From the AFR:
Cement maker Adelaide Brighton, steelmaker Arrium and 22 other major energy users in South Australia have won draft clearance from the competition regulator to jointly purchase electricity in a significant move that looks set to change the balance of power in the state’s fragile energy market.
The group, which also includes Brickworks and OZ Minerals, but excludes mining giant BHP Billiton, is spearheaded by the South Australian Chamber of Mines and Energy (SACOME). Together the organisations represent about 15 per cent of electricity demand in South Australia, where industry has been struggling with a series of blackouts that have cost revenues and jobs.
…Under the preliminary ruling from the Australian Competition and Consumer Commission, the group will be able to jointly tender to buy electricity for 11 years.
SACOME said the move had the potential to avoid the high prices and uncertainty that are “threatening the viability of many businesses”.
…”Given the high levels of concentration on the supply side of the market in South Australia, the tender may provide further competition benefits by combining demand and increasing the participants’ bargaining power in the retail supply of energy contracts”, Mr Sims said.
The ironies absolutely abound. BHP isn’t joining because it would find itself a member of both cartels negotiating against itself, with its mining interests in SA wrestling against its Gippsland gas JV with Exxon. Even so, the obvious move for BHP and the other gas careteliers now is to mount a fair-trading lawsuit against the buying cartel!
Only in this idiotic country!
How about we just fix the problem at the source, via Credit Suisse:
■ Our preferred option is to reclaim the third-party gas currently being exported: Aside from the Horizon contract between GLNG and Santos, there was no evidence in the EIS or FID presentations that more non-indigenous gas was required. As such, one could argue reclaiming what has only been signed due to a scope failure, is equitable. Including the Horizon contract GLNG will be exporting >160PJa of third-party gas in the later part of this decade. Whilst we get less disclosure these days, BG previously said that after an initial 10–20% in the early days (now gone) QCLNG would use ~5%
■ Our preferred option is to reclaim the third-party gas currently being exported: Aside from the Horizon contract between GLNG and Santos, there was no evidence in the EIS or FID presentations that more non-indigenous gas was required. As such, one could argue reclaiming what has only been signed due to a scope failure, is equitable. Including the Horizon contract GLNG will be exporting >160PJa of third-party gas in the later part of this decade. Whilst we get less disclosure these days, BG previously said that after an initial 10–20% in the early days (now gone) QCLNG would use ~5% thirdparty gas – 20–25PJa. APLNG is self-sufficient, but as can be seen the other thirdparty gas would get extremely close to balancing the market. Clearly these things are far better done by mutual agreement from all parties, rather than a political mandate.
■ GLNG loses but can all be compensated? We estimate that, at a US$65/bbl oil price, GLNG as an entity would lose US$447m p.a. of FCF if they could no longer toll thirdparty volumes. Interestingly, if Kogas and Petronas could recontract their offtake on a slope of 12x (doable in the current LNG market) then their losses as an equity partner are all offset (not equally between the two albeit). Santos would see ~50% of its US$134mn net GLNG loss offset if the Horizon contract could move up to a slope of 8x from 6x. The clear loser would be Total. We wonder whether cheap government debt, a la NAIF, could be provided at the (new, lower volume) project level or even to take/fund an equity stake in it? In reality all parties (domestic buyers included) have some culpability in the situation, so a sharing of pain does not seem unreasonable 02 March 2017 Australia and NZ Market daily 31.
Der.
