What’s happened to journalism at the Australian Financial Review? This is a rhetorical question because we all know the answer. It has become the plaything of any and every vested interest in town.
The latest example is this rot:
Extending the Australian Domestic Gas Security Mechanism provides an excuse for Victoria and NSW to “go slow” on securing their own gas supplies, while potentially risking the energy security of important overseas investment partners, Santos’ GLNG venture has warned.
GLNG, one of the three LNG export ventures in Queensland which is facing prospective curbs on shipments by the federal government to avert a domestic shortage, is opposing the proposed extension of the ADGSM until 2030, warning of “unintended consequences”.
The arguments from the venture, which includes France’s TotalEnergies, Malaysian national oil company Petronas and giant LNG importer Korea Gas Corp., come after a damning report released by the competition watchdog on Monday which largely blamed the three LNG export ventures for a potential 56 petajoule shortfall in domestic gas supplies in 2023.
The federal government in response has taken the first step towards triggering the ADGSM for next year, which could cap LNG exports by GLNG, Origin Energy’s Australia Pacific LNG venture and Shell’s QCLNG.
The debate around the east coast gas crisis comes as gas prices in Victoria, the state worst hit by extreme wholesale prices over the past two months, softened further amid continuing mild winter weather in the southern state, which has reduced demand for gas for both heating and for electricity generation.
Gas spot prices in Victoria slipped to $12.90 a gigajoule on Wednesday, down from the capped price of $40/GJ which had been in place for two months until Sunday to prevent prices rocketing even higher.
“All have contributed to a decline in the gas and electricity prices.”
Populist rhetoric about gas that “belongs to Australians” being sold to foreigners at a super windfall profit for producers is economic illiteracy.
So, what is the issue here?
- Manufacturing is only one small part of the fallout from the extreme gas prices. The other is that the gas price has driven up electricity prices for EVERYBODY. What we are really talking about here is a pan-east coast economy energy shock that will add 6% to the CPI over the next year if left unaddressed and that will smash real incomes and house prices as the RBA is forced to chase inflation higher.
- Victoria may have curtailed possible gas extraction but the question is why? The Santos-led GLNG outright lied about having enough gas reserves to cover its export contracts when it commissioned its plant in 2010:
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.
Santos also played a role in the collapse of regulation for environmentally safe extraction of gas reserves in NSW and declared it was prepared to export that gas, too, if its Narrabri project went ahead.
The question, therefore, is not why VIC hasn’t lifted its gas moratorium, which is heavily supported by the community, it is why should it reward the terrible behaviour of the cartel?
- Labeling this context “populism” is ludicrous intellectual laziness, especially since it is all ignored! The gas does belong to Australians and grotesquely inappropriate editorialising doesn’t change the fact.
The gas cartel has overreached in its appalling behaviors. Now the AFR is doing the same in defending it. In the process, threatening the profits of its parent company, Nine. Not to mention every EVERY other business east of WA.
Gas reservation with a $7Gj price trigger NOW.