Last week, we witnessed the seemingly extraordinary when the East Coast gas export cartel suddenly turned on itself, demanding the domestic reservation of Aussie gas.
But was this really what it appeared to be? Or was it just more of the same corruption that has robbed Australians blind for over a decade?
I will let you decide.
Origin Energy’s LNG export business, APLNG (supported today by QCG LNG), released a proposal to use export permits to limit the volume of exports and keep Aussie gas at home.
Crucially, to make it “fair,” ORG’s idea is to make sure that those who withdraw gas from the wider domestic market for export should have limits.
Clearly, ORG does not see itself as one of those businesses because it ships gas south. Nor is Shell’s QGC LNG.
ORG is pointing at the LNG business of Santos, called GLNG, which does not have enough of its own gas to export and buys it from third parties further south.
So, this is not remarkable at all, given that all ORG was doing was foisting the problem onto a competitor.
It wasn’t noteworthy for another reason.
By a lucky coincidence, the Origin-sponsored Grattan Institute was releasing the same idea, but it went further.
1. Integrate the ADGSM, Heads of Agreement, and Gas Market Code into a single supply framework that operates on a continuous basis and includes, via export licences, an ongoing obligation to supply the domestic market.
2. Facilitate greater market transparency by empowering the AER to take on the ACCC’s current role in monitoring the market and enforcing compliance; integrate the publication of price and contract terms and domestic market imbalances, building on AEMO’s existing projections of demand, supply, and possible shortfalls.
3. Consider the need for a stable reference price to replace the current reasonable price, if the first recommendations do not provide market confidence for contracting. This reference price should be indexed to a stable international marker such as the Brent crude oil price. It could be based on export parity, possibly with a domestic discount.
4. Federal and state jurisdictions should review existing use-it-or-lose-it obligations on holders of exploration permits or licences who fail to meet their obligations from acreage release programs.
5. Take further action to address the looming gas shortfalls in south-east Australia, if the Energy and Climate Change Ministerial Council’s actions are not effective.
6. Assess the above recommendations in the context of the future expiry of the long-term export contracts, when further adjustments may be appropriate.
7. Review and revise the Future Gas Strategy to include a deeper consideration of future demand across subsectors and consistent with Australia’s climate change policies. Such a strategy must include policies to reduce gas use across the jurisdictions and should provide producers and big users of gas and electricity with the predictability they need for investment.
Those recommendations can be read as follows:
- Smash Santos because it is not ORG, our sponsor.
- Bury the peskily independent ACCC function inside the much less media-friendly AEMO so the issue for ORG, our sponsor, goes away.
- Use export parity prices to lift local prices from $13Gj to $17Gj urgently so that our sponsor, ORG, can rip more money out of every household and business east of WA.
- Review but do nothing about use-it-or-lose-it obligations because ORG, our sponsor, will be required to produce more gas, instantly resolving the local shortage.
- Do something! That is, nothing, so ORG, our sponsor, is not upset.
- Do nothing to upset export contracts, or the profits of ORG, our sponsor, will fall.
- Make a giant motherhood statement so that ORG, our sponsor, is forgotten.
And, whatever you do, don’t mention invisible recommendation 8, which is to use the excellent Dutton gas reservation proposal that targets spot gas sales to Asia, because that would deliver cheap gas and smash ORG profits, our sponsor.
Let’s also sit back and admire Grattan’s response to the heat coming from MB.
To hide the corruption, it has feminised and fig-leafed Tony Wood, former ORG executive.
Was there a big change in Australian gas markets last week?
Not exactly…
