It appears my fears about Arrow development are playing out already, via the AFR:
The prospects for developing Arrow’s Surat Basin coal seam gas reserves took a huge step forward on Friday with news of a 27-year contract by Arrow, owned by Shell and PetroChina, to sell gas to the QCLNG venture in Queensland.
The gas sales deal is set to kick off a multibillion-dollar investment to extract about 5 trillion cubic feet of gas is expected to result in Arrow gas starting to flow by 2020, adding about 10 per cent to the annual production in the southern and eastern states.
That is roughly 5300Pj of gas over 27 years. The east coast gas shortage is roughly 200Pj per annum. So the Arrow development almost perfectly matches the domestic shortage over three decades. Now sold to China. More:
UBS energy analyst Nik Burns said that while he expected most of the Arrow Surat gas to end up in the export market as LNG, it would also supply into Shell’s recently established east coast gas and power trading arm, supporting and potentially accelerating Shell’s ambitions to build up that business.
EnergyQuest consultant Graeme Bethune suggested the development of Arrow would likely lead to calls for a percentage of gas to be reserved for the domestic market, given the tight east coast market.
Queensland Natural Resources Minister Anthony Lynham already on Friday voiced interest to hear from Arrow on domestic gas supply plans.
The fact that even with Arrow gas, Queensland will still have spare LNG plant capacity in Gladstone means that Asian LNG prices will still set domestic gas prices, said Wood Mackenzie analyst Saul Kavonic.
Congratulations to the ACCC which gave this gas to Curtis Island cartelier, Shell, under two years ago.
Meanwhile, China offers lesson for Australia in how to handle runaway monopoly gouging, via Reuters:
China’s state planner has ordered eight regions to meet with natural gas producers, liquefied natural gas (LNG) terminal operators and traders on Monday to “regulate” the market as prices of the clean fuel soar due to winter heating demand, a government official said.
The meetings highlight Beijing’s concerns about rising gas prices amid its policy to shift millions of homes to gas heating from coal for the winter along with thousands of factories and businesses to combat air pollution.
Fixed quotas and prices for the Curtis Island cartel’s domestic supply is the only policy left to fix this debacle.
