The east gas gouge rolls on but at least it was cheaper last week at home than it was in Japan as the local Winter squeeze winds down:
However, the trend remains up and much higher volumes of gas are headed offshore yet. So, on Friday the government’s market reforms were agreed, from The Australian:
Yesterday, all state and federal energy ministers agreed to sweeping reforms to the gas markets, including by moving away from secret, bilateral gas pricing in favour of a market with more transparent pricing and new trading hubs, and easier access to gas transport infrastructure.
All states except Victoria have agreed to adopt an implementation plan for collaborating on scientific and regulatory issues related to increasing onshore gas supplies.
Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts seized on this to urge Victoria to lift its onshore gas moratorium. “Without firm action from all states, families and businesses will face higher energy costs, investment in manufacturing will be threatened and Australia’s transition to a low-emissions future will be much more difficult,” Dr Roberts said.
You’ve got to love the editorial perspective. No quotes from anyone except the very gas lobby that represents the cartel that’s doing the gouging. No wonder the pressure is all on the “Victorian Government”.
These reforms are still welcome. The bilateral system has had its day and enabled the cartel to bully customers up and down the coast. Transparency will at least help underline the gouging. Pipelines also need stronger regulation to contain their monopoly pricing.
But whether more coal seam gas will actually lower the price is another question altogether especially since, whenever the global gas glut ends, there sure ain’t enough local gas to hold down the global price. The moment prices rise, Aussie gas will be headed north and offshore. This was made obvious last week with the release of Santos’ profits, from Macquarie:
Capex constraints and delays: STO management attributed the impairment to slower ramp-up of equity gas production as a result from capital expenditure reductions and changes to future pricing assumptions of third party gas. We anticipate that GLNG will produce below capacity, sufficient only to meet GLNG’s contracted LNG volumes of ~7.2mtpa to KOGAS and PETRONAS. Additionally, we have extended the ramp-up time of GLNG Train 2 production, which we now expect to reach plateau by Q3CY18.
STO is already short of sufficient cheap gas to compete and the slow ramp up of its trains is in effect a kind of slow motion shut-in. Any extra cheap local gas of sufficient magnitude will still be sucked straight offshore even before global prices rise.
There is also the question of how much gas that can be developed against community objections, how cheaply and whether it will make any difference to the cartel. No is my view, from The Australian:
New frontlines in the battle among environmentalists, pastoralists and gas explorers are set to be drawn, with governments in NSW and Victoria weighing up moves to reopen the door to critical energy projects to avert a looming price crisis.
The Baird government is preparing to stare down fierce environmental opposition to coal-seam gas mining by lifting a moratorium blanketing most of NSW and approving projects on a “case by case” basis.
In Victoria, the potential for numerous conventional gas projects is described by exploration firm Lakes Oil as “game-changing”.
Lakes Oil chief executive Roland Sleeman, who counts Gina Rinehart’s Hancock Prospecting as a major shareholder, was hopeful that a lift in the state’s moratorium on all new gas projects would allow work in Gippsland and near Port Campbell to continue. “We think that’s going to be a particularly huge opportunity, one that could potentially turn around supply and demand in Victoria,” Mr Sleeman said.
…Anti-mining group Lock the Gate is already threatening to campaign against any easing of restrictions, and is calling for a complete ban in the state.
NSW allows coal-seam gas projects in a small slice of the state focused on Narrabri, where Santos is hoping to develop a mine.
The development of that project could supply between one-quarter and one-half of the state’s gas needs, according to the Australian Petroleum Production & Exploration Association.
Except that the new gas will be headed straight offshore as GLNG fills its supply gap.
Even with more fracking, we still need domestic reservation. We still need mandated new competitors that break the cartel. One or two won’t do it. This is market failure on a humongous scale and tinkering won’t fix it.
Gas is just $2.60GJ in the US today, because it does what it takes to protect its local market, including reservation.
