Post on 01-Apr-2015
The Plight of Qldrsquos Domestic Gas Market ndash Prosperity or Doom
By Glen GillMD of Innovative Energy Consulting Pty LtdEUAA Qld Energy Forum BrisbaneApril 19 2012
1
Disclaimer
2 April 2012 EUAA Qld Energy Forum
IMPORTANT NOTICE This presentation document was prepared by Innovative Energy Consulting Pty Ltd (ldquoIECrdquo) for the 2012 EUAA Qld Energy Forum attendees and the information contained in it are based on information supplied by third parties and from sources believed to be reliable No attempt has been made to verify the information and no representation is made as to its accuracy or completeness Any forecasts and statements of opinions contained in this document or given during the presentation are views of IEC and others and are therefore subject to change and should not be regarded as predictions of future events They are based on assumptions uncertainties and contingencies Actual future events may vary significantly from forecasts
This presentation speaks only as of the date it is given and the views expressed are subject to change based upon a number of factors including market conditions IEC has no obligation to tell EUAA Forum organisers or any attendees if an opinion changes or if IEC becomes aware of any change in the information or any inaccuracy in or omission from this presentation document
It is the responsibility of any and all recipients of this document to satisfy itself as to the accuracy of any and all data contained herein
IEC and the officers directors employees and agents of IEC do not accept any responsibility or liability (including in negligence) for this document or its contents This does not apply to the extent that liability by law cannot be excluded
Contents
1 How did we get here2 Challenging Producer Rhetoric3 Alberta or Norway ndash which will it be for
Qld
3 April 2012 EUAA Qld Energy Forum
How did we get here
4 April 2012 EUAA Qld Energy Forum
Eastern Australiarsquos Gas Industry Pipeline sector rhetoric
ndash Light handed regulation or else no further investment will occurndash No need for a level playing fieldndash Infrastructure tolls are not a major cost component
Producing sector rhetoricndash Long term contracts with secret pricing clauses and take or payndash Gas to gas competition is unacceptablendash Exxon resisted the construction of the Eastern Gas Pipeline by BHPDukendash Incumbents trashed the CSG industry during its genesisndash WA LNG players initially trashed the CSG to LNG aspirationsndash Warehousing gas reserves for possible export salesndash LNG export parity pricing for domestic gas market
Gas reform initiatives have not resulted in abundant low cost clean energy in Australia
Large energy end users have not had any major victories5 April 2012 EUAA Qld Energy Forum
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Disclaimer
2 April 2012 EUAA Qld Energy Forum
IMPORTANT NOTICE This presentation document was prepared by Innovative Energy Consulting Pty Ltd (ldquoIECrdquo) for the 2012 EUAA Qld Energy Forum attendees and the information contained in it are based on information supplied by third parties and from sources believed to be reliable No attempt has been made to verify the information and no representation is made as to its accuracy or completeness Any forecasts and statements of opinions contained in this document or given during the presentation are views of IEC and others and are therefore subject to change and should not be regarded as predictions of future events They are based on assumptions uncertainties and contingencies Actual future events may vary significantly from forecasts
This presentation speaks only as of the date it is given and the views expressed are subject to change based upon a number of factors including market conditions IEC has no obligation to tell EUAA Forum organisers or any attendees if an opinion changes or if IEC becomes aware of any change in the information or any inaccuracy in or omission from this presentation document
It is the responsibility of any and all recipients of this document to satisfy itself as to the accuracy of any and all data contained herein
IEC and the officers directors employees and agents of IEC do not accept any responsibility or liability (including in negligence) for this document or its contents This does not apply to the extent that liability by law cannot be excluded
Contents
1 How did we get here2 Challenging Producer Rhetoric3 Alberta or Norway ndash which will it be for
Qld
3 April 2012 EUAA Qld Energy Forum
How did we get here
4 April 2012 EUAA Qld Energy Forum
Eastern Australiarsquos Gas Industry Pipeline sector rhetoric
ndash Light handed regulation or else no further investment will occurndash No need for a level playing fieldndash Infrastructure tolls are not a major cost component
Producing sector rhetoricndash Long term contracts with secret pricing clauses and take or payndash Gas to gas competition is unacceptablendash Exxon resisted the construction of the Eastern Gas Pipeline by BHPDukendash Incumbents trashed the CSG industry during its genesisndash WA LNG players initially trashed the CSG to LNG aspirationsndash Warehousing gas reserves for possible export salesndash LNG export parity pricing for domestic gas market
Gas reform initiatives have not resulted in abundant low cost clean energy in Australia
Large energy end users have not had any major victories5 April 2012 EUAA Qld Energy Forum
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Contents
