For Australia’s gas sector the immediate impact of Covid-19 has been in the form of delayed FIDs as operators cut costs and reassess the medium and long-term demand outlook. Covid-19 has disrupted global demand for oil and gas as countries went into lockdown and although such measures have eased recently, there are fears of a second wave of the virus. This has primarily affected upcoming LNG projects with four such projects originally planning for a 2020 FID being delayed to next year. Domestic gas demand dropped in the first half of 2020 and annual demand is expected to be lower than 2019, but the long-term outlook is relatively stable, with the biggest impact set to be on future exports.
Gas demand in Australia is expected to record a small decline in 2020 primarily due to Covid-19. The heat and power, residential, and industrial sectors have comprised the majority of Australian gas demand and the pandemic has adversely impacted demand across most sectors. While demand should rebound for most sectors, gas demand from power generation sector may not return to its previous levels as renewables continue to grow their share of the power mix.
Total gas production is forecast at almost 14 bcfd in 2020, predominantly from conventional fields supplying LNG plants. Gas production hasn’t been immediately impacted by Covid-19, instead future LNG projects have taken the brunt of the force and had the knock-on effect of spurring uncertainty around upcoming midstream expansions in relation to spare capacity. Due to the project deferrals of LNG projects, conventional offshore gas is expected to see a delayed rebound from 2025 when fields including Woodside’s Scarborough project and Santos’ Barossa project are currently forecast to come online.
The North West Shelf has remained the greatest supplier of LNG in the country, with Gorgon expected to overtake as top producer in 2022. The future of the North West Shelf is less certain now as supply shortages in the medium term have become a point of contention, while short-term supply was recently secured form nearby fields. Chevron ’s announcement they intend to sell their stake in the venture, and the delays to FID at Scarborough and Browse have added uncertainty to the outlook. As potential supply from these new developments has been pushed further out to when North West Shelf will have significant spare capacity, the necessity of the $6.1bn Pluto LNG expansion is in question.