3.1. Actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning The Company is involved in natural gas production for Indonesian and East Coast Australian markets that are energy constrained and hungry for gas to generate electricity that would otherwise likely come from coal generation. The Company’s forecasts indicate constrained markets will be sustained, with continued economic value for its production and value for its reserves. 3.2. Ongoing gas demand will be strong Short term Gas demand in the current financial year is high, reflected in high prices. The IEA says global gas supply is set to remain tight. The global balance is subject to ‘an unusually wide range of uncertainties’ and could return to heightened volatility. https://www.iea.org/reports/gas-market-report-q2-2023 Conditions for gas demand are different in locations where we operate. Australia is gas constrained, with demand expected to remain high as coal exits electricity generation. In Australia, the ACCC says there should be sufficient gas to meet forecast demand across the east coast in 2024, while the southern states are expected to experience a shortfall. It warns that the major risk is transport and storage capacity to deliver Queensland’s surplus gas to southern states. https://www.accc.gov.au/media-release/gas-supply-outlook-for-2024-improves-but-risk-of-winter-shortfalls-remains In Indonesia, consultancies Rystad, Refinitiv and Wood Mackenzie all expect gas consumption to rise, with the main risk to consumption volumes being reductions in government subsidies causing prices to rise. The IEA projects global oil demand will climb by 2.2 mb/d in 2023 to reach 102.1 mb/d, a new record. Growth is forecast to continue, though more slowly, at 1.1 mb/d in 2024. https://www.iea.org/topics/oil-market-report Medium term / Long term The IEA and other forecasters believe the energy transition has begun. The IEA says growth in world oil demand will slow through the 2020s, while total demand continues to rise. It estimates global oil demand will reach 105.7 mb/d in 2028, up 5.9 mb/d compared with 2022. Petrochemicals are the key driver of global oil demand growth. https://www.iea.org/reports/oil-2023 In Australia and New Zealand, the transition will likely mean a long-term moderation in demand for oil, while in Indonesia the outlook depends on the uptake of renewables. Indonesia is heavily energy constrained and rapid uptake of renewables may moderate growth in demand for oil and gas but is unlikely to reduce overall demand in the medium term. To support its energy requirements, the Indonesian government has domestic production targets of 1 million barrels of oil per day and 12 billion cubic feet of gas per day by 2030. This is a 50%-100% increase in 2023 production forecasts. Overall, the demand picture represents volume and price opportunity, although longer term volumes are uncertain and volatile. Cue assesses that existing forward prices adequately capture the balance of future price risks. 3.3. Regulation is likely to increase in australia and new zealand, carbon prices are likely to rise, and limits are likely to be imposed on emissions from domestic consumption. In anticipation of higher carbon prices, the Company’s sensitivity testing includes a shadow carbon price when screening new investments and testing of existing assets. The Company applies sensitivity testing to its assets and reviews assets for impairment as part of our financial audit and assurance processes. This testing reviews whether asset valuations have been materially affected by climate-created conditions, including effects on prices, costs, insurance, financing and abandonment. Sensitivity and impairment testing manages economic risks to assets. Where those risks change materially, disclosure is made under the Company’s continuous disclosure obligations. Resilience to physical risks, such as weather events, is reviewed as a normal part of engineering risk management. Regulatory risks are mitigated by having revenue producing assets in three diverse jurisdictions. Taskforce on Climate–Related Financial Disclosures (TCFD) Statement continued 22 Cue Energy Resources Limited Annual Report 2023
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