African Workers Installing Pipes in a Combined Cycle Gas Power Plant in Egypt. Nicolás Adamo, CC BY-SA 4.0, via Wikimedia Commons

Aussie Net Zero Insanity: Shell Suspends East Coast Gas Supply Agreement

Essay by Eric Worrall

Gas companies appear to be hinting they might halt exploration and drilling in Australia, unless the government backs off from imposing price controls.

East coast gas supply pact at risk as price controls loom

By Nick Toscano
Updated December 12, 2022 — 4.23pm

Global energy supermajor Shell has suspended its role in a landmark gas supply deal designed to prevent shortfalls on the east coast next year as it assesses the impact of the Albanese government’s plan to cap fossil fuel prices.

Queensland’s three LNG exporters – Shell’s QCLNG joint venture, Origin Energy-backed APLNG and Santos’ GLNG – are set to hold talks this week to determine whether their September agreement to supply 157 petajoules of gas – about 25 per cent of annual east coast demand – can go ahead after the government announced a series of interventions in the energy market. 

The government last week announced a series of initiatives designed to reduce soaring power bills. They include temporary price limits of $12 a gigajoule on uncontracted wholesale gas and $125 a tonne on coal, and powers to influence the price of gas contracts beyond next year. The proposals have sparked a furious response from gas producers, and analysts have described the initiatives as a “declaration of war” on the industry.

If the agreement falls over, Resources Minister Madeleine King may be forced to step in and trigger for the first time the Australian Gas Security Mechanism – a policy that would force producers to hold back certain volumes for domestic sale only – to avert fuel shortages or blackouts.

Read more: https://www.watoday.com.au/business/the-economy/east-coast-gas-supply-pact-at-risk-as-price-controls-loom-20221212-p5c5lh.html

The shortages and price hikes could be resolved very quickly, if the Aussie Government restored confidence by liberating the energy market. But this would require politicians to abandon their Net Zero fantasies, and admit they were wrong. So I don’t see that happening anytime soon.

Instead, Australian politicians seem hell bent on punishing fossil fuel companies for keeping the lights on.

It is not just price controls which energy companies are facing. A few days ago, the Queensland Land Court made history by citing climate change as one of its reasons for recommending a coal mining permit be rejected – a decision which sent shockwaves through the Aussie fossil fuel industry.

Fossil fuel companies don’t have to put up with this abuse. Why should they tolerate price caps, mandatory price controlled quotas, and regulatory hostility in Australia, when they can divert billions of dollars investment to that promising new gas field which stretches from Ghana to the DRC? Why should they deal with an Australian political class which hates them, when they can deal with African governments which are desperate for investment and jobs?

Money is already pouring into projects like the East African Crude Oil Pipeline, along with existing projects like the operational West African Gas Pipeline, so multinational energy companies are already deeply involved in African energy projects. Any additional provocation could be the final straw which convinces them to pull out of Australia completely.

Australian politicians are about to receive a hard lesson on who is really in charge when it comes to Australia’s energy supply. Fossil fuel companies don’t need Australia, but Australia needs fossil fuel companies.

Ordinary Australians will pay the price for the incompetence and arrogance of our leaders.

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Scissor
December 12, 2022 10:03 am

“Ordinary Australians will pay the price for the incompetence and arrogance of our leaders.”

Understatement?

Eng_Ian
Reply to  Scissor
December 12, 2022 1:12 pm

It’s okay, we’ve got turtle. /s

Duker
Reply to  Scissor
December 12, 2022 1:20 pm

Thats was the case almost a decade back when the eastern states didnt have mandatory domestic supply rules in place for gas exporters
West Australia did so and its prices are much lower as a result of the 15% supply for domestic users being guaranteed ahead of the export market.

Mr.
Reply to  Duker
December 12, 2022 2:31 pm

He is an appalling person, but his policies have stood up as decidedly more rational than his opponents’ are proving to be.

Duker
Reply to  Mr.
December 12, 2022 7:10 pm

I guess his surrender to the taleban was completely rational, maybe Trumps pre election boast they would be out by Xmas even earlier than the May date not so much ( he fired his Defence Secretary because he resisted that)
Some also have seen his non retaliation actions against Iran, both after the large drone shootdown and the ballistic missiles attacking US bases, as rational but ignoring his own red lines.
We can only wonder if his summits with North Korea would also have been ‘highly rational’ outcomes too.
His whole covid approach was contradictory and irrational swinging from only ‘a flu’ to shutting the borders to US citizens and foreign nationals ( which was soon corrected to non US nationals only)

Tom Halla
December 12, 2022 10:08 am

They learned nothing from Nixon or Carter, on price controls resulting in shortages. Unless they are avid enough greens, and want “conservation”?

Moriarty
Reply to  Tom Halla
December 12, 2022 11:06 am

The politicians won’t learn until the voters quit demanding things like price controls. It takes courage and leadership to resist demands to “do something.”

MarkH
Reply to  Tom Halla
December 12, 2022 9:13 pm

When the gas runs out, or the power goes off, what are people going to do? They are going to be angry at the companies who would sell them these products (the media and government will vociferously blame those “greedy capitalist companies”), and they will implore the government to “do something” to fix it. In reality, it was the government themselves who create the problem, for which they will now step in with the “solution”, one that involves giving them more power. It seems that a sizeable portion of the population are unwilling or unable to see this. They want to be taken care of by daddy government, even if it means giving up all of your freedoms.

We’ve been warned of this time and time again. But, if history tells us anything, it tells us that we do not learn from history. We may, unfortunately, be in for another bout of learning by experience.

