Via Michael West:
Santos has lodged a big report based on false assumptions to push its Narrabri CSG project through regulators. Its independent expert is not independent, nor expert. Michael West investigates.
They thought they could get away with it; that is, lobbing a chunky “independent expert’s report” at one minute to midnight in a bid to win approval to frack for coal seam gas at Narrabri.
It is down to the wire for Santos’s CSG project in NSW. Just one more hurdle. Despite myriad environmental concerns and strident opposition from farmers and the local community, the project got the tick from the NSW environment minister. Note well: *environment minister*.
Final approval rests with the Independent Planning Commission and Santos has endeavoured to game the process by lodging a voluminous “expert” report at the eleventh hour with new claims over the costs for the project, false claims.
The report is a hoax. The gas cartel of Santos, BHP-Exxon, Shell and Origin have kept prices so high they have killed domestic demand for gas.
“The entire basis on which Santos/Acil Allen’s report is written – the claim that there is stable domestic demand – is incorrect,” writes gas analyst Bruce Robertson in a report for IEEFA.
“Domestic demand is falling, despite low prices, and is destined to fall further and faster due to the global gas supply glut and the flattening of international prices.” The graphic below tells the story. If this chart shows “relatively flat demand” then Santos has a funny idea of what constitutes “flat”.
Robertson, a farmer and analyst at progressive research house IEEFA, has form in picking lies and duds in the energy sector. He exposed the electricity transmission giants in 2014 for claiming demand was rising when it was falling.
When they shamefully changed their story to claim it was “peak demand” that was rising, rather than overall demand, Robertson proved that too was falling.
A couple of years later, when the gas cartel was lobbying to frack the Gloucester region for coal seam gas, Robertson again exposed their “supply cliff” contentions as false. There is no supply cliff, nor was there. Australia has since vaulted Qatar to become the biggest gas exporter in the world.
Now, as the Government and its gas-stacked panel of NCC economic advisers (the “Covid Commission”) are preparing to splash billions in taxpayer money on gas projects as Australia’s “transition fuel” to a renewable energy future, Bruce Robertson has exposed their entire argument as a deception.
The most glaring falsehood in the Acil Allen supplementary submission to the Independent Planning Commission (IPC) which will decide shortly whether to approve the Santos project is that gas demand is not “relatively flat”, it has fallen.
Gas usage in Australia has declined by 21% since 2014. It has fallen because the gas cartel has pushed gas prices so high they have killed demand. Gas usage for electricity generation has dropped by 58% since 2014.
“Narrabri gas is high cost gas to produce, costing $8.50/GJ ($6.40/GJ at the well head plus $2.10/GJ for transmission to Sydney),” says Robertson.
“The current spot gas price is less than half this price at $4.21 in Sydney (as at 21 August 2020). Contract prices are in the range of $8-11/GJ. Santos cannot supply gas to Sydney and make a profit from the proposed Narrabri gas fields at current gas prices.”
Acil Allen has form when it comes to questions over its research and independence.
Oil and gas major Chevron, operator of the Gorgon and Wheatstone LNG projects, dusted off an old report it had commissioned from ACIL Allen Consulting to present to a Senate inquiry investigating tax and royalties. This claimed Chevron’s contribution to government coffers between 2009 and 2040 would be a thumping $338 billion.
Even before Covid and the collapse in the global gas sector, the claims were deemed extravagantly wrong.
Although he did not reject the ACIL report as being old at the time, Chevron’s managing director Nigel Hearn predicted the PRRT payments from Gorgon (now shipping) and Wheatstone (to ship later this year) would be between $60 billion and $140 billion.
It never came to pass. It never will. Now we have Acil Allen backing Santos’s claims that Narrabri’s onshore gas will be cheaper to produce than previously thought. Even if this were true, there is no case for tearing up farmland to produce more gas when there is more than adequate supply.
This supply however is being manipulated to keep domestic gas prices high. The cartel is selling low into foreign LNG markets just to get rid of the supply overhang so they can charge Australian consumers higher prices.
“One of the key reasons the domestic LNG price on the east coast of Australia did not fall as overseas prices fell was that in the last quarter of 2019 and in early 2020, LNG producers collectively sold 18 LNG spot cargoes into international markets at prices substantially below domestic gas price offers,” says Robertson.
These sales are in contravention of the Heads of Agreement set out between LNG producers and the Australian Government, which stipulates that uncontracted gas must first be offered to the domestic market on “competitive market terms” before it is offered to the international market. This has not occurred, and no action has been taken by the government to rectify this.”
“(Energy Minister) Angus Taylor instead brought out his big stick to bring the gas companies into line (it is in fact not a stick but a sack of money to shower them with)”.
Rather than policing the cartel properly, the Government’s solution to this breaking a Heads of Agreement and price fixing has been to give them a bag of money. That the cartel donates via its individual members to the three major parties should be noted.
ACCC chairman Rod Sims has noted a number of times that there are issues in the gas market. There have been umpteen inquiries pass, billions of dollars of losses notched up by the gas majors in their LNG export disaster – losses they are recouping at the expense of Australian customers and taxpayers. It is time Sims and the ACCC take action.
Let’s recall the last time a debate like this was led by Santos:
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.
And the rest is history:
- crashed Asian prices for Aussie gas;
- skyrocketing local prices for Aussie gas.
I used to be an enthusiastic supporter of Narrabri gas. But that was before gas cartel lies destroyed the basis for it:
- removing all sixteen conditions of the NSW chief scientist for safe extraction allowing STO to do whatever it likes with millions of tonnes of carcinogenic salts;
- project-specific domestic reservation meaning STO will be free to offset more gas from Narrabri with more exports from elsewhere keeping the local market tight and prices high;
- the structural global glut which will keep Asian prices low and can be accessed through LNG imports adding more competition as well as gas to the local market, and
- competing renewable energy alternatives that are already cheaper for peak electricity.
Narrabri absolutely should not go ahead.