East-coast Australian gas markets—Overcoming the lumpiness of capital allocation and temporal instability
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Author(s)
Nelson, T
Griffith University Author(s)
Year published
2018
Metadata
Show full item recordAbstract
Australia's east-coast gas market has undergone significant transformation in the past decade. The discovery of non-conventional coal-seam gas reserves led to investment in three ‘lumpy’ LNG export facilities in Gladstone, Queensland. Drilling activity has subsequently slowed, a direct result of a soft global price for LNG. This slowdown, in an environment of a tripling of east-coast gas demand, has resulted in concerns about domestic gas shortages. To be clear, there is no lack of gas resources. Instead, the problem relates to the relative lumpiness of capital allocation and temporal instability driven by changing global ...
View more >Australia's east-coast gas market has undergone significant transformation in the past decade. The discovery of non-conventional coal-seam gas reserves led to investment in three ‘lumpy’ LNG export facilities in Gladstone, Queensland. Drilling activity has subsequently slowed, a direct result of a soft global price for LNG. This slowdown, in an environment of a tripling of east-coast gas demand, has resulted in concerns about domestic gas shortages. To be clear, there is no lack of gas resources. Instead, the problem relates to the relative lumpiness of capital allocation and temporal instability driven by changing global circumstances. Utilising a simple partial equilibrium model, various options for overcoming these problems are analysed. Of these options, developing import infrastructure appears to be a ‘no regrets’ option that would ensure that the price floor, the LNG netback price, also becomes the market price cap.
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View more >Australia's east-coast gas market has undergone significant transformation in the past decade. The discovery of non-conventional coal-seam gas reserves led to investment in three ‘lumpy’ LNG export facilities in Gladstone, Queensland. Drilling activity has subsequently slowed, a direct result of a soft global price for LNG. This slowdown, in an environment of a tripling of east-coast gas demand, has resulted in concerns about domestic gas shortages. To be clear, there is no lack of gas resources. Instead, the problem relates to the relative lumpiness of capital allocation and temporal instability driven by changing global circumstances. Utilising a simple partial equilibrium model, various options for overcoming these problems are analysed. Of these options, developing import infrastructure appears to be a ‘no regrets’ option that would ensure that the price floor, the LNG netback price, also becomes the market price cap.
View less >
Journal Title
Economic Analysis and Policy
Volume
59
Copyright Statement
© 2018 Economic Society of Australia, Queensland. Published by Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence (http://creativecommons.org/licenses/by-nc-nd/4.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, providing that the work is properly cited.
Subject
Economics
Applied economics
Econometrics
Economic theory