1 How did we get here2 Challenging Producer Rhetoric3 Alberta or Norway ndash which will it be for
Qld
3 April 2012 EUAA Qld Energy Forum
How did we get here
4 April 2012 EUAA Qld Energy Forum
Eastern Australiarsquos Gas Industry Pipeline sector rhetoric
ndash Light handed regulation or else no further investment will occurndash No need for a level playing fieldndash Infrastructure tolls are not a major cost component
Producing sector rhetoricndash Long term contracts with secret pricing clauses and take or payndash Gas to gas competition is unacceptablendash Exxon resisted the construction of the Eastern Gas Pipeline by BHPDukendash Incumbents trashed the CSG industry during its genesisndash WA LNG players initially trashed the CSG to LNG aspirationsndash Warehousing gas reserves for possible export salesndash LNG export parity pricing for domestic gas market
Gas reform initiatives have not resulted in abundant low cost clean energy in Australia
Large energy end users have not had any major victories5 April 2012 EUAA Qld Energy Forum
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
How did we get here
4 April 2012 EUAA Qld Energy Forum
Eastern Australiarsquos Gas Industry Pipeline sector rhetoric
ndash Light handed regulation or else no further investment will occurndash No need for a level playing fieldndash Infrastructure tolls are not a major cost component
Producing sector rhetoricndash Long term contracts with secret pricing clauses and take or payndash Gas to gas competition is unacceptablendash Exxon resisted the construction of the Eastern Gas Pipeline by BHPDukendash Incumbents trashed the CSG industry during its genesisndash WA LNG players initially trashed the CSG to LNG aspirationsndash Warehousing gas reserves for possible export salesndash LNG export parity pricing for domestic gas market
Gas reform initiatives have not resulted in abundant low cost clean energy in Australia
Large energy end users have not had any major victories5 April 2012 EUAA Qld Energy Forum
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Eastern Australiarsquos Gas Industry Pipeline sector rhetoric
ndash Light handed regulation or else no further investment will occurndash No need for a level playing fieldndash Infrastructure tolls are not a major cost component
Producing sector rhetoricndash Long term contracts with secret pricing clauses and take or payndash Gas to gas competition is unacceptablendash Exxon resisted the construction of the Eastern Gas Pipeline by BHPDukendash Incumbents trashed the CSG industry during its genesisndash WA LNG players initially trashed the CSG to LNG aspirationsndash Warehousing gas reserves for possible export salesndash LNG export parity pricing for domestic gas market
Gas reform initiatives have not resulted in abundant low cost clean energy in Australia
Large energy end users have not had any major victories5 April 2012 EUAA Qld Energy Forum
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Challenging the Rhetoric
LNG Parity Pricing For The Domestic Market
6 April 2012 EUAA Qld Energy Forum
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
The Producerrsquos Dream - Convert Gas into Oil
Gas Dumping Era
Low oil prices resulted in LNG netbacks to wellhead that were much less than that received from WArsquos domestic market ndash hence the $12 Billion flare comments by Woodside in the 1990rsquos
Export Parity Pricing Era
7 April 2012 EUAA Qld Energy Forum
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Santosrsquo View of World Gas Trade
Source Santos 2012
8 April 2012 EUAA Qld Energy Forum
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
The Wisdom of the Day
ldquothe future gas price in the eastern and western markets is in transition toward a price linked to the international LNG price and hence crude oilrdquo
Quote from Q1 2012 NT submission to Commonwealth regarding draft EWP
9 April 2012 EUAA Qld Energy Forum
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
The Experts
10 April 2012 EUAA Qld Energy Forum
Expert price forecasts that ignore gas supplydemand fundamentals amp discount the formulation of an integrated Australian energy policy that encourages onshore energy intensive industry given the surplus of energy supplies that exist in Australia
Source Dart Energy
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Clean Energy Initiative
ldquoIt is important for Australia to have the lowest possible cost of energy as we move to a carbon constrained worldrdquo
March 2012 Clean Energy Finance Corporation report to Commonwealth Government
$10 billion dollar fund to invest in clean energy Gas is clearly by far the cleanest fossil fuel and it
will be a long time before we are weaned off fossil fuels but all of the gas is earmarked for the export market unless parity pricing exists11 April 2012 EUAA Qld Energy Forum
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Reality Check
12 April 2012 EUAA Qld Energy Forum
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Intrsquol Gas Union 2009 Survey
13 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
IGU 2009 World Gas Market Study The survey was across all categories of gas trade domestic
production pipeline imports amp LNG imports The largest single gas price formation driver in 2009 was gas-
on-gas competition at 36 Oil price escalation was the second most popular driver at
21 but was largely attributed to pipeline imports and LNG imports into net importing countries
The three price regulation categories totaled 35 were split fairly equally and applied almost exclusively to domestic gas production
