1. 1 Office of the Chief Economist Factors influencing Australia’s gas supply and demand Mark Cully Chief Economist 8 March 2016

2. 2 The long term energy outlook is uncertain, but gas has best prospects amongst fossil fuels Global annual demand growth to 2035 Forecasts show a wide variation in energy demand outlooks, but gas demand grows in all scenarios Source: BP (2016) Statistical Review of World Energy 2015 and IEA (2015) World Energy Outlook

3. 3 Global growth continues to disappoint Subdued global growth could see commodity prices remain soft The IMF’s World Economic Outlook forecasts have seen a series of downgrades in 2014, 2015 and 2016. Declining commodity prices, increasing financial market volatility and uncertainty regarding growth in China have weighed heavily on the outlook. Global growth forecasts 2014, 2015 and 2016 Note: The IMF releases a forecast every quarter for the current calendar year and two projection years. Source: IMF World Economic Outlook (2014, 2015 and 2016) Forecasts for 2014 Forecasts for 2015 Forecasts for 2016

4. 4 Medium term outlook is affected by low commodity prices Prices of key commodities Source: IHS (2015), Platts (2015) and Bloomberg (2015)

5. 5 Strong LNG demand growth in new markets, but a growing excess of LNG capacity LNG demand by country Source: Department of Industry, Innovation and Science (2016) and Nexant (2015) LNG supply growth exceeds demand growth Europe and China underpin LNG demand, but the rest of Asia shows the greatest growth.

6. 6 Global LNG markets are becoming more fragmented and flexible LNG demand in the rest of Asia Sources: Department of Industry, Innovation and Science (2016) Gas Market Report 2015 and Nexant (2015) World Gas Model Shorter term LNG trades Source: International Gas Union (2015) World Gas Report

7. 7 The eastern Australian market is undergoing a major transformation Gas powered generation demand in the eastern market Source: AEMO (2015) National Gas Forecasting Report Total gas demand in the eastern market

8. 8 Investment into new supply will be needed, despite falls in demand Production capacity in the southern states Source: Department of Industry, Innovation and Science (2016) Gas Market Report 2015 Production capacity in the northern states

9. Phone: Email: 9 Follow us @economist_chief@economist_chief chiefeconomist@industry.gov.au (02) 6102 8180 Chief Economist Department of Industry, Science and Innovation Mark Cully