Gas price spike 'to stay'

Beach Energy managing director Reg Nelson has predicted a sustained spike in natural gas prices in the eastern states lasting as long as a decade due to the "supply crunch" affecting the market.

Beach Energy managing director Reg Nelson has predicted a sustained spike in natural gas prices in the eastern states lasting as long as a decade due to the "supply crunch" affecting the market.

Mr Nelson said wholesale prices had already risen to the widely forecast $7-$9 a gigajoule, adding they could rise to more than $10 for short-term contracts, given the tightest period in the market would only occur in 2017.

"It is a price spike, and it's going to be here for quite some time," he said ahead of an investor briefing by the oil and gas company in Sydney.

"The best thing for everyone is really to see that price as the incentive to explore and develop and to provide the competition that will ultimately ensure security of supply."

How long the price spike will last depends on how quickly supply can be brought to market, and particularly New South Wales, where it is needed most, Mr Nelson said.

Beach is well placed to benefit from what it calls the "new gas pricing paradigm", where domestic gas prices in eastern Australia are increasingly linked to oil prices, and driven by LNG export volumes from Queensland.

It has fields in the Cooper Basin that will supply Origin Energy at oil-linked prices starting from mid-2014, and also has acreage in the Gippsland and Otway basins in Victoria, as well as the emerging petroleum province of the Maryborough Basin in Queensland.

Mr Nelson said the supply tightness had been in the offing for years, and customers were partly to blame for not locking in supplies at an earlier date.

Turning to Beach's oil business, Mr Nelson said one of his aims before his retirement from Beach in mid-2015 was to find "the equivalent of a new Western Flank" for the company, to replace the high-yielding oil production flowing from fields in the Cooper Basin.

The best prospect for that lies in Beach's Tookoonooka oil exploration venture in south-west Queensland, where the company is working with Toronto-listed Bengal Energy.

The 2600-square-kilometre Tookoonooka licence includes a meteorite impact crater that could open up a new exploration play for conventional oil that Mr Nelson says could be rapidly brought to market.

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