Mark Abbotsford

Executive Vice President Marketing and Trading Woodside Energy Ltd.

Speech to the Australian Domestic Gas Outlook Sheraton Grand Sydney Hyde Park

Tuesday 28 March 2024

[Check against delivery]

Good morning everyone and thank you for that warm welcome.

Thank you also to everyone who's come to listen, including distinguished guests.

I would like to begin by acknowledging the traditional custodians of this land, the Gadigal People of the Eora Nation and pay my respects to their Elders past and present.

Before we start, please take the time to read the disclaimers, assumptions and other important information.

And please note all dollar figures in today's presentation are in US dollars unless otherwise indicated.

My presentation will touch on the important intersection between gas supply and government policy.

And I acknowledge today's event is taking place here on the east coast.

But I'll largely focus on Western Australia, where Woodside has 40 years of operational experience.

Over the journey, we've learnt a lot about the value of working collaboratively with our customers, our community and government.

We have a proud history of reliably supplying gas that powers homes and businesses on a daily basis.

And while you don't always hear about it, we also lean in in times of crisis.

We intend to keep building on this record, as we work to deliver the transformational projects needed for ongoing energy security and economic prosperity through the energy transition.

While this sounds easy when you say it quickly, it's actually anything but easy.

Nor is it predictable.

To this point, I'd like to look at what's changed in the market since we last met here at ADGO 12 months ago.

As most in this room will likely know, global gas prices have normalised following the highs driven by Russia's invasion of Ukraine in 2022.

Insert Date

Insert Title of Speech

1

But the message driven home by this volatility remains unchanged and that is, customers are placing a high value on securing long-term energy security and lower volatility indexation, that is portfolio away from spot indices.

And whether at home or abroad our customers share the same goals, they want to decarbonise, while continuing to support economic growth.

Only last week at CERA in Houston, I was on a panel where my colleague from India talked about seeing a potential increase in LNG demand of over 100 million tonnes per annum.

While I think this might be too bullish, it does demonstrate the demand-side optimism in Asia.

There are, however, many proof points indicating the increased customer focus on securing long-term supply.

They include Wood Mackenzie data, showing the majority of contracts signed in the global LNG market in 2023 were for durations of 20 years or more.

This trend towards longer LNG contracts has been building since 2021.

Our recent deals with LNG Japan and JERA provide evidence of Asian players, in particular, looking to secure access to long-term LNG.

These companies are buying equity in the Scarborough Joint Venture and we are in discussions for the sale of LNG.

Locally, in Western Australia, we are also starting to see domestic gas customers increasingly prepared to take longer-term, more strategic portfolio procurement strategies, given the risk of being overly reliant on short-term procurement.

Like any energy market, Western Australia's is not static, the balance between supply and demand is always changing and sometimes in surprising ways.

Take for example, the Australian Energy Market Operator's 2023 WA Gas Statement of Opportunities.

It's a document many in this room will be familiar with and it came out in December.

But it's now already out of date because of developments affecting both supply and demand.

Driving factors behind a reduction in demand, include operational changes made by major gas users, as well as structural changes in the nickel industry.

These events highlight the need for flexibility in policy development and implementation.

A key policy underpinning energy supply in WA is the state's Domestic Gas Policy.

It aims to ensure a volume of gas equivalent to 15% of the gas exported from WA is available to local households and businesses.

The WA Government applies the policy flexibly and Woodside supports it continuing to do so in a way that recognises the individual circumstances of each project and the needs of the State.

As an example, the Pluto LNG project may not have been developed but for a flexible approach.

And Pluto now provides the platform for the development of Scarborough.

May I also say, we believe the policy is working, WA has enjoyed reliable domestic gas supply because we have a successful LNG industry.

To ensure WA's continued energy security, new export-scale gas projects are needed.

And to achieve this we will continue to need policy flexibility.

Looking at new supply on the horizon, Scarborough will contribute an estimated 180 terajoules a day of domestic gas and has a nameplate capacity of 225 terajoules a day.

It is also intended to provide surety of supply for our regional partners, for decades to come.

Scarborough gas will be processed through a newly constructed Pluto Train 2 and following modifications, the existing Pluto Train 1, located in Karratha.

This photograph was taken in early February and as you can see, site works are progressing well.

Overall, the Scarborough Energy Project was 55% complete at the end of 2023.

We are targeting our first LNG cargo from Scarborough in 2026 - meaning it's intended to be supplying domestic and international customers very soon.

In particular, I'd like to highlight that we are contracted to supply gas to Perdaman Chemicals and Fertilisers, from as early as 2026, primarily from the Scarborough Energy Project.

Perdaman is building a plant near Karratha that's expected to make 2.3 million tonnes of urea fertiliser per annum, including a million tonnes destined for the Australian market each year.

That's equivalent to more than 40 per cent of the 2.4 million tonnes of urea Australia imports annually.

