Gas Storage Facilities Eastern and South Eastern Australia

February 2015

Gas Gas Storage Facilities Storage Facilities Table of Contents

Table of Contents 1. Introduction.............................................................................4 2.

Peak Demand and Supply......................................................6

2.1

Historical Peak Demand and Supply ...................................................6

3.

Storage Capacity....................................................................8

3.1

Overview of Existing and Committed Storage Facilities.....................8

3.2

Adequacy of Storage Capacity.......................................................... 10

3.3

New storage options......................................................................... 12

3.4

Cost analysis..................................................................................... 13

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© Core Energy Group 2015

Gas Storage StorageFacilities Facilities Gas Definitions and Acronyms

Definitions and Acronyms Unless otherwise stated, the definitions detailed in Table 1.1 and acronyms listed in Table 1.2 apply throughout this report.

Table 1.1  Report Definitions Term

Table 1.2  Acronyms Definition

d

day

GJ

Gigajoule: a unit of energy measurement equal to 109 joules

km

Kilometres: a unit of distance measurement equal to 103 meters

PJ

Petajoule: a unit of energy measurement equal to 1015 joules

TJ

Terajoule: a unit of energy measurement equal to 1012 joules

TJ/d

Terajoules per day: a measure of gas consumed or transported in one day

TJ p.a.

Terajoules per annum: a measure of gas consumed or transported in one year

$ or AUD

Australian dollars

Acronym

Definition

2P

Proved and probable reserves

ACQ

Annual Contract Quantity

ACT

Australian Capital Territory

AEMO

Australian Energy Market Operator

AGL

AGL Limited

APLNG

Australia Pacific LNG

AUD

Australian dollar

CBJV

Cooper Basin Joint Venture

Core

Core Energy Group

CSG

Coal seam gas

GJ

Gigajoule

GPG

Gas Powered Generation

GSOO

Gas Statement of Opportunities

LNG

Liquefied natural gas

Mcf

Million cubic feet

NSW

New South Wales

PJ

Petajoule

Qld

Queensland

SA

South Australia

Tas

Tasmania

UGS

Underground Gas Storage

Vic

Victoria



© Core Energy Group 2015

| III

Gas Gas Storage Facilities Storage Facilities 1. Introduction

1. I N T R O D U C T I O N 1.1

Introduction

Core has been engaged by AEMO to provide an overview of gas storage capacity in eastern and south eastern Australia (“EA”). The terms of Reference for this element of the broader Core engagement are included as Attachment 1.

1.2

Background

As illustrated by Figure 1.4, the EA region experiences a significant degree of variability between average daily demand and peak daily demand. This is largely attributable to seasonal climatic factors which influence the intensive use of heating and cooling appliances. This variability is a critical feature of the EA gas market. Over recent history, a few large supply sources have accounted for the majority of peak supply. In particular, the Cooper Basin JV (“CBJV”) and Gippsland Basin JV (“GBJV”) have provided substantial flexible supply, under long standing contracts into Vic NSW, SA and ACT. The relationship between peak supply and peak demand is highlighted in Figures 1.1. to 1.4. A significant portion of CBJV and GBJV contracted supply reaches the end of its term in 2016 and 2017, respectively Therefore, it is considered timely to consider the adequacy of peak supply capacity to meet future peak demand.

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© Core Energy Group 2015

Gas Storage StorageFacilities Facilities Gas 1. Introduction

Figure 1.1  Vic Monthly Peak Gas Flow | TJ/d

Figure 1.2  NSW & ACT Monthly Peak Gas Flow | TJ/d

1,400

700

1,200

600 500

1,000

400

800

300

600

200 400

100

200 0

Jan Feb Mar Apr May Jun Longford

Jan Feb Mar Apr May Jun

Jul Aug Sep Oct Nov Dec SWP

Total

Jul

Aug Sep Oct Nov Dec

EGP

MSP

Total

NSW VIC

Camden

Source: Core Energy & GBB

Figure 1.3  SA Monthly Peak Gas Flow | TJ/d

Figure 1.4  Average and Peak Daily Demand | TJ/d 1,400

450

QLD

1,200

350

VIC

SA

TAS

1.99x

2.00x

1.85x

1.87x

1,000

300 250

800

200

600

1.56x

1.63x

150

1.47x

1.63x

400

100 50 0

NSW/ACT

1.98x

400

1.17x

1.15x

1.48x

1.16x

1.53x

1.57x 1.69x

1.11x

1.59x

1.13x

1.64x

200 2.03x

Jan Feb Mar Apr May Jun MAP

Jul

SEAgas

Aug Sep Oct Nov Dec Total

0

08/09

1.96x

1.49x

09/10

10/11

Average Daily Regional Demand

1.38x

11/12

1.25x

12/13

Peak Daily Regional Demand

Source: Core Energy & GBB

© Core Energy Group 2015

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Gas Gas Storage Facilities Storage Facilities 2. Peak Demand and Supply

