This country has gone to the dogs and the gas debate shows very clearly why. Shell and Origin are controlling the debate with the absolutely ludicrous via The Australian:
Sydney may need to import higher priced natural gas if NSW continues to restrict onshore gas production in the face of rapidly growing exports from Gladstone, according to gas industry chiefs and analysts.
The left-field prospect was floated by Shell Australia chairman Andrew Smith in the opening industry speech at the Australian Petroleum Production & Exploration Association in Brisbane yesterday, where he said bans in NSW and Victoria were stifling the development of new gas reserves.
“If we choose not to act on declining gas fields, the idea of constructing a re-gas terminal in Port Botany may fast become a viable alternative for the industry,” Mr Smith said.
“In the short term, LNG imports would introduce new supply and competition into the NSW gas market — in the current climate, I could see the rationale for such a suggestion, as LNG prices are historically low and pricing structures for pipeline capacity limit gas flow.”
…Origin Energy managing director Grant King said it could become economic for Sydney to import gas if the NSW moratorium was not reversed.
“If coal-seam gas production is not allowed in NSW, then Sydney will be the market most distant from a gas resource, and therefore the economics of transportation by ship may well be better than transportation by pipe,” Mr King said on the sidelines of the APPEA conference.
This is Monty Python stuff. Shell (via BG) and Origin have just squandered the better part of $50 billion on Gladstone Island building white elephant LNG projects. Both are locked in market share battles to the death with global LNG production, have zero prospect of being able to make a return on their investment, risk making losses on a cash basis as well, face the very real prospect of shutting-in said plants and both will have to write off most of the investment.
Yet here they are, standing together atop their pile of burning capital, withholding gas from NSW for loss-making exports while suggesting that it is state policy that is to blame for a so-called “gas shortage”. The media reproduces it like some dodgy facsimile.
The notion of building an LNG import facility is ridiculous:
- productivity would plunge given we’d be mis-allocating more capital to a sector dying of capital mis-allocation;
- costs would rise for NSW consumers because they would have to pay for gas extraction, freezing, shipping, unfreezing and piping as if a resource barren island marooned island off Japan;
- and this would permanently raise the local gas price to above export net back prices ensuring that the current local gas gouge enjoyed by these fine gentlemen would have a structural underpinning.
Honestly, it would make more sense and be less economically damaging to nationalise these firms.
But there is no need for such draconian steps. All that needs to be done is to shift the governance regime around east coast gas by installing a domestic reservation policy. It could take any number of forms, just so long as it forces the Gladstone three to sell the appropriate level of their gas into the local economy at regulated margins, rather like electricity. Alternatively, we could break up the cartel.
Unbelievably, our card carrying Banana Republicans weren’t finished, from the AFR:
Origin chief executive Grant King says a lower corporate tax rate is crucial to getting future projects off the ground and the long lead time on investing in big gas projects means a decade “glide path” towards a 25 per cent rate will help shape investment decisions.
“In this industry it often takes us five to 10 years to building something and then 20 years to get a return,” Mr King said at the Australian Petroleum Production and Exploration Association Conference in Brisbane on Monday.
“For those who might say what’s the point in talking about a 10-year glide path to a tax cut, that’s not very long in our industry. The tax rate does affect the economics and its affects the investment decision.”
The only profits that our Grant is making is from gouging the local gas market. His exports are a lost cause. So, basically, he is asking for a reward from the very people he’s gouging while ignoring his astonishing mismanagement of their resource endowment.
Staggering.
