All images: Gladstone Ports Corporation.
BY ELIZABETH FABRI
GROWING liquefied natural gas (LNG) exports out of QLD has put the Port of Gladstone in the spotlight as domestic gas security issues weigh on the industry, and energy prices on the east coast continue to climb.
2017 was a record trade year for the Port of Gladstone, which has cemented itself as QLD’s largest trading port.
Its commodity base is varied, but it is the port’s increasing LNG exports that are in the spotlight as domestic gas shortages pose a threat to east coast markets.
There are a number of factors contributing to the predicted domestic shortfall, but the heat was on Gladstone’s $70 billion LNG precinct as a primary cause.
In 2017, the port exported 20.2 million tonnes (mt) of LNG, with all three projects (APLNG, GLNG, and QLNG) continuing to ramp up to nameplate capacities, which would see up to 24mtpa of LNG shipped from Curtis island once fully developed.
But exporting high volumes of LNG was what the precinct was always intended to do, Gladstone Ports Corporation chief executive Peter O’Sullivan said.
“It was a little surprising that Gladstone was at the centre of the debate,” Mr O’Sullivan told The Australian Energy Review.
“When these plants were constructed, the planning was always that they would be major export terminals and they access new fields.”
In fact, it is these projects, along with the mega projects off the WA coast, that have helped Australia (almost) overtake Qatar as the world’s largest exporter of LNG.
Earning this title, however, does not solve the issue facing Australia’s domestic market.
In July 2017, following a series of inquests, the Turnbull Government went into damage control and introduced an Australian Domestic Gas Security Mechanism (ADGSM) which would give the Government power to divert uncontracted LNG exports to the local market if it determined there would be a shortfall.
After meeting with the east coast LNG exporters, in November the Government decided it would not trigger export controls, and instead rely on a ‘handshake’ agreement for producers to make more gas available to domestic customers at competitive market terms.
Santos, for example, made a chain of announcements in the last half of 2017 that it would deliver additional gas into the domestic market, with contributions of more than 60 petajoules (PJ) over the next two years.
“Santos and our GLNG partners are delivering on our public commitment earlier this year to meet domestic gas demand while also honouring our long-term LNG contract obligations,” Santos managing director and chief executive Kevin Gallagher said in December.
“This additional supply from GLNG is enough to also cover half of any shortfall that might arise under the ACCC’s high demand case for 2018.”
The Government still reserved the right to trigger exports next year if it saw fit.
Mr O’Sullivan said from a sovereign risk perspective, if the Government did pull the trigger existing contracts at the port would be protected and maintained.
“From a security of contract perspective we imagine that the existing contracts and existing export capacity would be protected going forward,” Mr O’Sullivan said.
“Areas of any energy security and potential Moratoriums on gas are probably more worrying in terms of whether they will stop future development and decrease the chance of future growth.”
A Record Year
The Port of Gladstone managed to break a number of records across it operations in 2017; namely in LNG.
“2017 was a very positive year for the Port of Gladstone in particular; we actually set a new record for the last financial year. We did 120 million tonnes of trade, which was one of the first times we went past Hay Point to become QLD’s largest port,” Mr O’Sullivan said.
For the 2017 calendar year, the Gladstone Ports Corporation (which also comprises the Port Alma Shipping Terminal, and the Port of Bundaberg) handled more than 121.3 million tonnes (mt) of trade. Of this, Gladstone handled 120.5mt.
In December alone, more than 1.9mt of LNG was exported through the port; an increase of 200,000t compared to November.
And on the coal front, 68.29mt of coal was loaded across the RG Tanna terminal and Wiggins Island terminal in 2017; a 2 per cent decrease year on year.
A decline in coal throughput for 2017 was largely attributed to Cyclone Debbie and the loss of production from two coal mine closures in the region.
“While the cyclone didn’t impact the port directly, it impacted the surrounding mines and then the rail link,” Mr O’Sullivan said.
“There was a fair bit of rain in Gladstone so recovering that, cleaning up and still trying to put a record throughput during the year is always a good challenge.
“We were only down for a few hours and then we were back up loading again so the direct impact was quite minor.
“We worked pretty hard over the ensuing weeks to make sure we were able to catch up and drive the coal exports as much as possible.”
However, in January, coal exports hit a nine-month low of 4.72mt (a 25 per cent drop from December), following a train derailment of 20 loaded coal wagons near Duaringa on 24 January.
“The derailment impacted the supply of coal for just under a week, but that’s up and going again,” Mr O’Sullivan said.
“We’re starting to run at full capacity, and looking forward to making up for any of the coal exports that were affected by the rail. We do have that spare capacity at the terminal so we can sprint and make up some of the loss,” Mr O’Sullivan said.The port also had a number of projects in the works to improve infrastructure, along with a renewable energy trial at one of its administration buildings.
In FY18, the Gladstone Ports Corporation is targeting between 125mt and 130mt of tonnage on the back of continued growth in the LNG sector.
It also hoped to move up to the 140mt mark in the coming years.
“Our current capacity without having to change our channel with our existing configuration, is at least 150mt so even though we anticipate that growth of moving up to 14mt, it still means we still have spare capacity and still means we can continue to grow and develop,” he said.
“Between coal, LNG and alumina bauxite industry, we think it’s going to be a very positive financial year for us.”China remained the port’s biggest trade partner for LNG, followed by Japan, Korea and Malaysia.
“I visited China in October/November last year and it was interesting to note the work that they are doing on cleaning up the environment,” Mr O’Sullivan said.
“A lot of their older plants and factories around Beijing were being closed down and they are looking at less coal-fired, more renewables, and more LNG and that’s obviously very positive for Australian LNG producers.
“We think China will continue to be the main importer for LNG.”