Based on current producing fields and upcoming domestic market obligation from Chevron's Gorgon and Wheatstone LNG mega-projects, Wood MacKenzie forecasts a shortage of over 150 million standard cubic feet per day post-2021 - much more than the gas supply required for a fertiliser plant or an iron ore mine.
Current producing domestic fields are in natural decline, and Wood MacKenzie believes the North West Shelf will reduce supply to the domestic market post-2021 as contracts roll off.
The NWS has already met its DMO obligation for the producing fields, and Wood MacKenzie says the LNG DMO from Gorgon and Wheatstone is unlikely to be enough to replace decline from the NWS and domestic fields.
There is the possibility of reserves upgrades from existing fields, there is of course downside risk there too.
With exploration having dried up over the last four years, Wood MacKenzie's WA lead analyst Saul Kavonic said Chevron could control about half of the local market post-2020, and might have the ability to bring on additional domestic gas volumes at low cost - or withhold them.
"With the low oil price operators are pulling back more on exploration which is exacerbating the problem, so absent additional exploration success, domestic gas prices will have to rise to justify developing these high-cost fields," Kavonic told Energy News.
"So Chevron's strategic behaviour with regards to domestic gas will be quite important in terms of how the dynamic plays out."
Kavonic believes the current oversupply amid low pricesis an anomaly as Chinese player CITIC Pacific has had its problems with the ramp-up of its Sino iron magnetite development in the Pilbara.
"They have their take-or-pay obligations which they're then dumping onto the domestic market, which is impacting the spot market," he said.
Theoretically, the Australian Competition and Consumer Commission could intervene to split up the marketing of Gorgon and Wheatstone gas between its joint venture participants.
If this were to happen, Chevron would not be the only go-to point for gas supply contract negotiations, and gas users could enjoy some equity marketing.
Gorgon is a joint venture between the Australian subsidiaries of Chevron (47.3%), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).
Eighty percent of the Wheatstone Project's foundation capacity will be fed with natural gas from the Wheatstone and Iago fields, which are operated by Chevron Australia in JV with Australian subsidiaries of Kuwait Foreign Petroleum Exploration Company and Kyushu Electric Power Company, together with PE Wheatstone (part owned by TEPCO).
The remaining 20% of gas will be supplied from the Julimar and Brunello fields held by Woodside Petroleum and Kuwait Foreign Petroleum Exploration Company.
The Asian players in that mix will want the gas for their own countries' increasing needs, but beyond that there could be some potential for domestic use for WA.
Energy News has contacted Chevron Australia for comment.
