graph on page 9) - Long term contracts will soon expire leading to demand being significantly greater than supply (see graph on page 10) - Existing contracts out of South Australia are unlikely to be rolled over given that most of this gas is committed to LNG export facilities - Victoria does not provide a viable substitute source of gas in the event that SA supply is removed (see graph on page 11) » Gas Masterclass » April 2014 » AGL External

Regional gas production vs. regional gas 9 consumption - 2012 Gas Quantity (PJ/a) 2012 Aggregate Demand (PJ/a) 350 2012 Aggregate Production (PJ/a) 140% 300 124% 250 200 150 90% 100 50 4% - VIC QLD SA NSW » Gas Masterclass Source: EnergyQuest, AGL Energy Ltd » April 2014 » AGL External

NSW contracted supply vs demand 10 NSW Gas Supply (PJ) 200 200 Tallawarra CCGT Plant NSW Supply Contracts commissioned 180 180 NSW Aggregate Demand 160 160 Smithfield 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 - » Gas Masterclass » April 2014 » AGL External

Existing pipelines cannot supply full NSW 11 market out of Victoria (if MSP is removed) Eastern ¡Gas ¡Pipeline Moomba ¡Sydney ¡Pipeline NSW-­‑VIC ¡Interconnector Total Capacity ¡EGP ¡+I'con TJ/d 700 Implies EGP expansion from 294 TJ/d to at least 475 TJ/d 600 500 400 300 200 100 0 -­‑100 -­‑200 Data Source: National Gas Market Bulletin Board » Gas Masterclass » April 2014 » AGL External

12 AGL modelling has taken a different approach to most: We have used daily rather than annualised supply and demand data which delivers much more powerful results » Presentation Title » February 2008 » AGL Internal

13 Practical implications of temporary gas supply shortage » Presentation Title » February 2008 » AGL Internal

14 Businesses will be most affected Gas-intensive industrial users will have 3 options, if their gas supply • contracts expire over 2016/17: - Cease trading, - Pay much higher prices, or - Reduce production. However, irrespective of binding contracts, large industrial • businesses still face potential curtailment if NSW Govt needs to exercise emergency powers. » Gas Masterclass » April 2014 » AGL Internal

consuming sites by location in NSW Proportion of manufacturing jobs and gas 10% 12% 14% 16% 18% 20% » AGL External » April 2014 » Gas Masterclass Manufacturing Jobs 0% 2% 4% 6% 8% (% of total) Smithfield East Hills Auburn Toongabbie Menai Campbelltown Lakemba Londonderry Heffron Blacktown Riverstone Wyong Macquarie Fields Maroubra Fairfield Hornsby Lane Cove Cronulla Marrickville Miranda Penrith Bankstown Gosford Lake Macquarie Mount Druitt Port Stephens Manly Castle Hill Oatley The Entrance Wakehurst Orange Cessnock Camden Monaro Murrumbidgee Rockdale Wagga Wagga Bathurst Pittwater Lismore Coffs Harbour Granville Tamworth Wollongong Baulkham Hills Ballina Wollondilly Drummoyne Burrinjuck Hawkesbury Maitland Parramatta Clarence Dubbo Albury Goulburn Kogarah Ryde Tweed Kiama Terrigal (LHS) Manufacturing Jobs as % of total Sites (RHS) Number of Large Gas Consuming South Coast Myall Lakes Bega Upper Hunter Swansea Charlestown Keira Pt Macquarie Strathfield Mulgoa Ntn Tablelands Cabramatta Murray-Darling Canterbury Oxley Willoughby Shellharbour Newcastle (Number of Sites) Davidson Balmain Liverpool Consumers Ku-ring-gai Large Gas Barwon Epping Heathcote Blue Mountains Wallsend Coogee North Shore Sydney Vaucluse 0 2 4 6 8 10 12 14 16 15

16 What does AGL’s modelling show? » Presentation Title » February 2008 » AGL Internal

Aggregate gas load forecast for the east coast 17 2012-2018 Aggregate Gas Demand (TJ/d) 8,000 Residential & SME Commercial & Industrial 7,000 Power Generation LNG Train6 LNG Train5 6,000 LNG Train4 LNG Train3 5,000 LNG Train2 LNG Train1 Residential 4,000 Commercial Power 3,000 & Industrial Generation 2,000 1,000 0 2012 2013 2014 2015 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

18 Base case for 2014 - 2018: current market conditions Aggregate Demand (TJ/d) 7,000.0 The first substantive gas supply shortages occur in April 2016 (export volume shortages at the LNG 6,000.0 terminals). The domestic market experiences shortages from May 2016 (in NSW and in the ACT). 5,000.0 4,000.0 3,000.0 Unserved Load 2,000.0 Aggregate System Load Served 1,000.0 - 2014 2015 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

19 Profound impact on LNG export terminals Aggregate LNG Load (TJ/d) 5,000 4,000 3,000 2,000 1,000 Unserved Load LNG Load Served - 2014 2015 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

Base case scenario: devastating impacts in NSW – up to 118 20 days of gas shortages Aggregate Demand (TJ/d) 700.0 600.0 500.0 400.0 300.0 200.0 Unserved Load 100.0 NSW+ACT System Load Served - 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

21 Expand the EGP and Culcairn interconnect Aggregate Demand (TJ/d) 700.0 600.0 500.0 400.0 300.0 200.0 Unserved Load 100.0 NSW+ACT System Load Served - 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

22 Add Newcastle Gas Storage Aggregate Demand (TJ/d) 700.0 600.0 500.0 400.0 300.0 200.0 Unserved Load 100.0 NSW+ACT System Load Served - 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

23 Add new sources of gas supply into NSW Aggregate Demand (TJ/d) 700.0 600.0 500.0 400.0 300.0 200.0 Unserved Load 100.0 NSW System Load Served - 2016 2017 2018 » Gas Masterclass » April 2014 » AGL External

24 What needs to be done to avert this crisis? » Presentation Title » February 2008 » AGL Internal

25 Response options There are adequate gas reserves (in the form of CSG) in the ground » in NSW Therefore there are three possible options: » ▪ Divert supply – domestic reservation policy – would be ineffective ▪ Restrict demand – National Benefits Test for future LNG export developments – may be worth considering ▪ Expand supply within NSW within framework of community engagement and environmental protection – most logical solution Above all, it has become vital that action is prompt. » Gas Masterclass » April 2014 » AGL External

26 What needs to be done to avoid this crisis? East coast gas market – a business perspective NSW gas supply must be facilitated » Presentation Title » February 2008 » AGL Internal Gas Masterclass| April 2014| AGL External