2 . P E A K D E M A N D A N D S U P P LY 2.1

Historical Peak Demand and Supply

2.1.1

Demand

Historical average daily demand for Vic has been ~600TJ, NSW and ACT 350–400TJ and SA 275–300TJ. Peak demand over the same five year term has been~1,200TJ in Vic, NSW/ACT ~600TJ and SA 400–500TJ. The relationship between average and peak demand or load factor (peak as a multiple of daily average) is VIC — 2.0, NSW/ACT — 1.5–1.6, and SA — 1.6 times average daily demand. The variance between average and peak demand has been approximately 600TJ in Vic, 200TJ in NSW and up to 150TJ in SA. Figure 2.1  Average Daily Demand by Region | TJ/d

Figure 2.2  Peak Daily Demand by Region | TJ/d

700

1,400

600

1,200

500

1,000

400

800

300

600

200

400

100

200

0

09

10

11

NSW/ACT

12

VIC

13

0

09

SA

10

11

NSW/ACT

12

13

VIC

SA

Source: Core Energy and AER

Source: Core Energy and AER

A key factor influencing the volatility is weather conditions and the related use of gas heating and GPG for cooling. The volatility in GPG demand is highlighted in Figure 2.4. Figure 2.3  Average GPG Demand | TJ/d

Figure 2.4  Peak GPG Demand | TJ/d 1,200

400

1,000

300 800

200

600

400

100 200

0 08

09 NSW/ACT

10

11 VIC

Source: Core Energy Group and AER

12 SA

13 Total

0

06

07 NSW/ACT

08

09 VIC

10

11 SA

12

13 Total

Figure 2.5  Source: Core Energy and NEM Review



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© Core Energy Group 2015

Gas Gas Storage StorageFacilities Facilities 2. Peak Demand and Supply

2.1.2

Supply

Figure 2.5 summarises the average daily contribution by production area , for three main seasonal markets, over the last five year period. Of particular interest is the major role of Longford, Moomba, Otway and Iona/WUGS in meeting peak seasonal demand. Victoria Vic demand peaks in winter, primarily due to gas heating use. Peak gas supply has been sourced largely from Longford (GBJV gas contract) and the MSP (CBJV contract) (Refer Figure 2.6). New South Wales & ACT NSW and ACT demand also peaks in winter, with peak gas supply sourced largely from EGP (GBJV gas contract) and the MSP (CBJV contract, including Moomba storage) (Refer Figure 2.7). South Australia SA peaks in both winter and summer due to winter gas heating and summer air-conditioning load supplied by GPG. Supply is met largely from the MAP (CBJV) and SEAGas (Otway) (Refer Figure 2.8). Figure 2.6  Avg. Daily Supply by Production Area | TJ/d 500

400

Figure 2.7  Vic Peak Demand | TJ/d; 2013

1,200

1,400

1,000

1,200

800

1,000

300 600 200 400

800 600 400

100

200

200 0

0 08

09 Cooper Bass

10 11 12 Camden CSM | NSW Longtom

0

13 Otway

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Longford

Gippsland

SWP

Total

Note: Gippsland propduction is represented on the secondary ascis on the RHS.

Figure 2.8  NSW/ACT Peak Demand | TJ/d; 2013

Figure 2.9  SA Peak Demand | TJ/d; 2013

700

450

600

400 350

500

300

400

250

300

200

200

150

100

100

-

50

Jan Feb Mar Apr May Jun

Jul Aug Sep Oct Nov Dec

EGP

MSP

Total

NSW VIC

Camden

0

Jan Feb Mar Apr May Jun MAP

Jul Aug Sep Oct Nov Dec

SEAgas

Total

Source: Core Energy and AER

© Core Energy Group 2015

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Gas Gas Storage Facilities Storage Facilities 3. Storage Capacity

