SA secedes on energy as Do-nothing does nothing

So this is what it looks like to have a government, via the AFR:

The South Australian government is set to intervene in the gas market to safeguard its own energy security as part of a sweeping overhaul of energy policy to try to curb soaring electricity prices and deliver better reliability, sparking concerns about a potential unravelling of the national gas market.

…The South Australian government is also set to use a new long-term power contract for 75 per cent of its own agencies’ electricity needs as a driver of more competition in electricity supply in the state, and is also likely to bring in more incentives to accelerate the extraction of gas out of the ground by companies.

…The national electricity market wasn’t delivering certainty for the state and it needed to act to stop being “at the mercy” of what he called a “broken” national electricity system…”Our intervention will be dealing with a number of forms of intervention and of course gas is going to be key,” he told reporters on Monday in Adelaide.

EnergyQuest consultant Graeme Bethune has suggested that in theory the South Australian government could intervene to stop Cooper Basin gas flowing to LNG projects in Gladstone and direct that gas instead be sold to a government-controlled gas-fired generator in SA. But the South Australian government has ruled out buying the gas-fired Pelican Point power station from French firm Engie which was at the centre of a political storm in early February when the plant lay idle as the national market operator forced power cuts on 90,000 households and businesses. The state government may move, however, to ensure that enough gas is preserved for vital baseload power generation to prevent a repeat.

Do it. GLNG and Santos are the most guilty parties in sucking up third party gas from the national market. If SA can reserve it for its own uses then it should. Especially so since the Do-nothing federal government has politicised the issue by blaming renewables thereby isolating SA and further threatening its power supply.

Details are obviously sketchy at this juncture so I can’t tell you if it will work or it is a gambit designed to force the federal hand given SA is still dependent upon state inter-connectors. Either way, at least it is action. Do-nothing Malcolm is busy with more important matters:

Malcolm Turnbull has counselled senior ministers involved in a Victorian factional war to end the feud, amid allegations that the damaging leak of travel records against Health Minister Greg Hunt could have been an internal “political hit”.The Australian has confirmed that the Prime Minister’s office was made aware last month of concerns among cabinet colleagues that the leaking to the media of Mr Hunt’s historical travel records before the January reshuffle had originated from within the government’s ranks.

And:

Malcolm Turnbull is fast-tracking moves to reform Australia’s race-hate laws with the joint party­room set to determine how section 18C of the Racial Discrimination Act will be overhauled as early as next week.

As cabinet meets in Canberra today, Coalition MPs have told The Australian they want the issue dealt with swiftly, with the death of cartoonist Bill Leak, who was subjected to a high-profile 18C investigation, sharpening the need for change.

Meanwhile, the bootleggers and baptists are lining up to prevent any action at all. The ACCC head Rod Sims, whom I usually like, is holding the line on his economic laboratory approach:

Mr Sims will tell a conference in Sydney on Tuesday that his “worst fears are being realised” in the east coast gas market, with a shortage of supplies driving up prices and creating a crisis for some industrial gas users.

Once some manufacturers close their doors, they will not likely reopen, he will say.

The chair of the Australian Competition and Consumer Commission, which recently completed a thorough examination of the east coast gas market, said the LNG exporters couldn’t have foreseen at the time they decided to build their huge projects that onshore gas drilling would be restricted in several states, leading to the current shortfall in domestic supplies.

“That said, if I was providing private advice to the LNG producers I would say they would be well advised to support the domestic market as much as they can at this critical time,” he will say.

A “significant portion” of GLNG’s gas requirement has come from the Cooper Basin, while some comes “all the way from Victoria,” Mr Sims will point out.

Assuming a long-run average oil price of about $US55 a barrel “would have been a better planning assumption”.

In other words they should have foreseen it. Damn right they should. MB did. Blind Freddy did.

But the ACCC is also really guilty here. Not only did it produce a gas report that ruled out the most obvious solution of reservation on the grounds of economic purity, only 18 months ago it also waved through the Shell acquisition of BG Group, which tied the huge Arrow reserve to Curtis Island as well. Why wasn’t Arrow development or divestiture a condition of the sale?

The article goes on:

Former federal resources minister Martin Ferguson will also use his address at the conference to attack the drilling restrictions in Victoria and NSW, and to warn against any temptation by government to impose domestic gas reservation.

Any measures to reserve gas in a bid to solve the east coast gas crisis would turn Australia into a sort of Venezuela, damage investment and business confidence and hurt manufacturing workers, Mr Ferguson will say. He is now head of resources at Seven Group Holdings and an adviser to the APPEA oil industry lobby group

So says the arch crony-capitalist. Prime the guillotine.

The east coast gas market has failed. Even today, we are still paying $9Gj versus the same gas in Japan at $7.80Gj:

wrhtw

When you account for the fact that there are next-to-no taxes coming out of sector and the economic damage that’s being done to manufacturing and households, we are literally paying Big Gas to take away a national resource like its garbage.

It’s not Venezuala, it’s Nauru, only worse given they actually made money and had the sense to form a sovereign wealth fund.

Comments

  1. This is all a ploy to remove restrictions from fracking. What a bunch of assholes these people are.

    • A classic example of the importance of property rights in everyday life. Resource extraction included (mundane as it may be).

    • Although I’m cynical, I’d like to think it’s the simpler explanation. Weatherill just doesn’t want the pitchforks at the door.

    • Leaner: yes.

      But also a say over whether your neighbour allows an industrial landscape next door, polluting your common groundwater and air.

      Bit hard for city folk to understand.

      • Noted. Different topic but same point – if the state government didn’t have control over land use for extraction it would be harder for the limitations you seek to be put in place.

  2. Logically, I’d imagine that the deal will be Shell selling to SA due to the market responding to price signals as it should. If/when that happens will that change your perspective at all Hnh?

      • I’m pretty sure if Shell can sell spot LNG at $X netback and sell into SA at $X + Y they will sell into SA (noting that there is cost for Shell to transport to SA). If Y is too high due to a lack of competition then don’t we need more supply to fix that? Ie, the issue becomes a supply one which feeds into removing impediments to finding and developing new sources of gas.

  3. Never fear Australia’s own “Vampire Squid” Mac Bank has sensed an opportunity and will soon be dabbling in East Coast gas markets with its newly acquired for a song Central Australian reserves.

  4. It is cheaper to run the air conditioner in reverse mode than it is to burn gas to get heat. I am dismayed that new houses in MEL have ducted gas heating and gas water heating!

    Yes, air conditioners were less efficient 10-15 years ago but now there is the incredible Daikin Ururu Sarara.

    • And if you have PV solar you can heat/cool the house during the day for free before you get home and it gets dark. Add a battery pack and you are set for the night. All new houses built should be forced to have electric heating/cooling and Solar Cells, and for batteries in 3-5 years.