Santos warns of big spike in gas prices
East coast gas prices are rising faster than expected before the start of a suite of gas export projects in Queensland from 2015 and as long-standing domestic supply contracts mature.
Santos has two 20-year contracts to supply Origin Energy and AGL with gas, both of which expire around 2016.
Santos told analysts on Wednesday its average gas price had risen to $5.67 a gigajoule from $5.14 a year ago, with the price headed towards $9 a gigajoule by 2015.
Senior executive James Baulderstone highlighted the need to bring on stream additional production.
"NSW natural gas is critical to east coast energy security," the company said. "Additional supplies to meet increased demand, with a tripling of gas demand to tighten the market ... new gas supply sources are needed in 2015-20 to meet the supply challenge."
Along with production planned from Narrabri, in north-west NSW, Santos said gas capacity in the Cooper Basin would rise 10 per cent in 2013 and by a further 20 per cent by 2015, as it prepared to meet higher demand from a series of export gas projects being built in Queensland.
Narrabri output is planned at 200 terajoules of gas a day, with the aim of supplying half of NSW gas demand, which would result in "material" royalty payments to the NSW government.
Santos said its output in 2014 was expected to run at 52-57 million barrels of oil equivalent, thanks to the start up of new operations, such as its gas export project in PNG.
For 2013, output was now expected to run at 51 million barrels of oil equivalent, down from 52 million forecast earlier.
Output in 2014 will be boosted by initial production from the PNG gas project, which is expected during the second half of the year, output from Peluang, Indonesia, from the first half, while the Dua project in Vietnam will kick off around the middle of the year.
Planned outages include up to 40 days at Bayu Udan in the Timor Sea as well as an unspecified amount of downtime in the Cooper Basin as Santos prepares for an increase in throughput from 2015 as several gas export projects in Queensland start production.
The slight decline in output in 2013 is due to a minor loss of production at a project in Vietnam, while in eastern Australia buyers are conserving volumes contracted, before the increase in demand from late 2014, with the start up of several gas export projects in Queensland.
The company also said it expected global demand for liquefied natural gas, such as that to be exported from PNG and Queensland, will reach as much as 160 million tonnes annually by 2025, estimating the US will supply 4-60 million tonnes of that, leaving the balance to be supplied from elsewhere.
Global demand will reach as much as 290 million tonnes by 2030, it predicted.