14 April 2012 EUAA Qld Energy Forum
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Wholesale Gas Price Comparison
15 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
2009 Wholesale Gas Price Derivation
16 April 2012 EUAA Qld Energy Forum
Source IGU Nexant
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Gas to Gas Competition Only Canada the US lower 48 amp the UK have liquid
GTG competition Always commences with the creation of a vibrant
spot market (STTM) at a gas supply hub Commenced in gas supply regions of the USA and
Canadandash Alberta since the discovery of gas in the 1950rsquosndash GoM region of the US in the 1970rsquos ndash Spread to the rest of North America in the early 1990rsquos
Expands to downstream gas trading hubs over time
17 April 2012 EUAA Qld Energy Forum
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
European Gas Market in Transition
UK is leading the market liberalisation race to increased GTG
Pressure from LNG imports and pipeline imports from Russia to maintain oil linked gas pricing
Historical dominance of oil linked pricing amp escalation is wanning
Europersquos gas market fragmentation is also wanning
18 April 2012 EUAA Qld Energy Forum
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Dynamics of Gas Market Development
19 April 2012 EUAA Qld Energy Forum
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
How Gas Markets Work
Net gas importing countries are forced to pay for imported gas based on replacement cost of liquid hydrocarbonsndash Liquid hydrocarbons including LNG attract a price
premium due to transportation amp storage cost advantages related to its much higher energy density and liquid state
Net gas exporting countries have the benefit of getting high gas prices for exports and abundant low cost gas for their domestic markets
20 April 2012 EUAA Qld Energy Forum
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Qldrsquos Future ndash Norway or Alberta
21 April 2012 EUAA Qld Energy Forum
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Which Model with Qld Select
Alberta Canadabull Vibrant gas intensive
industries bull value adding of resource
within the provincebull Exports from Alberta to the
rest of Canada amp to US markets are a privilege earned by first supplying low cost gas to Alberta gas demand
Norwaybull 95 of gas production
exported to Europebull Small domestic gas demandbull Maximise royalty received
from gas production for Government coffers with little regard to the domestic gas industry
22 April 2012 EUAA Qld Energy Forum
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Benchmarking Alberta Canada Qld Australia
Population 37 million 46 million
Gas industry commencement
Early 1950rsquos Early 1960rsquos
Annual Gas Production 4125 PJa 260 PJa
Annual Gas Consumption 1600 PJa 215 PJa
Gas Price Floats daily and monthly Negotiated amp escalated
RP Ratio 8 years (Canada)lt10 years for past 2 decades
150 years (80 years for Australia)
of nations gas production
75 77 in 2011 but expected to grow substantially
Gas Export Policy Alberta top priority over exports to rest of Canada amp
to USA
No State nor Federal policy in place
23 April 2012 EUAA Qld Energy Forum
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Do Exports Really Add the Most Value
24 April 2012 EUAA Qld Energy Forum
Source American Chemistry CouncilExcept from Dow Chemicalrsquos submission to EWP
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Alberta Gas Demand
25 April 2012 EUAA Qld Energy Forum
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Alberta Gas Price Differentials
26 April 2012 EUAA Qld Energy Forum
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Alberta Canadarsquos Gas SupplyDemand
27 April 2012 EUAA Qld Energy Forum
Source ERCB
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Domestic Market Future Price Path
28 April 2012 EUAA Qld Energy Forum
LNG Export Parity PricingOil-linkedGas Producers DreamSurplus Gas Resources become a curse to Domestic Market gt$6GJ
Status QuoNegotiated pricesCPI escalationlong term GSArsquosLittle price discovery$4GJ
Major End Users Dream Responsible Resource OwnerLiquid Wallumbilla gas hubSTTM Price DiscoveryAll GSArsquos use floating STTM price$2 to 3GJ amp volatile
Indicative Gas Plant Gate Price
Either future scenario has price volatility
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Thank-you
29 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office
Innovative Energy Consulting Pty Ltd
30 April 2012 EUAA Qld Energy Forum
Innovative Energy Consulting Pty Ltd ABN 81 122 373 719
gleninnovativeenergycomau wwwinnovativeenergycomau
PO Box 1008 Maleny Qld Australia Tel +61 5435-8288 Mobile 0400772512
Managing Director ndash Glen W GillGlen has 30+ years of gas industry experience across the value chain in primarily North America and Australia This experienced includes executive positions with a number of world leaders in the gas industry and many years providing consulting services to large end users of gas large gas producers and midstream infrastructure ownersoperators Of particular relevance to this presentation is his experience leading gas trading and marketing operations with again some of the largest gas production and gas trading organizations worldwide This experience involved immature rather dysfunctional gas markets as well as open transparent and very liquid gas markets Glen is now provides consulting services from his Sunshine Coast based office