From The Australian, it appears that for the time being Australian LNG is winning the price battle with Japanese customers:
Woodside Petroleum chief Peter Coleman said recent LNG price negotiations, which included price resetting over the Pluto LNG plant with Japanese buyers, were as hard as they had ever been, despite contract talks being limited to current Japanese prices, not future supply.
“The buyers clearly have a very strong desire to see prices coming down over time — the negotiations to date have been as tough as any negotiations our team can remember,” Mr Coleman told The Weekend Australian yesterday.
Japan, the world’s biggest LNG importer, has been increasingly vocal in its support of burgeoning US liquefied natural gas export projects as a way to drive down LNG prices into Asia.
Despite the call for lower prices, Mr Coleman this week said talks over LNG contracts that were open for renegotiation this year had resulted in strong pricing.
“Those contracts, which are extensions and renewals, run for a five-year period, then they get revised again — they have in them a clause that refers to the landed price in Japan and elsewhere,” Mr Coleman said.
He stressed that US, or Henry Hub, prices would not be a consideration until the US started exporting — something that is scheduled for 2015.
“Henry Hub will come into that formula some point in the future, if it ever gets landed in Japan — that’s how we see long-term Henry Hub, or any new supply, affecting the prices,” he said.
Ideally the gas producers would deploy a bit of the same game theory that’s currently being used by the iron ore majors. You don’t want to push clients too hard or drive prices so high that you underpin the rise of competition. Then again, they’ve painted themselves into a corner with their own bloated cost bases so their options are more limited.
On that front, last week’s claims of union gouging on LNG projects appears to have forced a backflip by the MUA:
AUSTRALIA’S oil and gas industry has claimed a victory in its battle to stem rising labour costs after the maritime union backed away from controversial demands for its offshore members to be given Qantas Club memberships, iTunes cards and daily payments for being forced to share toilets and cabins.
The claims lodged by the Maritime Union of Australia as part of talks over a new enterprise bargaining agreement had angered the industry, which is already concerned about higher costs and poor productivity in building projects in Australia.
Confirmation of the backdown came after the Fair Work Commission called union and industry representatives to a confidential meeting in Melbourne this week in a bid to avert industrial action over the MUA’s list of demands.
…The MUA’s WA secretary, Christy Cain, confirmed the union was still seeking a 24 per cent pay rise over four years, changes to rosters and a requirement for industry to consult before being allowed to import foreign labour.
…The debate over rising costs and productivity in the oil and gas sector came as industry veteran Kevin Gallagher broke ranks this week by saying that poor leadership and management were also significant factors in Australia’s perceived underperformance.
Mr Gallagher — who is the managing director of oil and gas contractor Clough and the former head of Australia’s largest industrial project, Woodside Petroleum’s North West Shelf project — told The Weekend Australian that management had a bigger influence on Australia’s productivity than policy.
…”It comes down to the competency of the leadership and the competency of the management. I would argue that the productivity issues are more about those kinds of issues than they are about politics.”
Exactly right and never more true than in the midst of a huge management induced bubble. Lets wait and see what happens with the wage claim before we call this one a win for management. In the mean time both sides are ratcheting up the blame:
Crucial materials needed to build Australia’s biggest resources development – Chevron’s $52 billion Gorgon gas plant in Western Australia – are banking up on the wharves at the Australian Marine Complex, near Perth, in the latest blow to the project.
Chevron claims the 40 per pent cost blowout it has experienced so far on the Gorgon project at Barrow Island, 1000km to the north, is linked to the poor labour productivity and go-slow tactics of the militant Maritime Union of Australia.
The company, Australia’s biggest foreign investor, says waterside workers at the AMC take three or four times longer to load a vessel than in other parts of the world.
Chevron also released photographs to The Weekend Australian that it said showed congestion on the wharves of the AMC, where Chevron’s contractors are manufacturing equipment and materials needed to build Gorgon.
MUA WA secretary Christy Cain blamed Chevron for the delays and the soaring price tag of building Gorgon, which is due to be completed late next year.
