Via The Australian:
Malcolm Turnbull has promised manufacturers the price they pay for gas will halve as he intervenes in the market and imposes tough export controls to ensure Australian businesses, families, employers and industry receive guaranteed and affordable supplies.
The Prime Minister said 65,000 jobs reliant on gas were at risk until action was taken, as the government announces new powers that would allow Resources Minister Matt Canavan to block exports unless there are adequate supplies to meet Australia’s needs.
“It will ensure that the price of gas in Australia is at levels comparable to that in the international market because it is a global commodity,” Mr Turnbull told ABC radio.
“But what we’ve seen is because of these anticipated shortfalls, gas suppliers have been proposing contract prices which are really way too high. They are as much as four or five times the price per gigajoule, which is the metric, that are being offered in the United States.
“It’ll be cheaper than the prices that are being offered now, people are being offered prices of $20 a gigajoule, it should be around half that or less.”
…“This is a national interest matter, it is a short-term solution to a longer-term problem. The longer-term challenge that we face is we are not producing enough gas on the east coast — that is because of bans on gas exploration and development in Victoria above all and to a lesser extent in NSW.”
It’s a not unreasonable claim assuming GLNG adopts the gas swap solution that would price at around $9.70 today:
But, remember, if the gas swaps solution goes ahead, local gas will be attached to the oil-price. My forecasts for an Aussie dollar at 65 cents in the next twelve months will see gas prices march straight back up to $12.50Gj. If sell side outlooks for oil rising towards $70 play out (which I doubt), then the local gas price will be straight back to $15Gj.
So, what is the long term solution then? The AIG is too busy patting itself on the back to know:
“The priority to be given to the domestic gas market over gas exports announced by the Turnbull Government overnight is an appropriate and welcome response to an extraordinary crisis”, Australian Industry Group Chief Executive Innes Willox said today.
“Recently Ai Group put detailed proposals to both sides of politics for responsible exercise of the Commonwealth’s power over exports in order to motivate exporters to secure domestic supply. And we have made clear the costs that energy users are facing, and the consequences if nothing is done.
“The Government has listened and followed through with decisive action.
“The export approval process announced today gives the gas industry maximum flexibility to make commercial agreements to fill the hole in domestic supply due to the over-commitment to exports. And the firm prospect of an export ban should ensure that they take this opportunity.
“We are hopeful that the Government’s intervention will see the gas supply and price crisis ease in the near future – and that these steps will also take pressure off electricity prices.
“However, major energy challenges will remain. All states need to work with their communities, gas users and gas producers to ensure that enough gas can be produced to meet our needs.
“If gas prices do fall to export parity they will still be far above historic levels, and gas users will need to become more efficient or switch fuels to remain competitive. Our electricity system badly needs the blueprint for reform and flexibility being developed by the Finkel Review. And the absence of bipartisan, efficient and scalable climate policy remains a stumbling block to the energy investment we need.
“But it is heartening that both major political parties are now committed through various measures to ensure domestic gas supply to ease pressure on prices.
“Ai Group will fully participate in the process to finalise the export control regulations ahead of their implementation on 1 July. We will also continue to encourage all States to open up to responsible gas development under science-based regulation. In particular, effective moratoriums on gas development in Victoria, NSW and the Northern Territory should be lifted immediately or State and Territory Governments will continue to be responsible for damaging cost pressures on their own communities.
“The massive expansion of gas exports from Eastern Australia has led to a shortage, even as we produce more gas than ever before. As Ai Group’s recent Energy shock report demonstrated, this shortage is sending prices far above parity with overseas markets.
“Gas users across swathes of manufacturing are facing ruinous price increases. And the cost of gas is a big driver of the ongoing surge in electricity prices because of the critical role of gas fired electricity generators.
“Every day we receive calls from businesses dismayed by energy prices two to four times higher than their previous contracts. If the current situation were to be allowed to continue, jobs, investment and Australia’s economic diversity would be threatened.
“As the Federal Government has now clearly seen, the only way to relieve the gas crisis in the near term is for gas exporters to redirect gas into the domestic market, preferably through voluntary arrangements and gas swaps.
“Ai Group has long called for a national interest assessment of gas export arrangements to ensure we do not repeat the mistakes that have led to this point.
“Gas has been and will continue to be a key issue for Ai Group and our members,” Mr Willox said.
Gotti is in no doubt:
My qualification is that their mistakes would not have threatened the nation had it not been for two of the most appalling state governments we have seen in decades – the current NSW and Victorian administrations. They stopped gas development to pander to green votes and in the case of NSW please radio commentators.
…And while these irresponsible governments were creating chaos in gas, they also threatened our power supplies so, unless the weather is very kind or urgent measures are taken quickly, Sydney and Melbourne face blackouts next summer.
…Longer term we must get more gas.
Fortunately there plenty of gas in NSW and Victoria and the next step should be to punish those state governments for their disregard of the interests of their populations. But more urgently, the nation must force the delinquent states to recognise the power crisis they have created and then do something about it quickly.
What do suggest, Gotti? Sending in the army?
I’m in favour of more development but south eastern residents have every right to resist it. State governments know how unpopular it is. That’s why they’ve banned it.
There are also technical questions around Victoria having no proven gas reserves and the cost of extracting NSW gas.
If you want longer term gas solutions you need to get much more honest than Gotti’s partisan drivel. We need a permanent ban on third party gas exports, ongoing domestic reservation and “use it lose it laws” to force the development or divestiture of undeveloped gas reverses such as Shell’s huge Arrow plots.
Bashing the people the gas market is designed to serve serves no end at all.
