Via The Australian:
Malcolm Turnbull’s gas export restriction threats have been unable to counter the impact of rising oil and Asian gas prices, with average Sydney and Melbourne wholesale prices jumping 40 per cent last year and January’s prices in both cities the highest on record for that month.
While the government intervention and extra scrutiny has had the intended effect of bringing contract prices down from extreme levels, spot prices continue to rise with international commodities.
Gas and pipeline chiefs say the higher prices are here to stay and that Australian industry must find a way to adapt to the rapid doubling or tripling of gas prices after the opening of the east coast to LNG exports in the past few years and rising onshore development costs.
There is also the prospect that if oil prices, which Asian LNG prices are linked to, keep rising, east coast gas prices will too.
…Santos managing director Kevin Gallagher said traditional prices of $3 to $4 would not return because it cost more than that to get untapped east coast gas resources into production. “I’ve always said I think the right price is around that $7 to $9 range,” Mr Gallagher told The Australian, stressing that $9 wholesale gas prices were among the lowest in Asia.
The only reason we can’t have $3-4 gas prices is because that gas is being shipped to Asia. Once the enormous cost of doing so is included then the shipments are leaving at huge losses despite the low cost of the gas.
The only sensible solution is stronger domestic reservation to ensure the cheap gas stays here. If shipments can’t (or must be made) be made with higher cost gas then let the shareholders bear the pain, not the rest of us.
There is some potential good news, at the AFR:
Billionaire Andrew Forrest and two powerful arms of Japan Inc have formed a joint venture that aims to disrupt gas and power markets on Australia’s east coast by importing liquid natural gas into NSW.
…It is understood that JERA and Marubeni each own up to 25 per cent of the new venture and that, through Squadron Energy, Forrest is the single biggest investor.
The proposal that lured such a heavyweight Pan-Pacific slate of financial and technical supporters opens with investment in a LNG re-gasification terminal that would be parked at one of the industrial ports in NSW and would “facilitate” the construction of a 750MW power station.
…According to documents seen by The Australian Financial Review, the price of AIE gas would range between $8-10/gigajoule. The spot price in NSW on Friday was $9.72 and manufacturers have complained that new term contract pricing has become extortionate.
Hmmm…only potentially good news. Those prices are still extortionate. And having Twiggy join the east coast gas gouge does not fill me with hope. Sure there’s a little more competition but only if he doesn’t just join the cartel. Worse, having his influence upon the policy process is only likely to embed the $8-10Gj range as the new normal, entrenching resistance to what we should really be doing, the only thing that will give us cheap energy, keeping more east coast gas on the east coast.
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.
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