Gas cartel graduates to grave national security threat

The east coast gas cartel of BHP/Exxon, Santos, Origin and Shell has always been a grave national security threat given energy is the lifeblood of the modern economy. But if you want to see a direct threat to the national interest emanating from the gouging quintet then Orica just provided it for you:

Orica is weighing the future of its Newcastle ammonia plant with up to 300 jobs at risk as the high price of gas renders its Kooragang Island facility uncompetitive.

The explosives maker said it is considering importing ammonia rather than producing its own supplies with a decision likely in the next few years when new investment in the project is required.

Production sites such as Kooragang typically need major maintenance every three to five years, triggering a decision for Orica’s board on whether it continues to invest in the facility’s long-term future. Orica says the Newcastle plant is in the last quartile in terms of operational efficiency compared with the broader global industry due to high gas prices.

In other words Australia will no longer be able to make explosives at scale without foreign help, leaving us throwing grenades, firing bullets and launching warheads packed with locally produced marshmallow in all future military conflicts.

Orica’s Alberto Calderon made more eminent sense at Domain:

The long-term solution is relatively simple. The government needs to ensure that the domestic gas market is adequately supplied every year. Only the excess over this would receive export licences,” Mr Calderon said.

“So what to do in the long run is clear. The problem we have is that gas-intensive manufacturing will not survive in the long run.

“So what happens if LNG suppliers have an insufficient supply to meet capacity and contracts? Well, what is clear is that domestic users should not be asked to help cover the risks created by such exposure,” Mr Calderon said.

“Whether fair or not, this intervention demonstrates that the social licence to operate of the LNG exporters has been diminished as the broader community becomes aware that the promise of an LNG export-led economic recovery comes with a very high price tag in the form of a much smaller, less diverse local industry base.”

…Mr Calderon said the ACCC netback pricing – a comparison price that shows the export price minus the costs of transport – was now being used as the default floor rather than a comparison point.

All we need to do to fix this is strengthen the existing Australian Domestic Gas Security Mechanism (ADGSM) by stating that the gas cartel fixes prices permanently below export net back and capped between $5-6Gj.

This will force the cartel to supply more gas locally and take the losses from its own capital misallocation into white elephant LNG export plants, rather than using discriminatory gas prices across the entire east cost economy to bail themselves out. The cartel lied about having enough gas when the plants were under consideration by authorities so any agreement between Australia and the businesses is void.

In more general terms, the opposite is also true. If government does slam the ADGSM price lower then not only will manufacturing output pick up but power prices will crash across the east coast economy.  Gas generation sets the marginal cost in the National Electricity Market (NEM). Thus, sending the gas cartel its long overdue bill will deliver a material and direct stimulus cheque to every business and household every single month as utility bills tumble. Not to mention making Labor look like a friggin genius as renewable investment skyrockets and carbon output drops.

If you’ll pardon me for saying so, what’s not to ABSOLUTELY LOVE in this for a new government looking to nail its credentials to an historic three term mast.

Labor must toughen the ADGSM as its first act in power.

Comments

  1. As much sense as you make David, the result is inevitable. The Oil & Gas giants are the top of the business food chain, and they will rape us whether we like it or not. And any industry underneath them they couldn’t give a flying fvck about. Like a shark doesn’t think twice when eating a seal. Our pathetic politicians and media are too gutless to stand up to them for the greater good of the country.

      • Exactly, Always back self interest. And who funds the political parties? Who employs them post politics? The people, or the gas cartel?

      • St JacquesMEMBER

        That’s an excellent point bjw. And will the ALP dare to stand up to the wrath of the resources sector? Well, if they do this, the public will be overwhelmingly on their side. It’s a battle that must be fought to bring these out of control beasts that are ransacking the nation back in their box where they belong. This is a battle the ALP must fight.

