Having just spent $200 billion over the best part of a decade to become the world’s biggest exporter of LNG, Australia is now looking at the absurd prospect of building a terminal to import gas for domestic users. Here’s the ASX announcement yesterday from AGL:
AGL today announced Crib Point (Western Port) in Victoria as the preferred site for a gas import jetty and pipeline to increase energy security and supply for customers in south eastern Australia.
Crib Point is best placed to serve Victoria, Australia’s largest gas market, as well as take advantage of the existing pipeline network, industrial port facility and associated infrastructure.
AGL will continue to engage with the relevant stakeholders, including Government authorities and the Western Port community, to complete feasibility studies on the proposed site.
Richard Wrightson, AGL Executive General Manager, Wholesale Markets, said AGL is looking forward to continuing working with the local community on the proposal.
“This doesn’t signal the end of the feasibility studies for the proposed site but now accelerates the process. We look forward to ongoing consultation with the local community to answer their questions and proceed towards a formal application to the Victorian Government,” Mr Wrightson said.
“This project will enable access to the world market for gas, injecting some much-needed competition into the Australian market and help ease the tight gas supply.
“If all goes to plan, AGL would invest roughly $250 million, commence construction in 2019 and bring the terminal into operation by 2020/21”…
“Our strong balance sheet allows us to take a long-term view and invest our profits into renewable energy and strategic projects such as the gas import jetty and pipeline which will help underpin a more secure energy supply for Australia and has the potential, if required, to supply all of Victoria’s household and business customer gas needs.
“As the largest generator of electricity in the country, we’re working hard to deliver secure, reliable and affordable energy and increase competition in the east Australian gas market for domestic and industrial customers,” said Mr Wrightson.
You can’t make this stuff up. Could you imaging Saudi Arabia or Kuwait importing oil because its residents are paying some of the highest petrol prices in the world? Of course not. And yet this is exactly the situation facing Australia with regards to natural gas – all to reduce the ability of the gas cartel to gouge domestic users.
In reality, the terminals will never be used anyway given the moment they make the local market contestable the cartel will supply local gas more cheaply than the US or North Asia can. In the process, we will have permanently erased Australia’s cheap gas advantage by embedding the costs of liquifaction, shipping and regasification in the local price. But hey, it’s better than letting the cartel rip, gouging manufacturing into oblivion and burdening households with even higher utility bills when they already have no income growth.
Yes, it is installing white elephant infrastructure to offset the toxic impact of other white elephant infrastructure.
It’s a total waste of money versus the simpler solution: domestic reservation!
Policy could simply be shifted so that the gas cartel is forced to sell a certain volume of its gas locally. If it doesn’t then it loses the gas. It’s really just price regulating what is now an effective gas monopoly.
The Australian public and its gas-consuming businesses did not create or sign-off on the mad gas bubble in QLD that led us to this impasse, so they most certainly should not have to pay for it. If the gas cartel buggered up its own investments by misunderstanding that the political economy would not stand for being gouged like it is right now then that is its problem.
Reserve the gas now. If there’s not enough for delivery of export contracts then good. It’ll help mitigate the global glut and support offshore prices so that Asian households pay for the gas not Australians.
If it results in write downs or bankruptcy in producers then too bad. Gas producers dug this hole and they can lie in it.
