Via Matthew Stevens at the AFR today:
Why is NSW like Lithuania?
Well, according to a bunch of clever Norwegians, it is because the Baltic nation and Australian state share similar sources and solutions to their individual energy challenges.
The Norwegians in question work for Hoegh, the world’s leading provider of floating liquid natural gas storage and regasification terminals (FSRU) – it is the newest technology partner to the Andrew Forrest-backed Australian Industrial Energy.
…”We can do for NSW what we did for Lithuania,” Hoegh’s Ragnar Wisloff told The Australian Financial Review near the end of a flying visit to Australia last week.
“Lithuania is tied to a Russian gas pipeline and they didn’t like that much being left exposed to a monopolistic supplier that was exercising the political leverage of energy. So they came to see us to get themselves some level of independence. We have given them energy security through an FSRU (floating storage and regasification unit) called Independence. That is very similar to what NSW can do. It can get itself some security through diversifying the source of gas supply that gives it some level of independence from the pipeline.”
Can a nation really be this suicidally stupid? Australia as Lithuania? I mean, come on. We have gas to burn, the only problem is an export cartel has literally stolen it from under our noses. When the QLD Curtis Island LNG export terminals were built they said they had enough gas to fuel them. They lied. Previously from The Australian:
As Santos worked toward approving its company-transforming Gladstone LNG project at the start of this decade, managing director David Knox made the sensible statement that he would approve one LNG train, capable of exporting the equivalent of half the east coast’s gas demand, rather than two because the venture did not yet have enough gas for the second.
“You’ve got to be absolutely confident when you sanction trains that you’ve got the full gas supply to meet your contractual obligations that you’ve signed out with the buyers,” Mr Knox told investors in August 2010 when asked why the plan was to sanction just one train first up.
“In order to do it (approve the second train) we need to have absolute confidence ourselves that we’ve got all the molecules in order to fill that second train.”
But in the months ahead, things changed. In January, 2011, the Peter Coates-chaired Santos board approved a $US16 billion plan to go ahead with two LNG trains from the beginning….as a result of the decision and a series of other factors, GLNG last quarter had to buy more than half the gas it exported from other parties.
…In hindsight, assumptions that gave Santos confidence it could find the gas to support two LNG trains, and which were gradually revealed to investors as the project progressed, look more like leaps of faith.
…When GLNG was approved as a two-train project, Mr Knox assuredly answered questions about gas reserves.
“We have plenty of gas,” he told investors. “We have the reserves we require, which is why we’ve not been participating in acquisitions in Queensland of late — we have the reserves, we’re very confident of that.”
But even then, and unbeknown to investors, Santos was planning more domestic gas purchases, from a domestic market where it had wrongly expected prices to stay low. This was revealed in August 2012, after the GLNG budget rose by $US2.5bn to $US18.5bn because, Santos said, of extra drilling and compression requirements.
That is why you are paying through the nose today for gas and power. No other reason.
Importing LNG as the solution to an Enron-style gouge of Australian energy is completely insane. We’ll effectively be buying our own gas back from Asian customers and it will provide zero security. Why? Although gas may be available the question is at what price? The Asian region gas price is today at roughly $13.50Gj for spot and contract gas. The import terminal has to add the cost of construction and a margin taking it to roughly $16-17Gj delivered. The local Australian price today is $10Gj thanks to domestic reservation.
In short, it’s impossible to sell imported gas more cheaply than domestically reserved gas. The only way it becomes viable is if the reservation is killed.
If you allow that to happen then what follows is total disaster. As China slows and the Australian dollar falls in the decade ahead then the imported gas price keeps rising. Just as you’re trying to rebalance away from resource exports to non-resource exports and domestic demand, you deliver yourself a massive energy shock that hollows out the latter. Remember that gas also sets the price of electricity!!!!!!!!!!!!
This is before we even factor in the possibility of a rising Asian gas price. If prices in the region rise to $15Gj as many gas suppliers predict and the AUD falls to 55 cents then the imported gas price will hit $30Gj. The export cartel will simply keep shipping volumes offshore right up to that price for local supply.
This is bat shit CRAZY. That it has been endorsed by the NSW government and the ACCC as a plan for energy security is…I am lost for words…
