Via The Australian:
The father of Queensland’s $80 billion liquefied natural gas industry has warned that business and investment confidence could be destroyed by the state government’s deeply contested royalty hike killing “the goose that laid the golden egg”.
Coal-seam gas pioneer Richard Cottee spoke out as industry body the Australian Petroleum Production and Exploration Association said a second wave of gas projects in Queensland to boost domestic supply would be jeopardised.
State Treasurer and Deputy Premier Jackie Trad had wrongly insisted the tax increase would hit only the export sector, forcing her office to correct the record last night.
Cue the violins. Never mind that the industry is enjoying triple historic prices, with everybody else paying through the nose, that it pays no tax, and is protected from its own apocalyptic mistakes by hapless regulators and a corrupt federal government.
If a 2.5% royalty hike can kill all of that then it deserves to be out of business.
But an even more poisonous cloud rose at the AFR:
As we have noted here often enough, about 90 per cent of Australian LNG exports are shipped under long-term contracts that carry oil-linked pricing matrices. And as EnergyQuest noted last week, very ,very little of Queensland’s shipments to the region are spot – or uncontracted – sales.
The result is that the east coast domestic price is more a proxy of the oil price than it is of any of the regional spot LNG indicies.
…It means, for example, that the ACCC netback pricing series, which captures the movement in spot prices, might be looking at the wrong thing.
…It means that our newly consensus-minded federal energy minister, Angus Taylor, is wrong to imagine that lower regional spot prices should translate into lower domestic prices.
This is effectively to argue that because a murderer murdered the law against it should be abolished. It is the substitution of “businessomics” for basic logic.
Are we supposed to think that the Turnbull Government and the ACCC did not know that they were choosing Asian spot prices for the ADGSM benchmark? Of course they did. The JKM was chosen precisely because it would provide a better real time guide to domestic net back prices than do 30 year oil-linked LNG contracts.
That the LNG cartel has ignored its ADGSM commitments – the price today should be $4.50Gj not $10Gj – is not a reason to blame the mechanism. It is reason to blame the cartel for breaking the contract and to toughen it up.