3 . S TO R A G E C A PA C I T Y 3.1

Overview of Existing and Committed Storage Facilities

3.1.1

Introduction

Existing and committed storage facilities are summarised in Figure 3.1 and Table 3.1. Historically, three facilities have provided the majority of EA storage capacity: §§ Moomba storage (CBJV) §§ Iona/WUGS (Energy Australia) §§ Dandenong LNG (APA). However, in absolute terms, these facilities have provided relatively modest peaking services, due to the large degree of flexibility available via field production, under existing contracts. Figure 3.1  EA Storage Facilities

Mt Isa

QCLNG APLNG GLNG

Moranbah

Boree Gas Storage*

Roma Undergound Storage System

Ballera Gas Storage

Wallumbilla Ballera

APLNG Surat Basin*

Silver Springs Newstead Undergound Storage

Moomba

Key

Moomba Underground Gas Storage

Major Pipelines Supply Hubs Newcastle Liquefied Gas Storage

Newcastle Torrens Island Gas Storage and LNG

Camden

Capital Cities and Towns Existing Gas Storage Facility Under Development Gas Storage Facility Proposed Gas Storage Facility * Exact location yet to be finalised

Beach Energy Otway Basin*

Iona Gas Storage

Orbost Pt Campbell Origin Energy Otway

Lang Lang

Longford

LNG Injection

Liquefaction Plants (Under Construction) Liquefaction Plants (Proposed)

Source: Core Energy Group 8|

© Core Energy Group 2015

Gas Gas Storage StorageFacilities Facilities 3. Storage Capacity

3.1.2

Existing Storage Facilities

Table 3.1  Existing and Under Development Storage Facilities Storage Facility

Operator

Location

Injection Capacity | TJ/d

Withdrawal Capacity | TJ/d

Storage Capacity | PJ

Existing Storage Facilities Ballera Gas Storage Facility (Chookoo) Santos

SW Qld

NPA

NPA

10.0

Dandenong LNG Storage Facility

APA

Vic

8

238

0.7

Iona Storage Facility

EnergyAustralia

Vic

129

500

22.0

Moomba Gas Storage Facility

Santos

SA

Newstead Gas Storage Facility

Origin Energy

Roma Underground Storage Facility

GLNG

Silver Springs Gas Storage Facility

NPA

32

85

NSW

na

8

2

Qld

75

75

>50

AGL

Central Qld

30

30

35

AGL

Tomago, NSW

10

120

1.5

Committed Storage Facilities Newcastle LNG Storage Facility

* NPA – Not publicly available

Given the recontracting that will take place in 2016 to 2018, it is considered timely to examine the adequacy of these facilities to meet future peak demand — refer paragraph 3.2 below.

© Core Energy Group 2015

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Gas Gas Storage Facilities Storage Facilities 3. Storage Capacity

3.2

Adequacy of Storage Capacity

3.2.1

Introduction

The adequacy of storage capacity cannot be determined in isolation from other sources of supply. Ultimately peak demand will be met by a combination of supply sources including: §§ MDQ capacity under future contracts §§ Linepack capacity available via existing transmission pipelines §§ Underground gas storage facilities (included within definition of storage) §§ LNG peak shaving facilities (included within definition of storage). The adequacy of peak supply in EA (including storage) to meet peak demand, is examined below.

3.2.2

Projected Peak Demand

Core has developed forecasts of peak demand on an annual basis over the forward ten year period. Core modelling indicates that there is likely to be modest , if any growth in peak demand over the forecast period (with the exception of Qld). Therefore an assessment of the adequacy of peak supply capacity is based on the following assumed seasonal variation in demand: §§ Vic - range from average of 600TJ to peak of 1,200 TJ §§ NSW - range from average of 400TJ to peak of 600TJ §§ SA - range from average of 300TJ to peak of 450TJ.

3.2.2.1 Vic Core analysis indicates that Vic peak supply capacity is adequate to meet projected peak demand to 2024. Major supply sources include:

Table 3.2  Vic Peak Supply Sources Peak Supply Source

TJ/d

Longford (assumed Vic capacity allocation)

500

SWP

350

Dandenong LNG Storage

238

Iona Storage

500

NVI

50

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© Core Energy Group 2015

Gas Gas Storage StorageFacilities Facilities 3. Storage Capacity

3.2.2.2 NSW Core analysis indicates that NSW peak supply capacity is adequate to meet projected peak demand to 2024. Major supply sources incude:

Table 3.3  NSW Peak Supply Sources Peak Supply Source

TJ/d

Longford (assumed VNSW capacity allocation)

300

MSP (contracts and linepack)

100

Newcastle LNG Storage

110

NVI

100

Other linepack

50

3.2.2.3 SA Core analysis indicates that SA peak supply capacity is adequate to meet projected peak demand to 2024. Major supply sources include:

Table 3.4  SA Peak Supply Sources Peak Supply Source

TJ/d

MAP

75

SEAGas

225

Moomba

50

Ioana

100

Other linepack

50

© Core Energy Group 2015

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Gas Gas Storage Facilities Storage Facilities 3. Storage Capacity

3.3

New storage options

3.3.1

Introduction

Over recent years a range of new storage facilities have been proposed to provide additional peak demand capacity. These facilities are outlined below.