The COVID-19 pandemic and the war in Ukraine have taught us the importance of many things - including the need to be able to make fertiliser here in Australia, to help keep food prices down.

And the National Farmers Federation says the Perdaman plant will help propel Australia's self-sufficiency for this critical farm input.

Our contract with Perdaman is a great example of the domestic gas policy working, delivering gas for an immensely valuable local project with flow on benefits for the Australian community and the economy.

In 2023, Woodside's WA assets produced 76 petajoules of gas, representing approximately 19% of the state's domestic gas supply.

But like gas markets around the world, Western Australia's is finely balanced and supply shortfalls have been forecast to occur as early as this year.

As part of our ongoing and steadfast commitment to WA, we are in the process of finalising arrangements with the State to make more gas available for the WA market very soon.

We believe this proposed additional supply from Woodside, coupled with recent demand-side effects, largely addresses the expected shortfall in gas in WA, noted in the AEMO Gas Statement of Opportunities, in both 2024 and 2025.

This is ahead of new supply coming into the market from Scarborough in 2026.

Our proposed additional supply in 2024 and 2025 would be sent via the interconnector from our Pluto facilities to the Karratha Gas Plant.

For context, the interconnector is a 3.2 kilometre, 30-inch pipeline we delivered in March 2022.

The purpose of this pipeline is to transport gas to take advantage of future excess capacity at the Karratha Gas Plant and provide the potential to accelerate future developments of other offshore Pluto gas reserves, as well as third-party resources.

The interconnector is another step we've taken to set the Karratha Gas Plant up to continue delivering energy to WA and international customers.

As many in this audience would appreciate, no major project development is clearcut, and each resource is unique.

We began construction at Pluto LNG in 2007, just a year after WA's Domestic Gas Policy was formalised.

The project faced challenges as a single-train LNG facility, at the start of a period of significant cost escalation for the industry and the region.

On top of this, the nitrogen and carbon dioxide content in the gas from the Pluto fields typically exceeds the maximum inert components allowed by WA's pipeline gas network.

But as I mentioned, thanks to the flexible application of the WA Domestic Gas Policy, the Pluto Project was sanctioned, we have made domestic gas available in accordance with our arrangements with the state and we are now also developing the Scarborough to Pluto Train 2 Project.

This growth project is expected to generate more than three thousand jobs at peak construction.

And, it has already awarded more than A$3.6 billion in contracts to Australian companies and will boost Australia's economy by billions of dollars.

Through innovation, we have also developed the Pluto LNG Truck Loading Facility.

This facility provides gas for use in power generation at remote mine sites in WA.

Currently we have contracts in place with companies including the lithium miner Pilbara Minerals, as well as Abra, Strandline and Calidus.

Overall, our facilities make a significant contribution to supplying the diverse WA market.

And we continue to invest in new supply, with four projects in execution in WA valued at approximately $13 billion.

Here on the east coast, we saw AEMO just last week forecasting the risk of gas shortfalls on extreme peak demand days next year, ahead of annual supply gaps requiring new sources of gas supply from 2028.

AEMO noted that while the scale of gas consumption remains uncertain through the energy transition, all scenarios identify the urgent need for new investments to maintain adequate supply.

At present, 100 per cent of our east coast gas, which comes from the Bass Strait Project, operated by Esso Australia, goes to the domestic market.

And I am pleased to report Woodside Bass Strait intends to initiate an expression of interest process for 50 petajoules of gas across 2025 and 2026.

While these older fields are depleting, we expect to continue to be a significant supplier in this market into the 2030s.

We are also exploring LNG import opportunities into the South Eastern states.

At a federal level, the past 12 months has seen the introduction of the Gas Market Code.

This mandatory industry code is designed to ensure adequate supply of wholesale gas to the domestic market, at reasonable prices, and on reasonable terms.

Under the exemptions framework Woodside is working with our Bass Strait partner to make 260 petajoules of gas available between now and 2033.

This would be enough to power east-coast gas-fired power stations for around two and a half years.

The exemption mechanism is another example of the importance of flexibility to support new supply.

In closing, I want to leave you with a thought I believe should be considered more often when we think about ensuring Australians enjoy ongoing energy security.

And that is, while it's easy to shine a light on the role of producers, energy supply is a team sport.

The entire supply chain needs to work together, with greater transparency and in real time.

In WA, we know there's more that can be done to improve visibility of the market balance and inform decision making by participants.

With this in mind, we look forward to the recommendations of the WA Parliament's current inquiry into domestic gas policy.

As a company with gas interests on both sides of Australia, I'm fairly confident in saying there's no one market that's got the settings completely right.

But I believe all stakeholders hold common views, on the need for more supply, greater transparency, improved efficiency when it comes to approvals and recognition of the critical role gas can play in supporting a lower-carbon future.

And I am confident that if we continue to work together, we can ensure a prosperous future, for generations to come.

Thank you, I welcome your questions.

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Woodside Energy Group Ltd. published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 March 2024 06:29:06 UTC.