Via The Australian:
“What has happened in the past may just look like a storm in a teacup compared to what is coming,” said Nicholas Browne, Wood Mackenzie director for Asia-Pacific gas and LNG. With supply shortages forecast for east Australia from the early to mid 2020s “gas will need to be diverted from LNG export projects or imported via LNG. A new and uncertain market reality awaits gas consumers and producers in east Australia.”
Essentially, east coast producers will need to be incentivised to keep their gas at home rather than send it to buyers in Asia who are prepared to pay a premium. That will push up the local price and place it at a similar level to north Asian markets. Gas on Australia’s east coast, currently being offered between $8 and $10 a gigajoule, will move substantially higher and eventually push up the cost of utility bills for consumers, squeezing disposable income.
“In effect a gas short domestic market will need to compete with Asian buyers,” said Mr Browne. “From now on factors such as Chinese attempts to clean up its air and Japanese summer heatwaves will directly impact east Australian gas prices and consumers.”
…Only one import terminal is needed until the 2030s under Wood Mackenzie’s reckoning, yet all four may be built regardless “as players prize control and flexibility over collaboration”.
Import terminals won’t do jack. By definition they can only operate at the regional price plus production costs. To be profitable they will have to destroy the weak domestic reservation regime already in place, which operates at export net-back prices.
The good news is Wood Mac is too bullish on prices for Asia. They won’t be any higher in the mid-2020s than they are today. The bad news is that the AUD will be lower, ensuring that local gas prices linked to export net-back will be much higher anyway.
The only answer is stronger domestic reservation with which we could price gas at $5Gj forever, just as WA does. But that doesn’t suit the corrupt political economy so some kind of self-flagellating rort will no doubt take its place.
