Quadrant assesses gas supply issue
Macquarie and Brookfield will have to sell exploration potential in their planned $4 billion float of Quadrant Energy amid concern its domestic gas plants could run dry in as little as six years.
With Quadrant’s existing fields having peaked, it faces tough competition from rival new supplies and questions over whether customers can pay a gas price high enough to support developments.
Macquarie and Brookfield bought the WA domestic gas and oil interests of US firm Apache in April 2015 for $2.7 billion when the oil price was $US56/barrel. Brent oil was $US52 last week.
The Gas Statement of Opportunities for WA issued by the Australian Energy Market Operator in December predicted only the Gorgon, Wheatstone, North West Shelf and the small onshore Xyris plants had sufficient gas from existing fields to produce past 2023.
Quadrant’s production comes from its Varanus Island and Devil Creek plants and a minority stake in the BHP-operated Macedon plant.
Paul Taliangis, chief executive of Adelaide-based energy consultant Core Energy, said production from the fields supplying Quadrant’s customers had peaked, but the area was prospective for discoveries.
Mr Taliangis said the challenge for Quadrant would be to develop the fields at a low enough cost to be economic. For a new gas field to break even, it needed $5.50 to $6 a gigajoule and an oil price of more than $50 a barrel, he said.
Last year, Quadrant supplied 22 per cent of the WA gas market, with three-quarters coming from the two Quadrant-operated plants where Santos takes the remaining 45 per cent of production, according AEMO WA gas bulletin board.
Wood Mackenzie analyst Saul Kavonic said Quadrant was positioned to capitalise on increased gas prices from its infrastructure, as well as any gas production developed beyond its commitments to service its Alcoa contract.
A Quadrant spokesman said it did not publish reserve outlooks.