There are winners from the gas stoush

High domestic gas prices may be causing headaches for governments and consumers, but small-to-medium oil and gas producers and services companies are enjoying increasing investor interest as the market casts around for answers to the east coast gas shortage.

Australia's energy landscape is a complicated mix of explorers, generators, wholesalers, distributors and retailers, many of which stand to benefit from the severe gas crunch unfolding on the east coast.

The Australian Energy Market Operator and the Australian Competition and Consumer Commission this week announced they see a shortfall of 54-55 petajoules for 2018, with an increase to as much as 107-108 petajoules, demand permitting.

Most Australian homes are connected to the electricity grid with retailers like AGL Energy, Origin and Energy Australia.

Investors have seen the current gas price woes coming for some time, and AGL has enjoyed a 4.3 per cent rise so far this year and Origin Energy is up 12.1 per cent.

Origin and AGL also provide electricity to the national energy market and they own the power plants that convert raw fuels into electricity.

These generators transmit electricity across the grid, into homes using transmission networks owned by AusNet Services, up 5.7 per cent so far this year, and Spark Infrastructure which investors have boosted 4.2 per cent.

Gas supply itself is the major issue at present, and while the economics of this industry are complicated, investors are wary of the networks.

'Disrupted earnings'

"Disrupted supplies mean disrupted earnings," says Michael McCarthy, chief markets strategist at CMC Markets, pointing to the moratoriums in Victoria and Western Australia that lock all conventional and unconventional untapped gas supplies just as Australia's gas export industry ramps up.

"The electricity network is also de-stabilised by a rush to switch off traditional, carbon dioxide intense generators."

But those exploring for new gas potential are enjoying investor support.

Shares in Senex Energy have rocketed 17 per cent so far this year as the severity following its award of a "domestic only" tender in Queensland.

In a bid to redirect gas supply to support domestic demand, the Queensland government this year released 47 square kilometres of land for gas exploration in the Surat Basin bookmarked only for Australian consumption.

Senex plans to commit more than $200 million to the project, slated to begin production in 2019.

"These medium-sized oil and gas plays have been very successful in gradually repositioning themselves on the east coast," says Adrian Prendergast, energy analyst at Morgans.

"And as such, they've seen increased investor interest as they have access to a meaningful contribution to gas needs."

On the outside

The current inquiry into the east coast gas market has found that undeveloped supply needs to be brought quickly to market, but some oil and gas explorers are unable to cash in on the price rise boom.

Gippsland-based Lakes Oil is still locked in a bitter battle with the Victorian government, after the government passed legislation that retrospectively excused itself from economic damages incurred by the blanket ban on resources exploration.

Since 2012, there has been a blanket moratorium on both onshore hydraulic fracking and minerals exploration and Lakes Oil, which has licences to develop what it believes is a considerable amount of gas, has been forced to halt operations.

"They gave us the exploration licence and we have obligations to explore," says Roland Sleeman, chief executive of Lakes Oil. "And there are many companies around the place with scope to address this horrible gas shortage, to produce large quantities at low cost. But there is a great amount of bureaucracy in the way."

The story There are winners from the gas stoush first appeared on The Sydney Morning Herald.

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