Yeh. It’s become so preposterous that it’s like Elvis being spotted in a shopping mall. It surely can’t be true.
Except that it is. The Japan/Korea marker is now trading USD3Gj in Asia. Once converted to Australian prices which are, in theory, set by the Australian Domestic Gas Security Mechansim (ADGSM) we should also be buying the same Aussie gas at AUD3Gj.
Instead we’re paying $11Gj for 95% of volumes. Japan can now buy Aussie gas 73% cheaper than Aussies can.
Via the WSJ:
Liquefied natural gas is fetching the lowest price on record in Asia, a troubling sign for U.S. energy producers who have relied on overseas shipments of shale gas to buoy the sagging domestic market.
The main price gauge for liquefied natural gas, or LNG, in Asia fell to $3 per million British thermal units Thursday, down sharply from more than $20 five years ago as U.S. deliveries have swamped markets around the world.
…A problem for LNG suppliers like these is that power plants in Asia have been slower to switch from burning coal to gas than their U.S. and European peers were when cheap shale gas flooded their local markets, Mr. Joseph said
…“The U.S. cannot sustain reduced LNG exports this summer,” the Bank of America analysts wrote. “Natural gas prices might have to go low enough to stimulate sufficient Midwest power-sector natural-gas demand to balance the entire global gas market.”
And worse, comes China and force majeure, at Bloomie:
A Chinese buyer of liquefied natural gas and a copper importer declared what’s known as force majeure — meaning they are reneging on deals as the virus constrains their ability to take deliveries. The cancellations are among the first known cases of the legal clause being invoked in commodity contracts due to the epidemic.
“Everything that we were afraid of, from trade wars or global growth, doesn’t compare,” said Jan Stuart, global energy economist at Cornerstone Macro. “This virus is an entirely different risk, especially in commodities where China’s role dominates.”
China is the world’s biggest consumer of most raw materials, from energy products to industrial metals, and disruptions in its purchases create havoc across global supply chains. Now, while global markets bounce back from initial fears over the impact of the virus, the fallout in commodity trade is only worsening as Beijing keeps swathes of the country under lockdown and restricts travel.
…In a dramatic and rare step, China National Offshore Oil Corp., the nation’s biggest LNG buyer, invoked force majeure and told some suppliers it won’t take delivery of cargoes because of constraints caused by the coronavirus. French oil and gas giant Total SA rejected the declaration.
Yep. Asian prices are going lower still.
Why aren’t local prices crashing too? In the process providing immense utility price relief in electricity bills, given gas generation sets the marginal cost of power as well? Because the Morrison Government is in the pocket of perhaps Australia’s most evil company, Santos, and that is saying something.
The ADGSM was recently reviewed and it was recommended that it include the JKM as the price benchmark to trigger forced gas supply:
The review recognises that price is an important indicator in establishing whether the domestic market is functioning effectively and considers that the ACCC’s forward LNG netback price series is the most applicable prices when estimating the likelihood and extent of a potential shortfall. As such, the review recommends amending the ADGSM’s guidelines to include referencing the ACCC’s LNG netback price series in estimating a potential shortfall.
This amendment clarifies the relevance of the ACCC’s LNG netback price series to considerations under the ADGSM and strengthens the ADGSM’s ability to deliver on its objective of securing domestic gas supply.
So why is nothing being done? The ADGSM is governed by the Resources Minister, Matt Canavan, who just resigned to play coal politics with Bananby Joyce. The new guy, Keith Pitt, hasn’t even got his feet under the table: At The UnAustralian:
Queensland Nationals MP Keith Pitt, one of the government’s most outspoken advocates for nuclear power who previously quit the frontbench over his opposition to the Paris Agreement, has been catapulted from the backbench into cabinet as Resources Minister.
The 50-year-old former sugar cane farmer will also take over as Northern Australia and Water Minister, raising questions over how he will balance the interests of the mining and water industries.
First elected in 2013 as the member for Hinkler, Mr Pitt has served as assistant minister to the deputy prime minister under both former Nationals leader Barnaby Joyce and his successor Michael McCormack.
…“I will always put the national interest and the interests of my constituents above my own. I will always put reducing power prices, before Paris,” he said at the time.
But what’s he going to do when ScoMo himself has already hijacked the agenda for this, at Domain:
Gas is back on the national agenda. A deal between the Prime Minister and NSW Premier asks the state to “target” production of “an additional 70 petajoules” of gas a year in return for $960 million in federal grants or loans – to be matched by $1.01 billion in funding from the NSW government – to upgrade interstate power transmission capacity. This is supposed to enable renewable energy investment.
Investing in renewables and the grid is good, but why is government subsidising gas?
Santos has been seeking the right to extract coal seam gas from a site near Narrabri in Western NSW. The project is slated to produce – coincidentally? – 70 petajoules of gas a year.
In announcing the deal, Scott Morrison claimed Narrabri’s gas was “critical” to increasing Australia’s energy supply, and that we needed the gas to lower domestic power prices and reduce emissions.
Narrabri gas is $8Gj. STO can’t have the local price crash or it will never be developed. If the Government uses its own ADGSM then it will set a precedent and STO will be buggered, right along with ScoMo’s marvellous new climate change policy.
So, instead, EVERYONE on the east coast, every single household and every single business, is being buggered.
WHERE IS THE MEDIA, LABOR and CENTER ALLIANCE?
