As said many times, Do-nothing Malcom says all the right things with great panache then drops you cold and does nothing. Recall this:
“security is the first responsibility of every government. That is, national security and energy security…What Australians want is a result. They want energy security, energy that is affordable, and we need to meet what we agreed to in Paris.”
Yet following the second round of gas crisis meetings with the east coast cartel we get this today:
Following a second meeting of industry chiefs in Canberra yesterday, the Prime Minister said the country’s competition watchdog would force the sector to give the government information about its operations to try to improve efficiency and prices for consumers.
Mr Turnbull said although some progress was being made on “repairing” the gas market, the sector needed to do more about soaring energy prices that were harming industry.
“The government remains concerned that the east-coast export LNG operators have not yet clearly articulated how Australian households and business will get adequate supply at reasonable prices,” Mr Turnbull said after the meeting.
“The government has asked the exporters to provide further information, in the context of possible regulatory options to address the short-term market issues.”
…Scott Morrison said his direction to the Australian Competition & Consumer Commission to monitor the wholesale gas market in eastern Australia using its inquiry powers would help ensure Australians had access to affordable and reliable energy.
…The inquiry, to run for three years, will examine transparency of supply arrangements, contracts between producers and retailers, balance between demand and supply, and pipeline contracts. Mr Frydenberg said the meeting had been constructive but acknowledged more needed to be done to increase supply.
I mean, seriously, that’s the outcome! A three year inquiry into what was an acknowledged national security crisis. Even for Do-nothing Malcolm this is a new low in cold but that’s who he is.
Strategic gas drops have been made by gas firms to prevent blackouts and now the gouge will resume full-throated.
Meanwhile, Matthew Stevens keeps pushing the mother of all bad ideas:
…it is not often that Opposition Leader Bill Shorten extracts simple clarity from massive complexity. But he really did hit the nail on its proverbial on Tuesday in saying it is “literally crazy” that export customers are buying Australian gas cheaper than our local companies can.
It is widely held in the gas industry that Total is pretty much all that stands between Santos and a decision to, at very least, constrain the output of GLNG Train 2. But the fact that Santos has three foreign partners in GLNG suggests rather more complication than just one born of France alone. It takes just one of four votes to reject any Santos proposal. And the options consistently presented by the Australian driller have just as consistently been rejected.
Nonetheless, should the federal government now make a terrible error and opt for a policy pathway that undermines international confidence in Australia’s gas sector, then responsibility for that will lie heavily with Santos and its partners in GLNG.
…Gas customers big and small continue to push the government to risk firm action that would force a redirection of gas to the domestic markets. Some of what is being promoted is very sensible. Indeed, we have offered it in this space before. The idea of approaching export customers to alter contracts to allow large scale gas swaps is a good one. This would see GLNG acquire cheap spot gas to meet its contracted tonnages and redirect Queensland gas back into the market. Sure it might earn penalties for the partnership, but it is a fully commercial option ands that makes it a deal better than, say, domestic gas reservation.
…Any intervention to force GLNG to shut down an operation that was secured by government edict and is supported by contracts with lenders and customers would be disastrous for our standing as a destination for foreign investment.
Let me illustrate how ridiculous this argument is. On the one hand it is “crazy” that Australia pays more for its own gas than does Japan. On the other it proposes gas swaps as the solution to the problem. Yet that would yoke Australian producers to exactly the same oil-linked contracts that determine Japanese prices, rendering our situation only marginally less crazy, not “very sensible” at all.
We’d not only be embedding the high cost structure of a resource-deficit customer in our own economy, forcing local buyers to pay above export net-back prices, including the cost of liquefaction and shipping that is not even done, we’d also be exposing our industrial base to immense forex risk. Given the Australian dollar is very likely to fall, much more so than the Japanese yen, the oil price is going to rise and, ipso facto, so will oil-linked gas prices.
Moreover, these are very same contracts that Japanese buyers are busy destroying via declaring certain destination provisions within them illegal. In short, they’ll be abandoning these contracts for cheaper spot market gas just as Aussie manufacturers are signed up to them, virtually guaranteeing that Japanese gas prices will fall away as ours climb far above.
The truth is, gas swaps are only another form of “crazy” that allows market ideologues to claim that there is market solution. This includes commentators, the shockingly inept Australian Industry Group and a punch-drunk Opposition terrified of upsetting any kind of miner ever again.
There is NO MARKET SOLUTION to the problem. There is only a FAILED MARKET, one that blew an enormous LNG bubble and is now desperately trying to foist the fallout onto everyone else.
Which brings us to the worst of the Stevens’ argument. GLNG was not developed under “government edict”. We don’t have an energy management regime, domestic reservation or a gas reserves regulator. The only government approval was environmental. The gas market buggered this up all by itself. Thus, ironically, Stevens is horrified by the very solution whose absence caused the problem in the first place.
It is ludicrous to claim that fixing the failed market by applying the same rules already in force in every other resource jurisdiction on earth would be “disastrous for our standing as a destination for foreign investment”. Sure, it would lift us from being the hitherto easily plundered village idiot of global gas producers to something resembling a liberal democracy with functional institutions but that’s a perception change well worth making.
Third party gas export ban, domestic reservation and “use it or lose it” rules now.
