East Coast pricing, page-5

This was the response by COE to the ACCC East Coast Gas Inquiry

16. What are the key factors currently affecting the price of gas in Eastern Australia? Are current prices expected to be transitory or likely to be sustained? What information is most important to informing your view?
The key factors for Cooper Energy in determining its pricing requirements for the Sole development include:
 estimated development costs. This includes:
− offshore field and pipeline costs
− Orbost plant modifications
− offshore surveys
− engineering, procurement and management costs
 regulatory and stakeholder management
 expected return on investment, both by shareholders and financiers
 estimated operating costs for the life of the field
 tax payable including PRRT
 production and sales profile.

Typically, the pre-production capital cost component is the largest contributor to total project cost and pricing requirements. Some offshore capital costs are currently lower than in the last few years because of the reduced project development activity that has followed lower oil prices. Cooper Energy will monitor to see if these lower costs are maintained through to the expected development timeframes for the Cooper Energy projects. A large proportion of the capital costs are denominated in US$ and therefore any recent lower US$ costs are partly offset by the lower A$/US$ exchange rate.

Cooper Energy is also conscious of impact on end users of gas pricing and is therefore striving to achieve lowest costs possible.

To date Cooper Energy has held many discussions with a range of gas buyers. Based on these discussions we are in optimistic of contracting for sale our share of gas production prior to making a final investment decision in 2016.


17. In what way do non-price terms and conditions influence the negotiations for the price for gas or vice versa? Which non-price terms and conditions have the biggest effect on price negotiations?

In addition to project cost (discussed in answer to question 16 above) contract term does have an impact on project economics and therefore also price – particularly for gas supply from new projects. There does now seem to be a general preference for contracts of approximately 3 years duration for larger users which does increase the price required to support new gas projects.

see Cooper Energy Response ACCC

I have to add I am surprised that the general preference for contract term is ONLY 3 years. I guess the buyers are always hopeful that some new entrant finds a new source of supply "nearby" and will flog it to them cheaply. And then whine (with cheese of course) loud and long when new supply doesn't come along and prices go up.