Via the AFR:
AGL Energy has shrugged off scepticism about its $250 million plan to import gas into Victoria, kicking off an official process to invite LNG players to supply the project.
A formal request for proposals from a group of pre-qualified LNG suppliers was issued on Friday as AGL took a decisive step to follow through on its plan to start importing gas just as Australia is set to become the world’s largest exporter of the main liquefied form of the fuel.
The tender for LNG supply still hinges on AGL making a final commitment to build the terminal at its selected site at Crib Point in Victoria’s Western Port, and on regulatory approvals. But AGL says that demand for the gas is clear based on discussions it has held with gas consumers, including large manufacturing companies in Victoria and NSW, many of which are struggling to source gas at prices they can afford after a surge in prices this year.
Some commentators and east coast gas producers have argued that a import terminal doesn’t make sense given the country’s abundant gas resources. But state restrictions on accessing onshore gas, a limited choice of gas suppliers, and the cost of pipeline infrastructure and transportation tariffs count in favour of the controversial import proposal.
The major reason for it is the Curtis Island gas cartel. End of story. AGL will be importing gas today at AUD12Gj on oil-linked contracts and AUD13.50Gj on spot before it even adds a margin. It will get much more costly as the AUD falls. That that is even remotely competitive for VIC and NSW markets is already an economic disaster (given they’re used to $3Gj). But, worse, it hints at a looming doom loop in which power will be so unaffordable that demand destruction will drop the currency further, raising power costs even more, triggering further hollowing out, so on and so forth into Hell.
The answer is screamingly obvious. The WA contract gas price is AUD6Gj because it has the alternative policy of domestic reservation. The east coast needs the same, at fixed prices if necessary.
As many times as I have written this, thought it through, and tried to communicate it to the public, I just can’t get over how catastrophically stupid we are to let it continue. It is gutting manufacturing and crushing household budgets as it sends gas and electricity bills to the moon.
Meanwhile, the wrong just gets wronger as the key player in the Curtis Island cartel reaps the rewards:
The Foreign Investment Review Board process is looming as a big hurdle for US investor Harbour Energy as it positions for a renewed tilt at Santos, with the South Australian Treasurer arguing energy security must be the top priority as Australia grapples with a gas crisis.
Tom Koutsantonis, the SA Treasurer, views the FIRB process as the most practical option to block any buyout of Santos by a private equity-backed firm from the US. He intends to aggressively lobby the federal Treasurer should Harbour Energy step up its overtures with a higher indicative buyout proposal.
“There are a range of options available to us to protect Santos, including the FIRB process, which would involve consultation with the [rest of the] state government,” he said on Sunday. He said Santos’ operations were a critical part of the country’s energy infrastructure.
Mr Koutsantonis said the private equity backers of Harbour Energy were unlikely to be long-term owners and business builders.
But that doesn’t bother Matthew Stevens:
The attention-grabbing clarion of concern sounded by South Australia’s Treasurer, Tom Koutsantonis, laid claim to some sort of bid-blocking potential. But that rather over-sells the state’s power to intervene to protect its home-grown oil and gas champion.
The new reality is that the best Koutsantonis might do to prevent a move on Santos would be to advertise his prejudice with his federal counterpart, whose department is responsible for the Foreign Investment Review Board and who has the final call over any recommendations it might make.
Almost the worst Koutsantonis could do is threaten to mess around with present and future land access and state approvals should Santos change hands. I say almost the worst, because there is one more dangerous step, and that would be to actually fulfil that threat in a fit of pique that would result in state self-harm.
Garbage. The only harm being done here is an ownership structure that will get more complicated and less influenced by policy when that is the only lever we have to pull to end this energy catastrophe. Not only must the takeover be blocked, we need proper, fixed-price if necessary, domestic reservation.
