Australia Natural Gas

Australia Natural Gas Industry Outlook

• Australia’s natural gas production increased by 1.1 percent in 2021, with a rise in East Coast and Queensland CSG production

• The electricity generation sector is expected to decreased its share in natural gas consumption in the coming years, due to an increasing share of renewables in fuel mix

• Australia was the largest exporter of LNG beating Qatar, with 108.1 BCM of LNG exports

• Supplier Landscape: Buyers can choose from multiple suppliers (4–5 on an average), also buy from short-term natural gas markets providing a higher degree of flexibility.

• Due to surplus natural gas production domestically, and the commoditized nature of natural gas, suppliers can introduce limited differentiation in their offerings.

Natural Gas Proved Reserves 

Australia Natural Gas Industry Structure and Outlook

• An interconnected gas grid connects all of Australia’s eastern and southern states and territories. While traditionally focussed on domestic sales, this market is undergoing structural changes as a gas export industry

• The western gas market is heavily focused on exports, but also supplies domestic consumption in Western Australia

• The northern gas market is Australia’s smallest producer. Its basins provide gas for export, and also for domestic consumption in the Northern Territory.

• The eastern gas region has some wholesale markets for gas, which allow retailers or large customers to purchase gas without entering into long-term contracts.

• Commissioning of the Northern Gas Pipeline in 2018 linked gas fields in the Bonaparte Basin having over 800PJ reserves (offshore of Darwin in the Timor Sea) to Queensland. A large quantity of the gas produced in this basin is converted to LNG for export

• Australia is the world’s largest LNG exporter and most of its LNG is shipped to Asia, where it is stored, re-gasified and injected into local gas pipeline networks

Australia Natural Gas Cost Structure Analysis
Cost Break-up

Natural Gas Prices

• Wholesale gas price is the major share of final price paid by consumers, and is at an average of 40 percent in Australia, however, it varies significantly by region

• The retail sales expenditure is around 10–15 percent of the total cost and is a component, which can be negotiated with the supplier

Australia Natural Gas Price Drivers

• Domestic gas consumption and LNG exports are the key drivers in determining the wholesale price component of the final industrial natural gas prices

• At the industrial level, load factor and Take or Pay levels can alter gas bills significantly, and therefore should be optimized

Porter’s Five Force Analysis: Australia Natural Gas Market

• Buyers have low to moderate buying power, due to a tight supply market and a medium level of choice of suppliers

• Suppliers have low power, due to the medium level of competition and the degree of nature of the commodity

Supplier Power

• Retail natural gas suppliers at the regional level have a medium market share, and buyers have an option of around 4-5 alternate suppliers on average

• Due to surplus natural gas production domestically, and the commoditized nature of natural gas, suppliers can introduce limited differentiation in their offerings

Barriers to New Entrants

• Large capital is required in exploration, production, pipeline, etc., which limits the entry of new players into the market

• The recent dip in profit margins of many natural gas suppliers will discourage new players from entering the market

Intensity of Rivalry

• In some places, there is competition coming up in terms of price, like Western Australia

• The expected increase in crude oil price due to IMO regulation will increase the demand for natural gas in domestic and industrial consumption. This might serve as a suitable time for suppliers to establish their customer base

Threat of Substitutes

• In the medium term, the only substitute is in the field of electricity generation, where renewables are replacing natural gas in Australia

• Soaring LNG demand in Asia and Europe is creating enough demand for Australian natural gas, for the long term

Buyer Power

• Buyers can choose from multiple suppliers, and also buy from short-term natural gas markets providing a higher degree of flexibility

• Markets are highly regionalized, and therefore the buyer has to pay depending on the region, which limits the flexibility to freely negotiate the prices

Why You Should Buy This Report

• This report provides a detailed analysis of the Australia natural gas price forecast, the cost break-up, supply chain, the natural gas price drivers, and analysis.
• It lists out the natural gas industry trends in Australia and best procurement practices. 
• The report does a SWOT analysis of major players such as AGL, Lumo Energy, Origin Energy, etc.
• This natural gas market analysis report breaks down the industry structure, supply-demand trends, and key regulations and policies affecting the Natural Gas Market. 
• It provides Porter’s five force analysis of the natural gas market in Australia.