Via The Australian comes former Santos chief executive John Ellice-Flint:
“Australia’s east coast gas supply dilemma can be viewed as the total failure of users — utilities and manufacturers — to contract short, medium and long-term supplies of gas,” Mr Ellice-Flint says in his opinion piece. “While our east coast domestic gas buyers have been asleep at the wheel, all our long-term gas contracts have been issued to foreign buyers for LNG export,” he said.
Mr Ellice-Flint said the potential crisis was bigger than many realised. “Gas is a critical component for the manufacturing of plastics, glass, fertiliser, explosives, cement, bricks, residential and commercial cooking, heating and cooling and transportation … in reality, a million jobs in the manufacturing industry in east coast Australia are at risk from this now well publicised gas crisis,” he said.
…And it is not just the industry’s fault that too many LNG trains were built at Gladstone — governments should have played a stronger role.
“Global best practice dictates that LNG trains are built only commensurate with proven reserves as they become available,” he said. “Had this been the case in Gladstone, the federal government would not have approved six LNG trains to be built simultaneously without proven reserves — a poor use of capital.”
Manufacturers were typically on long term contracts. That’s why 95% of the market is contract based. It was suppliers that refused to renew them on a long term basis because they knew the shortage was coming and wanted to profiteer.
As for government, quite right, it should have a national energy strategy and regulator to approve projects. In other words it should have domestic reservation like everyone else. But it doesn’t and every attempt to install it is trashed by Big Gas so it’s pretty rich to blame government now.
Big Gas blew its own bubble and bust and it should not be bailed out now by allowing it to plunder the east coast economy.
Ban third party exports. Install domestic reservation and “use it or lose it” rules.
