Gas cartel colludes to hide collusion

One of the revelations in the ACCC’s superb gas report yesterday is how advanced is the cartel behaviour of the Curtis Island gas exporters:

• The upstream market is highly concentrated and dominated by the three LNG exporters and their associates. In 2021, the three LNG exporters and their associates had influence over close to 90% of the 2P reserves in the east coast, through a combination of their direct interests in 2P reserves, associates, JVs and exclusivity arrangements. This highlights the effective control that the LNG exporters have over the supply and development of gas in the east coast, as well as competition in the domestic market.

• JVs can adversely affect competition if participants do not put in place and adhere to robust ring-fencing arrangements that prevent the sharing of commercially sensitive information,8 with other projects in which JV participants have an interest. A JV participant can also have the incentive and opportunity to exploit their position in a JV to delay the development of gas if it improves the participant’s competitive position in other projects.

• Joint marketing by incorporated and unincorporated JVs is more prevalent than we expected, with the LNG exporters and some other producers engaging in joint marketing in the domestic market without authorisation. This results in a material reduction in the number of producers competing to supply gas into the domestic market.9

• Exclusivity provisions in GSAs entered into between domestic producers (as sellers) and LNG exporters (as buyers) are restricting the ability of domestic producers to compete to supply gas into the domestic market. These provisions can also reduce the incentive that domestic producers have to develop gas over time and result in development decisions being based on the requirements of the LNG exporters, rather than the domestic market.

• Mergers and acquisitions of other producers, tenements or interests in JVs by larger producers, can result in a reduction in producers competing to supply gas into the market and slow the progress of gas development.

Together with the high degree of concentration in this part of the market, these arrangements contribute to a lack of effective upstream competition in the east coast. They may also increase the risk of coordinated conduct and increase the market power of the LNG exporters. This is concerning, given the supply conditions that are expected to prevail in the east coast in 2023 and beyond, and the reliance that will be placed on the LNG exporters to supply more gas into the domestic market.

This is advanced monopolisation to deliver economic rents with clear, indeed embedded, collusion.

I noted earlier that the cartel has begun to play politics in the past few days by taking its boot off the supply of gas in the east coast spot market where prices are now crashing.

So, do not mistake this for any kind of commitment to lower prices. This is gaming by said cartel.

There are further reports today that the cartel is now meeting to discuss how it can pervert the political economy to make itself invisible:

Australia’s three largest east-coast gas exporters have held an emergency meeting to discuss boosting domestic supplies after federal Resources Minister Madeleine King threatened unprecedented export controls if the industry fails to act first.

Representatives from the three Queensland producers – Origin Energy-backed APLNG, Shell’s QCLNG joint venture and Santos’ GLNG – joined a conference call on Monday afternoon, according to senior gas industry sources familiar with the talks.

The meeting was convened by their industry group, the Australian Petroleum Production and Exploration Association, and discussed the drafting of a non-binding “heads of agreement” to take to government in a bid to formalise their commitment to plugging a shortfall predicted to hit the eastern seaboard next year.”

In short, the gas cartel is colluding to hide collusion. LMAO.

Labor must ignore this garbage and go for the jugular: a $7Gj price trigger installed into a renewed reservation regime.

If the cartel won’t play, then make it law. If it bucks and won’t develop new sources of gas then apply “use it or lose it” laws to their reserves as well.

Smash the rorting bastards.

Houses and Holes
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Comments

  1. TheLambKingMEMBER

    If it bucks and won’t develop new sources of gas then apply “use it or lose it” laws to their reserves as well.

    We DON’T need new supplies of gas! We have enough gas supply already to heat the planet to over 4C – which will be catastrophic. The last thing we need is more fossil fuel supplies.

    Most countries have net zero targets which means mostly renewable electricity grids by about 2030 – so the demand for gas should drop.

    SA is running on about 98% renewables today and a wholesale price of negative $42.

    • PlanetraderMEMBER

      How on gods earth are you going to come even remotely close to 100% renewables by 2030? Physics has limits which is an unfortunate reality that is too much for some to bear. Yes renewables are worth persevering with but you live in fantasy land if you think that renewables can be 100% by 2030 or ever.
      So when the wind doesn’t blow or the sun doesn’t shine what then? How many solar panels will it take to produce a single solar panel? The economic cost of energy is and will continue to rise – and the hypocrisy by those wanting 100% renewables by removing fossil fuels as a cheap source of energy beggars belief.

      • TheLambKingMEMBER

        How on gods earth are you going to come even remotely close to 100% renewables by 2030? Physics has limits which is an unfortunate reality that is too much for some to bear. Yes renewables are worth persevering with but you live in fantasy land if you think that renewables can be 100% by 2030 or ever.

        Physics? This is an engineering and political problem – the physics was solved a long time ago. There are a number of people who show different ways we can get to mostly renewables. (rethinkx https://www.rethinkx.com/energy AEMO https://reneweconomy.com.au/is-aemos-step-change-scenario-of-94-renewables-really-a-stretch-target-51027/)

        So when the wind doesn’t blow or the sun doesn’t shine what then?