      • ErmingtonPlumbingMEMBER

        Attempting to Tax the miners didn’t work out well for the ALP under Rudd/Gillard and Rex Connors 1974 Gas pipeline from NW WA to the East Coast basicly got the Whitlam Government sacked by the global corpocracy.
        https://www.theguardian.com/commentisfree/2014/oct/23/gough-whitlam-1975-coup-ended-australian-independence.

        The issue is the existance of this Cartel exploiting the Australian people with their anti competative practices.
        Even without the National security concerns they simply should not be allowed to sell us OUR GAS at a price higher than ANY of our export customers pay.
        Your proposal H&H seems more saleable than mine and Rex’s prefered Nationalization.

      • They might have cheered on the sideline, but you are drawing a long bow to blame the ASIO, the CIA and MI5 for Goughs downfall. There was no need to hatch a ‘plan’ as Gough and the ALP imploded. To look at reasons for his fall one should examine the failings of the man and the totally embarrassing antics of some of his cabinet at the time.

      • @Thallus
        ” failings of the man and the totally embarrassing antics”
        These always exist. They are merely released publicly when deemed appropriate to remove people.

    • St JacquesMEMBER

      They’re not gutless Timmeh, they’re bought. Pretty much agree HnH, an ALP government could slash gas prices as one of its first acts with gas reservation and lots of people won’t forget that. The stark message will be, why didn’t the LNP do it if was so simple?

      • Yes, it is their sort of thing that would likely stick in the average punters mind & give Labor 3 terms. (like when Maggie broke the Unions in UK, Labor here could make a similar impact by breaking big business oligopolies as soul may people now see they have to much power, like the unions used to. But I suspect Labor are too far in bed with big business, no wonder as many as 30% of Aussies wil put minor parties as first choice)

  2. HadronCollision

    Who’s labor’s energy shadow and does anyone here have s line to them

    Also I’m sick of the wiggles at 5.40 more Ben and holly please also Lachy sure pulled the ripcord

    • Poor Lachy. He’s a talented singer and dancer but he’s made out of anti-charisma particles.
      If you have to watch kids tv, Bluey is good.

      Oh, and I’ve been wondering what Labor’s line on gas reservation is too 🤔

  3. Ammonia is fertilizer.

    We are hollowing our our ability to self-sufficiently farm. This puts us in deeper poo than we might be in if it was just about explosives.

    • Origin makes prilled ammonia nitrate for mostly mining use and fertiliser
      it does not make military grade explosive
      Near all the ammonia plants in australia including the big ones at Kooragang and Gibson island are time expired
      the future demand for ammonia based fertiliser is doubtful, and gelled explosive is easy to import as well
      thus importing is the GO.

      • Yes, both are worn out and their skills base has been and is retiring., probably cheaper for them to ship it out from Louisiana ..….hopefully Perdaman will get their WA plant up. Not a good year for Incitec all up .

      • PolarBearMEMBER

        You are right that military does not use Amonium Nitrate Fuel Oil (ANFO) mixture. It’s an industrial explosive and the most heavily used explosive in the world, due to it’s low cost. But Orica does manufacture nitric acid as part of it’s process, which is essential for manufacturing almost all explosives, including military. I’m don’t know if Australia manufactures its own military explosive, but the nitric acid would be essential for that.

      • PolarBearMEMBER

        Just to be complete: wikipedia informs me that ammonium nitrate is combined with TNT and RDX in the military explosive mixture Amatex. Another mixture, Amatol was widely used in WW1 and WW2, but not anymore.

    • of course… I remember that all this sh*t started when the government of the day made the mistake to not very quickly and furiously agree and allow fracking anywhere, anyhow, anyway…

      Within uh… less than a year – the existing production was sold in advance to anyone who could fog a mirror on the subcontinent or Japan… And that was the end of it.

      • there is more csg, just off shore between Newcastle and Sydney, than you could poke a stick at
        On a calm day, it can be seen bubbling in the ocean as was the condamine river
        it could be accessed by off shore rigs
        or directional drilling from on shore
        but will that arc up the greenies
        sure will.

