Are we missing something of major significance, that is unfolding right now - critical to the value of the company.
Surging gas might be an understatement - see story below and gas prices on the east coast featured on the 6pm news bulletins tonight.
SP could be over 3 cents Monday.
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MAY 27 , 2022
"On the East Coast, spot gas prices have risen by a staggering 529% in two years, from an average of $4.83 per gigajoule on May 1, 2020 to about $30.38 this month, data from Gas Trading Australia shows.
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“In the next 12 months, many industries dependent on gas will go bankrupt,” he told news.com.au.
----------------------------------------------------------------------------------------- Call for gas reservation policy on east coast of Australia as energy prices soar
Australians are facing a huge surge in energy prices. But not every Australian will feel the same pain due to unfair policies. Australians are bracing for higher electricity prices as coal and gas prices rise, but not all Australians are facing the same problem. While the rise in prices is partly blamed on the war in Ukraine, which has sent global gas and coal prices skyrocketing, some may wonder why Australians should also pay more. Australia is the world’s largest exporter of liquefied natural gas (LNG), shipping 80 million tons of gas abroad annually.
Despite this, the Australian Energy Regulatory Authority (AER) will sharply raise electricity benchmark prices from July, pushing prices up to 18.3% in New South Wales, 12.6% in Queensland and 9.5% in South Australia. . For some consumers, an additional $250 per year may not be enough.
Experts blame it on the failure of the gas reserve — separating the gas for use in Australia — when major LNG export projects were approved in Queensland. This has left Australians on the east coast more vulnerable to rising prices overseas.
It’s a different story in Western Australia, where gas is much cheaper, in part because the state has a gas reserve policy that requires about 15% of the gas produced for export to be provided to local consumers.
This has resulted in a significant difference in gas prices between the east and west coasts.
On the East Coast, spot gas prices have risen by a staggering 529% in two years, from an average of $4.83 per gigajoule on May 1, 2020 to about $30.38 this month, data from Gas Trading Australia shows. By comparison, WA price increases have been more modest, rising by about 160% from an average of $2.13 per gigajoule on May 1, 2020 to about $5.55 projected for June 2022. Gas Trading General Manager Allan McDougall said that the rise in prices in Western Australia is also unrelated to rising prices abroad. “First of all, this is due to the expiration of long-term contracts with the North-Western shelf gas and the reduction in production at this facility,” he said.
Mr McDougall said he expects only a modest increase in prices from the current $5.50 per gigajoule in Washington.
A chart in the Australian Energy Market Operator (AEMO) March 2022 Gas Opportunity Report shows that a huge amount of Australian gas is shipped overseas compared to what is used in the country.
Institute of Energy Economics and Financial Analysis (IEEFA) analyst Bruce Robertson said that gas prices are rising despite the fact that demand for gas in Australia is falling. He said prices will continue to rise in the coming months, putting many businesses at risk.
“In the next 12 months, many industries dependent on gas will go bankrupt,” he told news.com.au.
Mr Robertson said there was no reason why Australians living on the east coast couldn’t have access to cheaper gas.
“This highlights once again that our governments of both persuasions are failing us,” Mr. Robertson told news.com.au.
He said allowing companies to produce more gas, as some have suggested, has not brought prices down.
“It won’t work because you have only a few companies that control the market and set the price,” he said.
While the Morrison government’s “big stick” reforms did in fact lower prices at first, the war in Ukraine put an end to that. “Now they have decided to inflate prices again by raising prices very high,” Mr. Robertson said.
“Naturally Australia should have lower prices because the industry is heavily subsidized and we have opened up new areas for exploration, and yet the gas industry is returning the favor by charging Australians too high a gas price.
“This will never end until we have an internal gas reserve policy like in Western Australia.”
Australian business in danger
Weston Energy, a wholesaler and distributor of natural gas, drew attention to the problem in connection with the collapse this month. Weston had contracts to supply gas to more than 400 companies and government agencies on the East Coast, including New South Wales, ACT, South Australia, Victoria and Queensland. However, it was forced to close after an unprecedented rise in coal and gas prices over the past month. Weston Energy managing director Garbis Simonyan said the closure of several coal-fired power plants has dramatically increased demand for gas-fired electricity, while the war in Ukraine has driven up global gas prices.
This meant that Weston could not fulfill its contracts with the enterprises to supply gas at the price it had previously agreed to. Mr. Simonyan blamed the situation for a “real failure of politics” in Australia. “The fact that Australia is the world’s largest exporter of coal and gas, and that our domestic prices are at an all-time high, shows a real failure of policy,” Mr. Simonyan said in a statement. “Rapidly rising energy prices have put hundreds of Australian businesses and thousands of jobs at risk.
“The circumstances currently hitting Australian energy markets have been predicted for some time, but little has been done to prepare Australia’s energy producers and consumers for this impact.”
“This is our gas – it does not belong to transnational corporations”
Outgoing South Australian Independent Senator Rex Patrick has been a vocal critic of Australia’s gas situation and has been told by the Morrison government that options for a national gas reserve scheme will be discussed with the states and territories as part of a review to be completed by February 2021.
He said he was in talks with the government for a revision in exchange for his support for the government’s Stage 3 tax cuts.
A July 2019 letter from then Finance Minister Matthias Kormann, seen by news.com.au, confirmed that the government had said it would put forward the Australian Domestic Gas Safety Mechanism, which gives the Resources Minister the power to limit the supply of gas. export in the event of a critical shortage of gas to ensure that it is fit for purpose and delivered at the lowest possible prices.
Mr. Patrick said that other aspects of the review had been provided, including a study of prices, but the study of a possible gas reserve had only gone as far as consultations, and the review on this issue did not seem to be completed yet.
“This is gas for the citizens of Australia and this is government betrayal of allowing this gas to go offshore and put our producers out of business and raise the cost of living for our consumers,” he told news.com.au.
While rising energy prices are being blamed on international factors, Mr Patrick said the government has failed to put in place a mechanism to insulate Australia from these price increases. “We have more gas than you can put a stick on – the problem is that most of it is exported at world market prices, and this leads to Australians paying much more for gas than they should.
“This is our gas; it does not belong to these multinational corporations. We grant them a license to export this limited resource, and in return they and the government must fulfill their obligations under the social license.”
Mr Patrick said it was the Labor government led by Prime Ministers Julia Gillard and Kevin Rudd who failed to provide gas backups when the six LNG lines were approved at Gladstone and now he called on the new Labor government to address the issue and implement a backup scheme similar to the pattern of Western Australia.
“This is a crisis initiated by the Labor government and they have an obligation to do something about it now,” Mr Patrick said.
“Complex issue”
Former Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims stressed the complexity of Australia’s gas market during questioning by the Senate Economic Law Committee on Feb. 17.
Mr Sims said the government’s “big stick” legislation seemed to have worked to some extent, although Australians still pay more. “If you look at countries that don’t produce much gas, you will see that their prices are much higher than ours,” he told the committee.
“If you look at countries that are big gas exporters like us, you can see that our prices are probably a bit high.”
Mr Sims said he believes companies have realized they cannot continue to set prices in Australia to match those overseas as the government can take action.
However, he noted that before LNG producers started operating, producers were paying about $4 per gigajoule for gas, but that had risen to $10 or $11 earlier this year.
“Many of them can’t handle it. It’s a really difficult question.”
MEL Price at posting:
2.5¢ Sentiment: Buy Disclosure: Held
(20min delay)