The gas debate, if you can call it that, continues to stink up the joint. From The Australian:
Energy Minister Ian Macfarlane is negotiating with the states to fast-track a fix to the shortage as domestic gas supplies are redirected to the booming export market while new production is vetoed on environmental grounds.
Mr Macfarlane dismissed calls from manufacturers to quarantine gas for the local market and blasted the NSW government for failing to develop its own coal-seam gas fields, sending prices skywards.
“The solution to high gas prices is to flood the market with gas,” Mr Macfarlane said ahead of the government’s looming policy plan for energy and manufacturing.
Some NSW energy customers pay $3 per gigajoule for gas under long-term contracts, but the minister warned the price would rise to more than $10 over the next few years because of limits on CSG production across the state.
The Pacific Rim gas price will need to be consistently above $18 for that to be true. It’s far more likely to be $12 as the glut builds. That’s an export net-back price of $6-7 per gigajoule. Not great but could be worse. Two questions then have to be asked:
- what is the price to extract NSW CSG? Is it cheaper than this? If not then why bother?
- if it is cheaper then why won’t any and all new gas immediately trigger further LNG investment to ship it to north Asia as well?
If there is no domestic reservation policy the Minister will have to “flood” the North Asian market with gas to reduce local prices. Does NSW have enough gas for that, Minister?
Underlining the coming regional gas price slump, Japan has signed an MOU with Alaska, encouraging its developing mega-project:
Japan secured a low-cost and stable supply of LNG after the country’s trade ministry and Alaska’s Department of Natural Resources signed a memorandum of understanding.
Trade ministry official said that Japan will update the state of Alaska on its LNG demand outlook. It will also provide information on government schemes to help support the investment of Japanese private companies in Alaskan projects. On the other hand the state of Alaska will notify Japan on the progress of Exxon Mobil’s LNG project, reports Reuters.
Exxon Mobil and its partners in the project that is expected to cost between $45 billion and $65 billion, earlier asked for federal permission to export 20 million tons of LNG annually. The official also said that the shipping route from Alaska to Japan is considerably shorter than that from the Middle East which will significantly lower the import prices.
The US continues to find a sensible balance between taking Asian LNG market share and domestic reservation through consultative discussion. The level of our own debate suggests no shortage of gas at all.
