From BS comes Minister Josh Frydencoal:
“Since becoming the minister I’ve been struck by the significant challenge Australia faces on the supply side of the gas equation, which does pose problems for industry in the medium and long term,” Mr Frydenberg told The Australian . “We will need the commonwealth and states all working together on innovative and practical solutions for this problem.”
…Mr Frydenberg’s comments are set to add to pressure on key states to encourage more gas development.
…Australian Competition & Consumer Commission chairman Rod Sims briefed the ministers on Friday on his year-long investigation into the east coast gas markets, telling them that gas user complaints about a dearth of offers for the supply of gas in recent years were largely true. Across eastern Australia, domestic gas users had complained of soaring prices and more onerous conditions as $70 billion of Gladstone LNG projects are expected to triple east coast gas demand.
More gas will only solve the problem if it also increases competition and there is enough of it to overwhelm Curtis Island demand. The NEGI appears to have done that a little already. Otherwise it will simply add more pressure to export said gas.
My own view remains that the Asian gas price is going to go so low over the next decade that much of this pressure will dissipate for a time. If LNG contracts hover around $7 then that’s a net back export price of $5mmBtu, which is acceptable if balanced against growing spot volumes which will be even cheaper at $4-5mmBtu or $2-3mmBtu net back. I also expect the Curtis Island producers to be forced to cut volumes at some point as they fall below cash costs. As this reality filters through the supply side we ought to see prices fall.
That is unless the supply side is so over-consolidated that producers can cartel gouge the locals even as they ship cheap gas offshore.