      • Unless there’s enough to completely fill the export terminal capacity it doesn’t matter.

  4. I think it is a very good development that is industry is turning on itself.
    Manufacturers finally acknowldgin the elephant in the room.
    There’s no supply problem.
    There’s a demand problem.
    Andrew Liveris from has been pathetically wingeing about inadequate supply for years.
    Even before you acknowledge the destruction of water resources, and farming rights, adding more unconventional gas is like throwing pennies into the grand canyon.
    We need demand constraint
    Until 2 of 3 of the LNG trains go broke we will be constantly undermined by these local and foreign oil and gas parasites.

    • Pennies? Grand Canyon?

      I’m an Aussie. Can anyone give it to me in the local lingo?

      • Like providing ethics lessons to a Liberal National MP?
        Like throwing climate science at the far right?
        Like throwing fresh-off-the-boat migrants at a 7 Eleven franchisee?
        Like throwing apartment settlement dollars at Highrise Harry’s greed?
        Like throwing tattoo ink at a bogan millenial?
        Like granting a concession to Transurban’s rent seeking self-interest?
        Like explaining conflict of interest to Andrew Robb?
        Like explaining age of entitlement to Bronwyn Bishop?
        Like explaining social licecne to the LNG sector?
        Like providing an explanation of market risk to property specufestors?

      • like buyback water licenses from the MurrayDarling irrigators ?
        like convincing Bolt/Howard/Abbott that Pell is guilty?

  5. Hnh you need to flesh out your plan further than just cap prices. Do you support new drilling in NSW/Vic? If not do you support a new pipeline to get Qld gas to NSW/vic once the SWQP/MSP is at capacity? It’s easy to throw out a populist call to fix prices but if you want to be taken seriously you need a full plan.

    • I agree with the nationalisation of ‘the thing’, and many other things while we’re at it.

  6. bolstroodMEMBER

    The real national security issue with LNG is Fracking.
    Fracking causes unintentional fissures in the landscape that allow fugitive emmissions (Methane) to escape into the environment.
    The latest report on Australia’s Green house gas emissions had LNG (Methane) as the major cause of this nations emissions rising.When you Frack a continent there are consequences.
    Waves at Angus Taylor

  7. There was a plan to do a big upgrade the Orica facility at Kooragang Island about 5 years ago, called “project trident”. I worked at one tier 1 EPC at the time doing the FEED estimate. They had already purchased some costly bits of new plant out of Europe (a prill tower) and their was a European process engineer involved in the P&ID’s along with the usual Australian engineering consultants doing the balance of plant. Things like the large building were designed using precast concrete beams and columns as per European practice. I said at the time why don’t we just use the European structural drawings to save on engineering costs as these had been designed for snow loads (much heavier roof loads than in Australia). No was the response from the Australian consultants as they’d have to be verified to see if it was to Australian Standards and there were no precast yards in Australia who could do this type of precast work. They wanted to do a complete redesign using steel. I then mentioned I could get the precast structurals done in SE Asia as they are more familiar with the European construction methodology of long precast columns with crane rail corbels and those precast roof beams the Euopeans do, saving $$$. No to that was the response. Then the consultants (local Worley Parsons I believe) wanted a ticket clipping army of engineers to ensure the design drawings using European codes and the piping drawings to ASME codes (a US Standard for piping with global recognition) met to our local standards. The cost went up and up, in the end a new Orica general manager came in and took the company over and made the decision to ship what had already been purchased to the United States where the plant was eventually built. Part of the justification of the switch to the United States was it was cheaper to design engineer the project in the United States, rather than build here. We are killing the productivity of this country on a number of fronts, it doesn’t matter how productive the front end worker is or how little they are paid, its the army or rent seekers like gas companies and in the example above ticket clipping local engineering consultants.

      • Piss off. I could do that, which is just what Orica is going to do. But I’d like to see artificial barriers to investment torn down. What these companies pay their workers is just one component of the equation. You can sit back and watch the remnants of industrial investment sail off into the sunset.