The document summarizes key findings from the Gas Statement of Opportunities published in January 2014 by the Independent Market Operator. It discusses changes made to the GSOO to be more responsive to industry feedback, including increased focus on the North West Shelf and updated demand and price forecasts. The supply-demand outlook is assessed as adequate to 2023 assuming commercially acceptable terms. Future challenges for the WA LNG sector are noted relating to potential changes in Asian LNG pricing and contract terms.

1. Joachim Tan
Senior Analyst
4 March 2014 Stakeholder Forum
Gas Statement of Opportunities –
January 2014 Highlights

2. Agenda
• Changes in GSOO – January 2014
• Responsive to Industry Feedback
• Supply and Demand Balance, 2014 - 2023
• Demand Forecasts, 2014 – 2023
• North West Shelf
• Potential Supply Forecasts, 2014 – 2023
• Future Challenges for the WA LNG Sector
• Gas Reserves and Resources
• Forecasted medium to long-term average (ex-plant) new contract domestic gas
prices, 2014 - 2023
• Gas Bulletin Board data

3. Changes in GSOO – January 2014
• Responsive to industry feedback
• An increased focus on NWS
• More detailed explanation of gas demand and potential supply models
• Updated forecasts of medium to long-term ex-plant contract prices
• More detailed look at WA reserves and resources
• Inclusion of GBB Data

4. Responsive to Industry Feedback
• The following changes implemented in response to industry feedback:
• Increased focus on NWS (reserves, contractual commitments)
• Linkage of reserves to production facilities
• Consideration of different production costs for each facility
• Changes to assumed price elasticity of demand
• Modifications to the price forecast model
• Reduction of time lag between LNG price and domestic gas price
• The following changes suggested by industry are still under
consideration:
• Inclusion of projects yet to reach final investment decision
• Impact of US LNG exports on LNG pricing

5. Supply and Demand Balance, 2014 – 2023
Source: IMO’s Gas Statement of Opportunities – January 2014
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Quantity(TJ/day)
Year
Base Demand Scenario Lower Potential Supply Forecasts Upper Potential Supply Forecasts Gas Production Capacity

6. Key Findings
Domestic supply-demand balance
• For the 2014 to 2020 period, likely to be adequate gas supply to meet
existing contracted gas demand and expected growth in gas demand in
the domestic market assuming that commercially acceptable terms can
be agreed
• For the 2021 to 2023 period:
• the availability of gas to the WA domestic market is likely to be
sufficient if the NWS JVs supply at levels considered in the Upper
potential supply forecasts, but
• may not be sufficient (at forecast prices) to meet forecast domestic
demand if the NWS JVs do not supply gas to the domestic market
beyond existing contracts

7. Gas Demand Model

8. Demand forecasts, 2014 – 2023
• Demand forecasts include existing projects that have attained FID.
• Base domestic gas forecast: growth of 0.4% p.a. to 1,012 TJ/day in 2023
• Base forecast is lower than GSOO - July 2013, previous Base demand forecast
was 1% p.a. growth to 1,052 TJ/day in 2022
• High forecast, growth of 0.6% p.a. to 1,042 TJ/day in 2023, Low forecast flat to
958 TJ/day
• Key difference between High and Low forecasts – economic growth assumptions
• Key changes since GSOO – July 2013 :
o More sensitive price elasticity assumed in gas demand
o GBB data has informed changes to assumptions for alumina processing
and SWIS electricity
o Revisions to price forecasts

9. Demand forecasts – Comparison of July 2013 and Jan 2014
GSOOs
Source: IMO’s Gas Statements of Opportunities, July 2013 and January 2014
900
950
1,000
1,050
1,100
1,150
1,200
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Quantity(TJ/day)
Year
Low Scenario (January 2014) Base Scenario (January 2014) High Scenario (January 2014)
Low Scenario (July 2013) Base Scenario (July 2013) High Scenario (July 2013)

10. Price Sensitivity of Gas Demand, 2014 – 2023
Source: IMO’s Gas Statements of Opportunities, January 2014
$5.50
$6.00
$6.50
$7.00
$7.50
$8.00
$8.50
0
5
10
15
20
25
30
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Price(A$/GJ)
Quantity(PJ/annum)
Year
Non-SWIS SWIS Projected New Contract Prices

11. Key Findings - North West Shelf
• Estimated Reserves (~15,000 PJ)
• Total production (domestic and LNG) estimate (just under 1,200
PJ/annum)
• Years remaining at current production (~12 to 13 years)
• Trade-offs between LNG and domestic gas
o NWS less likely to offer long-term contracts due to status of
reserves and contracts (tail gas issues)
o Woodside CEO – The West Australian - December 2013
 NWS Capacity will start to ease
 Suggests NWS is willing to sell as long as domgas prices are equivalent with
international LNG

12. Key Findings – North West Shelf
Estimated to have sufficient 2P reserves for the 2014 – 2023 period,
subject to:
• the outcomes of ongoing discussions between the WA Government
and the NWS JVs that relate to remaining NWS reserves
• investment decisions required by the NWS JVs to access
remaining undeveloped reserves
• investment required to extend the life of the aging (30-year old)
domestic gas production facility at the Karratha Gas Plant (KGP)

13. Potential Supply Model
Potential supply – an estimate of the availability of gas supply (sum of
contracted supply and price sensitive supply) from gas producers (not
capacity)
Contracted gas supply is estimated for each production facility
Potential price-sensitive gas supply is estimated for each facility by
applying the forecast domestic gas prices forecast and the following
assumptions:
• average cost of gas production for each production facility
• availability rates of each production facility
• an assumed rate of return on investment for each facility
• contracted rates of each production facility

