From the AFR:
The east coast gas market is being compared to a “slow train crash”, with major shortages of coal seam gas for the Queensland LNG export projects bringing a crisis that may only be resolved by a whole-scale restructuring of the state’s new $70 billion sector, according to Credit Suisse.
The bank’s energy analysts calculate that the three Queensland LNG projects are short of as much as 8800 petajoules of gas reserves to meet their 20-year LNG sales contracts, equivalent to 12.5 times the total east coast domestic market.
But investment is not being made to develop gas resources on the east coast because of stretched balance sheets, low prices due to the oil price slump and uncertainty over future coal seam gas supply volumes.
CS said that the failure to invest was essentially the firms “stealing” east coast gas and is suggesting only a government-led restructuring can prevent a situation in which everybody loses: the projects, manufacturing and households, from a rising gas price.
Perhaps, but given I see the Asian gas price as likely to settle at $6-7mmBtu in the next few years as oil-linked contracts are renegotiated, that means that the export net back price is only $4-5mmBtu.
That’s as high as the local price can go before the LNG projects begin to cut volumes. If I’m right then the local shock is bad but not calamitous given historic average prices of $3-4mmBtu.
However, the LNG projects and their owners are rooted.
