The probable explanation is that we are now seeing the effects of ramp-up gas suppressing market prices in advance of the start-up of production at GLNG and APLNG. Given that QCLNG is already in production and is able to take ramp-up gas from the other projects under short-term swap arrangements, we do not expect prices to fall to the extent seen during the second half of 2014.
Prices in the Sydney market have fallen by around 20 per cent from their January highs, but in the Melbourne and Adelaide markets spot prices have continued to climb and are now at levels last seen in mid-2014.
The ramp-up of CSG production volumes is now clearly evident in production data published by the Australian Energy Market Operator on the National Gas Market Bulletin Board (Figure 2). Queensland CSG production in April exceeded 37 PJ – an annualised rate of almost 450 PJ/a – with eight new production facilities having come on line over the past 12 months.
Shale oil and gas wells typically exhibit high initial rates of decline after being brought into production.
The results from the AEMO-operated Wallumbilla Gas Trading Hub (which commenced operations in March 2014) are shown in Figure 3.