Repost courtesy of Jamber on the COE page that I found to be of interest yesterday as it’s applicable to SXY.
AFR today
The national competition regulator has pointed to a slightly softer outlook for east coast gas prices over the next two years based on LNG forward prices in Asia but one producer with gas for sale says prices will still be "strong", suggesting industrial gas buyers will still have to dig deep to lock in supplies. The latest price data for LNG "netback" prices LNG prices less processing costs netted back to the main Queensland supply hub released by the regulator on Wednesday suggests prices should remain within the range of about $8.20-$10.60 a gigajoule through to the end of 2020.
While the outlook points to slightly higher prices for next summer and again in late 2020 than signalled by the last release of data two weeks ago, the prices remain below the $12-$13 or more seen in 2018.
The regular LNG netback data now being published by the Australian Competition and Consumer Commission has become an important signaller to gas buyers as to roughly what they can expect for domestic prices. But as the ACCC advises, the netback number is not the only factor driving east coast prices, while local buyers must also factor in retailing and pipeline costs.
Ian Davies, chief executive of Senex Energy, which is in talks to sell gas it expects to have available from its Atlas project in Queensland in 2020,acknowledged the transparency in the market provided by the ACCC's information but said he saw a firm outlook for local prices despite a softening in the LNG spot market in Asia.
"Prices are still strong and will remain strong because the fundamentals of gas supply aren't changing," Mr Davies said, saying Senex had attracted interest from gas buyers looking to buy more than the 13 petajoules a year that it has for sale.
He said he expected contract prices on the east coast to be "in the ballpark" of the range given by the ACCC, adjusted by as much as 20 per cent on either side depending on the firmness of delivery volumes and the flexibility allowed to the producer.
"That means eight, nine, 10, 11 dollars [a gigajoule]; I don't see that range is going to change materially," Mr Davies said.
The jump-up in east coast gas prices compared to historical rates of $3.50-$4/GJ is hurting manufacturers and chemical makers, the most recent victim being western Sydney-based polystyrene cup manufacturer Remapak, which brought in administrators earlier this month.
Wood Mackenzie research analyst David Low said he anticipates a "tight" market prevailing in east coast gas this year and said that Senex is one of the producers well placed to benefit. He also named the major Esso/BHP joint venture in the Bass Strait, which recently gave the go-ahead for the $550 million West Barracouta project, and junior Cooper Energy, which is aiming to start commercial gas sales from its new $355 million Sole project off the Victorian coast in July. Cooper chief executive David Maxwell said recentlythat east coast gas buyers seem to have resigned themselves to higher prices for gas of about $10 a gigajoule, and echoed a widely held view that proposed LNG import terminals on the south-east coast would only cap rather than reduce domestic prices.
Several other energy juniors are seeking to tap opportunities presented by the tight east coast market. They include Leigh Creek Energy, which on Wednesday invited expressions of interest for the sale of up to 50 petajoules of gas despite its coal gasification project in South Australia still being at a pilot stage.
"It looks like the concept is working but it is still fairly early days," said Graeme Bethune, principal of consultancy EnergyQuest, noting that the well costs involved to provide commercial flow rates have yet to be firmed up.
