Curtis Island LNG plant production could drop with cheap gas

PRESSURE is mounting on Curtis Island's three liquefied natural gas plants as industry professionals weigh-in on what the low oil price means for their future.

Respected consultancy Wood Mackenzie has warned the APLNG, GLNG and QCLNG sites could face a grim future if the oil prices stay at the slumping $45-50 per barrel mark.

LNG FUKUROKUJU is purpose built to carry LNG from the APLNG facility at Curtis Island to Kansai Electric facility in Japan.
LNG FUKUROKUJU is purpose built to carry LNG from the APLNG facility at Curtis Island to Kansai Electric facility in Japan. APLNG

Wood Mackenzie upstream analyst Matt Howell said their most recent outlook report for LNG found the three Queensland sites should not run at full production under the current low oil prices.

Mr Howell said the price pressure was on top of growing concerns over the need for more gas for the three sites.

He said already GLNG was using a "substantial amount" of third party gas to fill their train.

The Australian Financial Review reported the new analysis found up to 43% of the up to 8000 new wells needed across the three ventures throughout the next 30 years would be unprofitable if LNG prices remained at the low current low prices.

Mr Howell said from their analysis, it left the three sites with two options; drag down costs or renegotiate contracts to reduce deliveries until early in the next decade, when the LNG market becomes more stable.

"(The Curtis Island plants) are at mercy of the oil price more-so than the projects on the West and North Australian coast," Mr Howell said.

The findings raise more concerns for the three $70 billion sites and the decision to rely on ongoing drilling of coal seam gas.

"The difference is for conventional LNG projects the ongoing cash costs are quite low but for the CSG LNG projects (on Curtis Island) they have that continual drilling and developing of new acreage to fill the plants," Mr Howell said.

"If prices were to be at the suppressed level, then it doesn't make sense for the additional wells to be made."

Other companies have weighed in on the issue too, with Blue Energy proposing to build a 200km pipeline to connect Gladstone's gas market to the Bowen Basin's.

Santos has already said it would not run its GLNG venture at full production because of the cost of sourcing additional gas.

However the other two sites have not confirmed if they would follow suit.

A QGC spokesperson said the project was a "significant contributor to Australia's economic development".

"We have consistently said we will send molecules to their highest value, be that to domestic customers or export and have a robust view of the demand for gas here in Australia and the future of gas markets in the Asian region," they said.

Topics:  gladstone industry

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