Recent reports forecast that domestic gas prices could rise to $12 per gigajoule from around $3.50 to $4 per gigajoule historically, prompting some manufacturers to shutter production and instead trade their gas contracts in the open market. An article today in The Australian cites Queensland’s largest power generator, Stanwell, which claims that rising gas prices will likely prompt a shift back to coal-fired generation as the major east coast LNG export terminals come on line and gas prices surge:
QUEENSLAND’S largest power generator will today declare that Australia is one of the world’s most expensive countries for energy…
Stanwell took the extraordinary step yesterday of announcing it would mothball its biggest gas-fired power station and resurrect a coal facility built in the 1980s – sparking predictions that gas-fired power plants would be withdrawn in other states…
The submission will caution that a raft of energy policies is eroding Australia’s competitiveness in manufacturing…
Yesterday, Stanwell revealed it would withdraw its Swanbank E power station, near Ipswich west of Brisbane, from service for up to three years from October so it could sell the gas rather than use it in electricity generation…
Mr Van Breda said it would be more lucrative for the state-owned Stanwell to sell its gas, given the high prices on the east coast, which are driven by the boom in liquefied natural gas projects…
“We see gas prices increasing and it makes more sense for us to sell our gas rather than burn it,” he said.
He predicted that others could also sell gas instead of using it in their own operations. “People are going to sell their gas if there is a better price for it,” he said…
Back in black then. This can’t help Australia’s long term carbon emissions effort (what there is of it these days) but from the perspective of sustaining what’s left of the industrial base it’s worse because the benefits to domestic industry from the falling Australian dollar could easily be offset by rising domestic gas prices, as the major east coast LNG export terminals come on line from 2016. And it’s set to get worse, as the AFR reports, the new LNG behemoths in Queensland are confirming fears that they need more gas:
BG Group has revealed it expects to rely initially on gas from third parties for up to a fifth of the supplies needed for its $US20.4 billion liquefied natural gas project in Queensland before cutting that back to use more of its own supplies.
Chief executive Chris Finlayson told investors overnight Australian time that in the 2014-16 period, supplies brought in from other companies would make up “some 10 per cent to 20 per cent of supply to the plant.”
He said once the two-train project had ramped up to capacity, that would fall to about 5 per cent.
Santos’s project, one of three, is considered to need more third party gas still.
Australia needs a domestic gas reservation policy. For every dollar earned from exporting gas to Asia, we now face losing much more in higher energy costs and/or lost value-added local production.
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