14. Potential Supply forecasts, 2014 – 2023
• Potential gas supply considers the quantity that producers are willing to supply at
the forecast medium to long-term ex-plant contract price.
• Upper potential supply forecast: growth of 1.7% p.a. to 1,324 TJ/day in 2023 and
Lower potential supply a fall of -0.8% p.a. to 1,025 TJ/day
• Difference between Upper and Lower forecasts – NWS supply
• Both Upper and Lower supply forecasts are lower than previous Base supply
forecast: GSOO – July 2013 Base supply forecast was growth of 3.7% p.a. to
1,851 TJ/day in 2022
• Key changes since GSOO – July 2013 :
o Model – individual production capacities and commercial factors considered
o Model – estimates of capacity for each facility into price-insensitive
(contracted) and price-sensitive (uncontracted) supply
o Reduced NWS production capacity used in supply forecasts
o Revisions to domestic price forecasts

15. Supply forecasts – Comparison of July 2013 and Jan 2014
GSOOs
Source: IMO’s Gas Statements of Opportunities, July 2013 and January 2014
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Quantity(TJ/day)
Year
Base Supply Scenario - July 2013 Lower Potential Supply Forecasts - January 2014
Processing Capacity Upper Potential Supply Forecasts - January 2014

16. Estimated Total Gas Demand (Total Domestic + LNG Exports),
2014 – 2023
Source: IMO’s Gas Statements of Opportunities, January 2014
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
TotalDemand(PJ/annum)
Year
Low Demand Scenario (including LNG Feedstock) Base Demand Scenario (including LNG Feedstock)
High Demand Scenario (including LNG Feedstock)

17. Future Challenges for the WA LNG Sector
• A number of medium to long-term growth challenges confronting the WA
LNG market, such as:
• the potential end of premium Asia Pacific LNG pricing;
• a move toward shorter-term LNG contracts in the Asia Pacific
region;
• the high relative cost of LNG production in Australia; and
• the threat of unconventional gas entering the international gas
market.
• These factors are not expected to affect the domestic gas sector in the
forecast period

18. Key Findings – Gas Resources and
Reserves
• Gas resources are estimated to be sufficient to meet forecast domestic
and LNG (including FLNG) demand levels for 2014 – 2023 period
(Carnarvon Basin ~27 years, Perth Basin ~ 11 years at 2023 total
production forecasts)
• Longer-term supplies (beyond 2023) rely heavily on WA’s
unconventional gas resources (tight and shale resources), which have
yet to be produced
• WA is reliant on the Carnarvon Basin (conventional gas) for gas supply
(>95% of gas supply) may warrant consideration on how to encourage
the diversity of domestic gas supply from other basins

19. Forecast Medium to long-term average (ex-
plant) new contract domestic gas prices,
2014-2023
• Greater clarity around the price forecasts that are incorporated in the
forecasts of potential supply and demand:
• Average medium to long-term (ex-plant) new contract prices
• Key changes since GSOO – July 2013:
• Consistent application of exchange rates in LNG netback price
modelling
• Corrected oil-LNG price relationship
• Reduced time lag between LNG netback price and domestic gas
price

20. Comparison of Forecast New Contract Gas Prices between the
GSOO - July 2013 and GSOO - January 2014 (Base cases only)
Source: IMO’s Gas Statements of Opportunities, January 2014
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Price(A$/GJ)
Year
Forecast Prices - January 2014 Forecast Prices - July 2013

21. WA’s Gas Bulletin Board (GBB)
• Public website that displays near-term information about gas production,
storage, transportation and demand:
• Forecasts of daily gas production, storage and transmission capacity, gas
flows (pipeline and storage)
• 12 month ahead forecasts of changes to the capacity of production,
transmission and storage facilities (maintenance reports)
• Daily actuals of:
• gas production by facility
• pipeline and storage gas flows
• gas consumption by large user facilities
• Emergency Management Facility – restricted access part of the GBB activated
in an emergency
• January 2014 GSOO includes GBB actuals from 1 August

22. GBB – Facility Production – 1 August to 31 December 2013
Source: IMO’s Gas Bulletin Board
0
200
400
600
800
1,000
1,200
1,400
1,600
Quantity(TJ/day)
Gas Day
Dongara Beharra Springs Devil Creek
Macedon Varanus Island NWS
Red Gully Total Production Capacity (LHS)

23. GBB – DBNGP Gas Flows (by Zone) – 1 August to 31 December
2013
Source: IMO’s Gas Bulletin Board
0
200
400
600
800
1,000
1,200
Quantity(TJ/day)
Gas Day
Dampier Metro South West

24. GBB – Mondarra Injection/Withdrawal – 1 August to 31 December
2013
Source: IMO’s Gas Bulletin Board
0
10
20
30
40
50
60
70
80
90
100
Quantity(TJ/day)
Gas Day
Quantity of Gas Injected Quantity of Gas Withdrawn

25. GBB – Gas Consumption by Industry – 1 August to 31 December
2013
Source: IMO’s Gas Bulletin Board
31%
7%
13%
6%
25%
19%
Electricity Generation
Gas Distribution Network
Industrial
Petroleum, LPG & Domestic LNG (no
exports) Processing
Minerals Processing
Mining

26. Next GSOO – Expected December 2014
Questions ?

27. 28