As predictable as the sun, via The Australian:
Queensland’s three big gas export plants are shipping at their strongest rates in seven months as global LNG prices rise to four-year highs and southern winter demand pushed Sydney and Melbourne gas prices to records last month.
The spike may inform talks gas producers and LNG exporters will hold with federal Resources Minister Matt Canavan this week, with two meetings convened to discuss the extension of a deal to offer uncontracted gas to domestic markets before export markets.
The latest Gladstone Port data shows the $70 billion of LNG projects built to export gas through six big Curtis Island freezers boosted August exports by 6 per cent to a seven-month high of 1.76 million tonnes, representing an annual rate of 20.7 million tonnes a year.
LNG spot prices this week hit a four-year high of $US11.33 per million British thermal units, or $16.75 per gigajoule, as China continues to buy all available LNG as part of its cleaner-air policies.
The local price is hovering in the mid $9s so it is well below export net-back. The cartel is clearly very aware that it is in the gun.
But it’s still not enough. Mid-$9s is triple historic price and more than double WA prices. Labor’s notion of benchmarking domestic reservation at $6Gj remains an excellent idea and the Asian gas price tells you why.
Asian gas prices at $17Gj is just the beginning. As the AUD falls into the 0.50s and the Asian price rises to $15Gj it will nearly double again, the export net-back price that is supposed to benchmark today’s Australian Domestic Gas Reservation Mechanism (ADGSM) will be delivering prices around $25Gj, much higher than we’ve ever seen before, even during the great gouge of 2016/17. If LNG imports are in place instead of reservation then that price will be more like $30Gj. That will drive power prices absolutely mad given gas sets the marginal cost of electricity in the National Electricity Market (NEM).
The local Australian gas price must be permanently disconnected from Asian pricing or these Doomsday scenarios are inevitable.
Benchmark a stronger ADGSM at $6Gj permanently. Do it with quotas if necessary. As today’s export price of $17Gj shows, the LNG producers can ship all of their gas profitably and the notion that they need higher local prices to maintain supply is a very bad joke made at the expense of the Australian people.