3.3.2

Previously Proposed Storage Facilities

Several gas storage projects have been proposed in the past, mainly prior to the development of the Gladstone LNG projects.

Table 3.5  Proposed Storage Facilities Storage Facility

Operator

Location

Additional comments

Boree Gas Storage

Innovative Energy Consulting

Adavale Basin, Qld

Storage capacity - 7.5 Bcf salt cavern, 5 salt caverns in total. Intends to supply CSG to the LNG hub in Gladstone, and emerging Wallumbilla/Roma gas hub, some 900km and 450km away respectively.

Origin Otway Gas Storage Facility

Origin Energy

Vic

Reservoir storage, utilising depleted onshore gas fields

Torrens Island Gas Storage and LNG

AGL

Torrens Island, SA

The proposed Torrens Island Gas Storage Facility was to be built on Torrens Island in SA. AGL Energy has proposed the project - comprising an LNG production plant, storage tank and re-gasification units that convert LNG to pipeline quality gas. AGL has obtained approval under Section 49 of the Development Act 1993: Crown Development and Public Infrastructure.

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© Core Energy Group 2015

Gas Gas Storage StorageFacilities Facilities 3. Storage Capacity

3.4

Cost analysis

3.4.1

Cost of Firm Storage Capacity

Core has undertaken analysis of the cost of services provided by existing storage facilities and the estimated cost of the committed Newcastle facility (utilising a 7% real WACC) to derive an estimate of the cost of EA storage services. Based on this analysis, Core has derived a service cost in the range of AUD0.50–0.65 GJ/day or AUD180–240/GJ/annum. A lower charge would apply to interruptible service.

3.4.2

Variable Cost

In addition to the above base storage service, there is a variable charge associated with injection and withdrawal. This fee is held confidential by storage operators but Core believes a cost of approximately 10–15% of the base service charge is a reasonable guide.

© Core Energy Group 2015

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Gas Gas Storage Facilities Storage Facilities Attachment 1 | Consultancy Services

Attachment 1 | Consultancy Scope The consultancy purpose is to: §§ Provide an update of current status of existing storage facilities, including details on maximum capacity, maximum injection and withdrawal rates and a description of any conditions that might affect withdrawal or injection behaviour. §§ Use best endeavours to assist AEMO to source information regarding operating costs, and any requirements for reprocessing facilities. As a minimum Core will provide benchmark costs for similar facilities. §§ Investigate and report upon the potential options that exist for new storage facilities.



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© Core Energy Group 2015

Gas Storage StorageFacilities Facilities Gas Terms of Use

Terms of use of this document This document has been prepared by Core Energy Group Pty Limited, A.C.N. 110 347 085, (“Core”) for for the sole purpose of providing the Australian Energy Market Operator (“AEMO”) with the analysis of gas storage facilities in eastern and south eastern Australia. This document has been prepared on the basis of a specific scope and does not purport to contain all the information that a particular party may require. The information contained in this document is general in nature and may not be appropriate for all persons and it is not possible for Core to have regard to the investment objectives, financial situation and particular needs of each party who reads or uses this document. This document should not be relied upon in any way to make any form of investment decision. Core believes that the information contained in this document has been obtained from sources that are materially accurate at the time of issue, but Core makes no representation or warranty as to the accuracy, reliability, completeness or suitability of the information contained within this document. To the extent permitted by law, Core, its employees, agents and consultants accept no liability for any statements, opinions, information or matter (expressed or implied) arising out of the information contained within this document. © Core Energy Group – All material in this document is subject to copyright under the Copyright Act 1968 (Commonwealth) and international law and permission to use the information in any form of document or report by any party other than the Consortium, must be obtained in advance and in writing from Core.

© Core Energy Group 2015

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Core Energy Group Level 10, 81 Flinders St Adelaide SA 5000 T: +61 8412 6400 | w: coreenergy.com.au Paul Taliangis Chief Executive Officer T: +61 8 8412 6401 E: [email protected]