annoucement this week, page-165

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As we wait, nothing new in this article but a good summary of the exciting environment we've stumbled into:

https://www.copyright link/news/special-reports/afr-focus-energy/no-easy-solution-for-gas-crisis-set-to-grip-east-coast-for-next-20-years-20181004-h168bs

Gas 'tragedy' plays out for east coast manufacturers

It's no mystery how we got here, it's been the proverbial "slow train crash" in the making.The problem is how to escape the crisis that looks set to grip the east coast gas market for the next two decades or more.LNG export caps, gas from the Northern Territory, Queensland's domestic gas initiative, subsidies, discounts, a trans-continental pipeline and LNG imports are all in the mix as an answer is desperately sought.Competition czar Rod Sims singles out the two key culprits: overbuilding of LNG export capacity in Gladstone, and restrictions on onshore gas in NSW and Victoria that killed off new projects.

"Those two things coming together means we have a drastic shortage of gas in Australia," said the Australian Competition and Consumer Commission chair. Prices have gone up two to three times but the only way they'll come down to any extent is to get more gas into the market."The start-up of LNG exports from Queensland in 2015 tied the east coast to the international market, where rampant Chinese demand and stronger oil prices have pushed prices higher.While the federal government's threat of LNG export curbs through the Australian Domestic Gas Security Mechanism (ADGSM) has tempered prices from early 2017's exorbitant $20 a gigajoule or more, current contract prices of high $8s-$11/GJ have left gas users reeling and fed through to electricity prices.Gas-based manufacturers are desperate, especially given signals for even higher prices next year.

Those in the manufacturing heartland of Victoria are especially hard hit as Bass Strait output, the longstanding supply stalwart, declines.Breaking  point. Some chemical makers are already at breaking point."We have been warning that $10 gas is a tipping point for viability for east coast industrial manufacturers," says Chemistry Australia chief Samantha Read."We are very concerned about the immediate future for manufacturers, supply chains and of course the people who will be affected by any significant job losses."While the energy market operator in June forecast no shortage through to 2030, many see that as over-optimistic given the uncertainty of undeveloped resources. In any case, that doesn't solve the price problem.Likewise for the deals between the federal government and Queensland's exporters not to leave the local market short."It's a short-term measure that gives some month-to-month certainty around interruptions to supply, but industry cannot keep operating on a knife edge," Read says.New gas to reach the east coast from the Northern Territory through Jemena's $800 million Northern Gas Pipeline will help but not move the dial.The Queensland government's well-received domestic gas initiative, where developers must exclusively supply the local market, could yield new gas flows by 2020 but again, not on a scale that would have much price impact.Dow Chemical leads those calling for a multibillion-dollar pipeline to haul in gas from the north-west.Others argue that LNG imports into the south-east – now in the sights of at least four rival ventures – make more economic sense, despite the seeming absurdity of both importing and exporting gas. Certainly in terms of large extra volumes within the next few years, imports look the only answer.Still, at an expected $10/GJ-plus, imports won't return prices to single figures.Sims has suggested producers may have to discount prices to prevent destroying local demand, while others suggest temporary subsidies for manufacturers.

Straight-talking Weston Energy managing director Garbis Simonian just wants the government to wield its powers through the ADGSM and curb exports, whatever the sovereign risk implications from undermining LNG sales contracts."National interest comes first," he says. "They have the mechanism, they should turn it on when the gas goes above the pain threshold, which is about 10 bucks."Sims is resigned to plant closures among manufacturers that are locked into gas either as a feedstock or an energy source."A number of those will fold at current gas prices, they just cannot survive," he says."It's a bit of a tragedy."