Gas cartel, One Nation threaten to leave gas in the ground

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Via the AFR:

The heads of the Queensland LNG ventures headed up by Origin Energy, Shell and Santos have been summoned to meet again with Mr Turnbull in Sydney on Wednesday morning, when they are expected to come under pressure to commit to only shipping gas that is covered under long-term sales contracts.

That should make enough extra gas available for east coast domestic users to fill all of the 55 petajoule base-case supply shortfall identified by regulators for 2018 in their latest assessments.

While that still leaves a gap to the 110 PJ of gas that Mr Frydenberg, writing in The Australian Financial Review on Wednesday, says the government wants the gas companies to make available for domestic use, the producers say the rest is also available.

“We believe that we can supply the market. We don’t believe we’re going to be short of gas in 2018 but we do need people who want the gas to come forward and contract for it, because it’s available now,” said Malcolm Roberts, head of the APPEA oil and gas industry association, who will attend the meeting.

Dr Roberts said the Queensland LNG industry has already ceased spot cargoes to the cheap Asian spot market apart from for “operational” reasons. But he said that if industrial buyers don’t commit to purchase contracts, gas would have to be sold into that market or kept in the ground.

And so goes the propaganda: there’s no gas shortage, right, only an unwillingness to pay high prices for it…as if the two are unrelated!

We know the offers being made on this gas are outrageously priced from the ACCC which has forced some transparency:

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These are still double the price of the same gas in Japan. Why wouldn’t customers refuse?

Meanwhile, the problems for the states are mushrooming, via The Australian:

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As the Victorian government yesterday stood firm against pressure to ease a moratorium on gas exploration and its NSW counterpart showed no sign of trying to fast-track a proposed Santos ­project in the state’s northwest, Pauline Hanson’s party threat­ened to use its political muscle to block drilling in Queensland.

“This country was forged on agriculture, not coal-seam gas, and agriculture is our future, ­because without it we don’t eat — we need food,” grazier and One ­Nation candidate Sharon Lohse said.

One Nation yesterday vowed to block the opening up of new Queensland gas reserves. The party, which could hold the balance of power in Queensland after the looming state election, objects to drilling on large tracts of farmland in the state’s southwest amid fears fracking processes used to release coal-seam gas would damage agriculture by contaminating the water table.

Ms Lohse, who refused to allow gas companies to dig wells on her cattle fattening’ property west of Chinchilla, said governments were “short-term in their thinking’’ in allowing CSG on agricultural land. “Where the major parties are focused on CSG and renewables as the answer to the energy crisis, One Nation has a broader view of the future,’’ she said. “We see new coal power ­stations and water sec­urity as the way forward for ­Australia.

One Nation will today announce its policy to hold an ­inquiry into CSG and impose a moratorium on any extension of its across the Channel Country in southwest Queensland.

Weak political management of this crisis is letting it run riot. If nothing is done soon to contain it then it’s going to result in outright crisis decisions coming into Summer. I repeat, stop stuffing around thinking you can persuade anyone to do anything and apply some big and dumb rules instead.

Set the amount of gas that must be reserved and fix the price at which it can be sold.

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Then formulate a long term policy that includes strict use it or lose laws for reserves and the creation a of gas national champion to develop upstream resources either expropriated or bought. It can have an explicit environmental charter to assuage public angst about fracking and it can sell into the market at fixed margins to benchmark the cartel.

Move or it will be chaos.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.