        1) You still get water out of your tap when the sky doesn’t rain. You store energy – either in dams, in batteries, or in hydrogen.
        2) The sun shines every day – and the sun is shining in Perth when it is dark in Sydney. The wind is blowing somewhere. We need interconnects to join the grid up.
        3) We don’t need to be 100% renewables. If we turn on a gas generator or 2 for a few hours on a few days a year to fill the gap we can be ‘net zero’

        How many solar panels will it take to produce a single solar panel?

        Depending on the lifespan, solar panels produce around 5,000 – 10,000 times the energy it takes to make them.

        The economic cost of energy is and will continue to rise – and the hypocrisy by those wanting 100% renewables by removing fossil fuels as a cheap source of energy beggars belief.

        This is 100% horse manure. Energy costs will reduce. Solar PV costs are reducing year on year. Battery costs are reducing year on year.

        • PlanetraderMEMBER

          Your faith that technology will override the laws of physics is admirable but misplaced.
          You have also conveniently (or deliberately) not mentioned the external and associated costs of this renewable energy nirvana. For example, what is the cost of the toxic waste being generated due to the substantial (and “loosely” regulated) extraction of rare earths and other needed stuff like cobalt, not to mention the waste generated when producing and scrapping solar panels, and the waste generated when burying pieces of scrapped wind turbine.
          By the time we have enough renewables to achieve what you want we will need to replace them all.
          In the meantime the punters will suffer so that a small handful of nobles may rape and pillage taxpayers hard earned through subsidies. Have a look at the massive coal fired plants in China sitting next to their solar panel factories – your fantasy that solar panels will produce x times new ones is not going to happen.
          Buffet said he would never have invested in renewables except for the subsidies – sounds like he knows which side his bread is buttered if you ask me.
          You should also familiarise yourself with the Economic Cost of Energy, not the $$ cost as it tells a different story to the one you tell.

          • TheLambKingMEMBER

            Your faith that technology will override the laws of physics is admirable but misplaced.

            What laws of physics do you think need to be broken? Renewables harness solar and wind energy – an infinite (in practical terms) energy source.

            You have also conveniently (or deliberately) not mentioned the external and associated costs of this renewable energy nirvana. For example, what is the cost of the toxic waste being generated due to the substantial (and “loosely” regulated) extraction of rare earths and other needed stuff like cobalt, not to mention the waste generated when producing and scrapping solar panels, and the waste generated when burying pieces of scrapped wind turbine.

            You conveniently forget to mention that the toxic waste from burning fossil fuels is orders of magnitude greater than renewables. You forget to mention that coal/gas/nuclear plants also have the same working lifespans of fossil fuels and also have orders of magnitude more problems burying, cleaning when scrapping them!

            By the time we have enough renewables to achieve what you want we will need to replace them all.

            Renewables have the same working life as coal and gas. It will take less time, cost less money, use less energy and create less waste to replace the existing coal power plants (which are nearing end of life) with renewables than it would to replace them with new coal plants!

            In the meantime the punters will suffer so that a small handful of nobles may rape and pillage taxpayers hard earned through subsidies.

            Ha! Fossil fuels receive more subsidies ($12bil) than renewables ($7bil)! Why are subsidising fossil fuels? AND fossil fuels are not paying for the toxic waste and carbon they emit when burnt. They don’t pay for any of those external costs – do you know the amount of respiratory problems caused by fossil fuels every year?
            https://www.marketforces.org.au/campaigns/ffs/
            https://arstechnica.com/science/2021/12/fossil-fuel-combustion-kills-more-than-1-million-people-every-year-study-says/

  2. Display NameMEMBER

    Lets face it, there are not many trillion dollar, politically stable economies, with heaps of natural resources and a highly educated workforce where you can earn a profit.Lets see them go to Senegal or Nigeria and set up shop. One adverse event and reservation will look like a walk in the park.

  3. Just wonder whether our pathetic media will actually mention any of this. The ABC is too busy virtue signalling about voices to parliament, gender issues etc etc, Murdoch media is obviously in the mining industry pocket (has been since it was established in the 1920s) and the AFR under Michael Suckbury loves the gas miners. Maybe if we could link total gas price gouging and economic collapse with indigenous rights or gender discrimination, it might get a run on the ABC, otherwise they’re not interested.

  4. Just an observation, looking at the NEM dashboard, I see that Gas has constituted 4% of electricity generation in the last 48hrs, with Wind and Solar generation up. Looking at the 3-month data, we see Gas contributing 10% of electrical generation, so that’s more than a 50% drop in Gas demand for electricity generation.

    Do you think that because we’re not using gas at the moment, simply because it’s windy and sunny, that this is the real reason for the domestic gas spot price dropping this week? Perhaps the winds favor the Gas Cartel here, and they don’t need to actively intervene because by sheer chance we haven’t needed a lot of gas so far this week.

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