reflections on where we are at with esg, page-4

H,

No doubt you recall how you felt when Rudd launched his RSPT bomb. Did you have any idea what would unfold from there? No one could have scripted that drama.

"Market reaction to the RSPT
The average EV/3P trading multiple for the CSG sector dropped by 14% following the announcement of the RSPT regime. The drop from the close of the prior week (30th April) to the close of the following week (7th May) was 18%."

The above is an extract from Wilson HTM research on BOW on 26 May 2010.

What has happened to the share price since Sunday? It's fallen. The fall has been relatively modest for a volatile stock.

By the way almost every other listed stock in the on earth has fallen this week.

As for the PRRT, I haven't heard anyone mention its impact on the CSG industry since the RSPT debacle. If it wasn't for the carbon tax it wouldn't figure in our considerations.

I'll wait to see how the CSG to LNG players assess the impact of the carbon tax but I'm thinking its going to be similar to a pimple on Miranda Kerr's face by comparison to the the RSPT.

So where are we at with ESG?

We are on the verge of a broadening market for ESG's gas. The domestic market will almost certainly have to compete for the gas. Renewables is substantially a fantasy of the Greens.

We're about to waste one hell of a lot of money on Green renewable initiatives which will further refine the defintion of "false economy".

The LNG industry will lobby for an increase in carbon concessions. It's at $12.50 per tonne worst case now and that's before offsets from land sinks, tree planting etc.

Santos, BG and APLNG have been expecting a carbon tax for years. They've acquired hundreds of thousands of acres and their planting trees almost as fast as the farmers knocked them down. Santos has planted 1 million trees in recent times.

We'll almost certainly have a new Federal government in two years. If the Lib's can't rescind the carbon tax in full they will certainly increase concessions for trade exposed industries including LNG and coal.

If you believe Julia G can turn 30% support for the carbon tax into 51% with her credibility issues you'll believe anything.

That's the short term. ESG's business has a 30 year plus time horizon.

Will Asia continue to invest in Australia's LNG projects?

Yes, certainly. They need energy from stable and reliable supplier.

Before someone responds sighting sovereign risk. A war in the Gulf is real sovereign risk, a more socialist government is just part of the democratic cycle. ESG and Australia will see Bob and Julia off in relatively quick time.

I'm quoting here from someone close to a substantial Chinese power authority, at present China is building the equivalent of Australia's electricity production capacity every four months.

From the Boao forum this week, India's annual population growth is equivalent to Australia's population. India's urbanisation is gathering pace.

Asia cannot develop the energy infrastructure needed to keep pace with the growth in urbanisation.

If ESG is not swallowed by GLNG or one of the majors, from a capital cost perspective, the timing of LNGN's development should be beneficial assuming no new projects come under development in Queensland.

ESG, Queensland LNG and the coal industry will continue to develop, albeit at a slower pace.

Bob Brown, the Greens and Labor have had their day. The increase in power bills and living costs will see them voted out.