Senator David Pocock on the gas cartel.
Gas producers want to open more gas fields, saying that increased supply will bring down costs. But recent history shows otherwise: gas production on the east coast has doubled during the past decade, yet prices have tripled. This is despite Institute for Energy Economics and Financial Analysis data showing that domestic demand has fallen 25 per cent over the same period.
Australia is one of the three biggest LNG exporters in the world, with 80 per cent of our gas exported or used in the LNG production process. This is why Australian households, small businesses and manufacturers are paying record-high gas prices. High electricity prices are also linked directly to the cost of gas.
More gas doesn’t mean cheaper energy, it just means more exports and bigger profits for gas companies. The reality is that Australia doesn’t have a gas shortage problem, it has a gas export problem.
It’s common sense that Australian families, small businesses and manufacturers should have the gas they need before producers are allowed to export. Instead, gas exporters continue to drive up prices for domestic users.
Such common sense is suicidal in the Australian parliament. See Senator Rex Patrick.
That said, now is a good time to raise the issue. The Australian.
Santos’ LNG facility is seeking short-term gas supply deals because its contract with Australia Pacific LNG – in which Origin Energy is a part owner – is due to expire.
The expiration of the contract with APLNG is considered the first part of a supply shortage that Santos and its partners in Gladstone LNG in Queensland must address.
Industry sources said Santos has accelerated approaches for short-term supply as the 10-year deal for 365PJ of gas from APLNG expires at the end of May.
Santos will also need to manage a second supply contract with AGL Energy that is due to expire in 2027.
…Theoretically, allowing gas from APLNG and AGL could substantially relieve domestic pressure, and the federal government may be tempted to intervene.
…Santos is widely believed to have factored in developing eastern seaboard supplies when it approved the $US16bn ($25.5bn) GLNG on Curtis Island in Queensland. It did so without having developed its own gas supplies, unlike Shell and APLNG.
That is, Santos lied to the Australian people when it overbuilt export capacity. Also at The Australian previously.
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.
…When GLNG was approved as a two-train project, Mr Knox assuredly answered questions about gas reserves.
“We have plenty of gas,” he told investors. “We have the reserves we require, which is why we’ve not been participating in acquisitions in Queensland of late — we have the reserves, we’re very confident of that.”
But even then, and unbeknown to investors, Santos was planning more domestic gas purchases, from a domestic market where it had wrongly expected prices to stay low. This was revealed in August 2012, after the GLNG budget rose by $US2.5bn to $US18.5bn because, Santos said, of extra drilling and compression requirements.
And that one lie has since destroyed the energy transition, living standards, industry and five prime ministers.
Exactly how much harm is the gas cartel allowed to do this before “common sense” prevails?
