Sell Abu Dhabi half of Santos. Or some fraction of that makes sense to the national interest.
We must all remember the history of this evil firm. As explained by The Australian in 2017 (below), Santos built two LNG export trains out of Gladstone, Queensland, without enough gas to meet export contracts. As a result, Santos hoovered up gas from third parties (including Victorian gas) and shipped it off to China, starving the domestic market.
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.
In short, the cartel is all Santos’ fault.
Abu Dhabi can have one QLD LNG train, but not both. The second must be sold to the Australian government, which can run it as a national gas company off-balance sheet.
That company can have a profit motive with more severe restrictions than the private sector, meaning that it must supply local gas first at reasonable prices.
This will break the cartel as it has to compete.
Other assets can be sold to Abu Dhabi, too, so long as they operate under a domestic reservation regime.
