Via The Australian:
Fresh gas shortages on Australia’s east coast could emerge from mid-2019 — two years sooner than official forecasts — due to a sharp decline in Victorian offshore gas production piling renewed pressure on domestic prices, a private firm fronted by former BHP executives has warned.
Venice Energy, the Mitsubishi-backed venture that aims to import liquefied natural gas into South Australia, says Victoria’s gas shortages will start appearing from the middle of next year.
This is in contrast to the Australian Energy Market Operator’s surprise June forecast that declared there was not likely to be short or long term gas shortages. That forecast, based on producer estimates on how much unproven gas resources they could convert to reserves, was controversial because it superseded one in March that said a shortage loomed in 2021 due to a faster than expected decline in supply from the state.
And herein lies the problem. It’s not that any gas shortage is likely to come earlier than expected. It’s that import rent-seekers can produce propaganda to pressure governments without a jot of accountability.
This is what importing gas will mean. It will add another layer of rent seeking businesses than can only make money if the Australian Domestic Gas Security Mechanism is never used. The importers by definition can’t compete with domestic reservation so it must be destroyed.
What this means is that prospective LNG importers are, in effect, just going to join the export cartel. There’ll be an import/export cartel that guarantees that the east coast will pay Asian prices for its own gas, the pain multiplied by whatever lower level the AUD falls to.
With the ADGSM gone, LNG imports will set the marginal cost of east coast gas. Today that is $13.50Gj plus their own costs versus ADGSM-capped $9Gj locally. As imports displace locally produced gas, any surplus will be vacuumed up by the export half of the cartel which is operating will below capacity.
If the AUD falls to 55 cents then the local gas price will rise to $20Gj. If the Asian gas market tightens and prices rise $15Gj as the AUD falls then that will be $30Gj.
It’s complete lunacy.
All we need is tougher reservation just like WA. Force the export cartel to leave 10% of volumes here. Use fixed price quotas if need be. $5Gj would be fine.
