'Staggering': Long-term crisis warning as gas demand drops

DEMAND for gas in Australia's East Coast has slumped, prompting warnings that Australia's gas crisis is not a short-term issue.

In EnergyQuest's June quarterly review, it found gas use is falling at a "staggering" 16% in the face of high prices.

Chief executive Dr Graeme Bethune said short-term East Coast gas prices had doubled since 2015, now averaging $9.95 per gigajoule.

There is a drought of investment in domestic gas because of the falling oil price.

His review also defended Santos' Gladstone LNG project after months of criticism for sucking the domestic market dry for international exports.

"There appears to be a view that the LNG projects are sucking vast volumes of gas from the domestic market and all would be well if this is stopped," Dr Bethune said.

He said this view was incorrect.

"Firstly, the sale of Santos' Cooper Basin gas to GLNG was all signed-off in 2010, nearly seven years ago, without any obvious government concerns," he said.

"Secondly, a substantial volume of other third-party gas contracted to the Santos-operated GLNG project appears to originate from other LNG projects and was never developed for domestic gas.

"Gas bought from third parties is not necessarily taking gas from the domestic market."

While the report was welcomed by Santos, it showed a grim outlook for the domestic gas industry as a whole.

"Paradoxically, high gas prices are not translating into a gas investment boom. Instead, the East Coast is experiencing a drought of investment in domestic gas," Dr Bethune said.

"The (oil) price is now softening in the face of rising US production. Australian gas development is likely to remain constrained by a sustained low oil price."



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