Tom Halla
Reply to  MarkH
December 13, 2022 5:37 am

I lived through that energy crisis, and Carter and the Democrats never admitted that price controls were the problem.

Pat from Kerbob
December 12, 2022 10:11 am

Hard to imagine anyone dumber and more idiotic than Justin Trudeau, but you may have a candidate there.

Personally, i would be happy for us to lose the title of “most idiotic leader in the galaxy”.

Moriarty
Reply to  Pat from Kerbob
December 12, 2022 11:07 am

You have heard of Joe Biden? He was stupid before he was senile.

Duker
Reply to  Moriarty
December 12, 2022 1:21 pm

heard of Trump. hes a moron as well as senility

Barnes Moore
Reply to  Duker
December 12, 2022 1:33 pm

I’ll take Trump’s energy policy over any other western “leader”. He may be an insufferable ass, but his policies were spot on. Only a detached from reality, indoctrinated, lobotomized fool living in the fact-free world of liberal la-la land would not see that he got far more right than he got wrong, despite his disgraceful personality.

AGW is Not Science
Reply to  Barnes Moore
December 12, 2022 1:41 pm

You’ve summed it up nicely.

pillageidiot
Reply to  Duker
December 12, 2022 1:45 pm

“heard of Trump. hes a moron as well as senility”

I count three examples of improper usage or spelling in your short comment.

I daresay that being deemed a moron by you, probably means the subject of your opprobrium is actually smart!

MarkH
Reply to  pillageidiot
December 12, 2022 9:21 pm

I counted a total of 6, maybe 7 spelling and grammatical errors in those two sentences. Almost impressive.

  1. First sentence should start with a capital letter.
  2. “Heard of Trump.” is a question, and should end with a question mark.
  3. Second sentence should start with a capital letter.
  4. “Hes” is a contraction of “He is” and requires an apostrophe
  5. (optional), a comma should be included after “moron”, as the sentence is the conjunction of two independent points.
  6. “senility” is a noun and the incorrect word to use here, it should be the adjective “senile”.
  7. The second sentence should end with a period.
abolition man
Reply to  Duker
December 12, 2022 2:21 pm

What flavor Koolaid is that that you’re drinking? Do you cut it with some liquor or cannabinol?

Moriarty
Reply to  Duker
December 12, 2022 2:30 pm

I wish I had a dollar* for every time some ignoramus brings up Trump as if that name is an excuse for any stupid policy or misbehavior by anyone other Trump.

*I used to wish for a nickel but with the inflation since January 20, 2021, I had to bump up the amount. And don’t forget 10% for the Big Guy, too.

Mr.
Reply to  Duker
December 12, 2022 2:34 pm

He is an appalling person, but in the main, his policies have stood up as being decidedly more rational than his opponents’ are proving to be.

MarkW
Reply to  Duker
December 12, 2022 3:54 pm

You really do live in some form of alternate reality.
Do you hate everyone who is more successful than you are?

Duker
Reply to  MarkW
December 12, 2022 7:13 pm

heard of Trump University … wasnt a sucess was it , nor trump shuttle, nor trump casinos
he is the only reason the GOP didnt have a blue wave , first time in 30 years for these mid terms
When he was president they lost the house , then the senate and then the presidency as a single term . Triple crown!

gezza1298
Reply to  Duker
December 13, 2022 5:53 am

It probably means that you believe the US electoral system is a shining beacon of efficiency and competence to the World as opposed to the truth of it being a corrupt, dysfunctional shambles that would embarrass a banana republic.

Ex-KaliforniaKook
Reply to  Duker
December 13, 2022 9:05 am

Trump has over 500 businesses. The odds say a few must fail, or you ‘re not maximizing your profits.

But don’t bother trying to get any facts.

Dena
Reply to  Duker
December 12, 2022 6:03 pm

Heard of Trump Biden. He’s a moron as well as senile.

Fixed it for you.

Rud Istvan
December 12, 2022 10:12 am

Plenty of politicians who only learn the hard way. Reason they are politicians is they couldn’t handle a real job where only learning the hard way is frowned upon.

Graham
Reply to  Rud Istvan
December 12, 2022 1:00 pm

You got that right Rud,
Here is another example from New Zealand .
Our Prime Nut Minister had worked in a fish and chip shop then went to work for Helen Clark a former PM of NZ at the UN.
On being elected Prime Minister ,she announced that she had a nuclear moment and baned all further oil and gas exploration and development off the coast of New Zealand .
This was passed into law.
She has no idea about economics and very little knowledge of how our country exports food to feed over 30 million people around the world.
She has shut down oil and gas development and now she wants to shut down our farming in the vain quest of reducing emissions of methane from our farmed animals .
Now she is encouraging overseas investors to purchase farm land to plant in pine trees which will NEVER be harvested and the investors will be paid carbon credits out of our taxes ,the money flowing overseas .
Instead of this land producing food and work including the meat works ,cartage, ports and servicing industries .
And more important is the loss of export revenue .
We will all be paying carbon taxes to send overseas .
This must be the best plan to bankrupt a country that you would expect from our worst enemy .
NO country needs enemies when your Prime Minister and government are trying to bankrupt our country in the misguided theory of saving the world from the nonexistent threat of climate change ..

Duker
Reply to  Graham
December 12, 2022 1:25 pm

The Zero Carbon legislation to align with Paris Climate Treaty was passed by 119 votes to 1 in parliament, which was expected as the former conservative government signed the Paris treaty and brought in the 30% reduction in CO2 by 2030

AGW is Not Science
Reply to  Duker
December 12, 2022 1:44 pm

So you’re trying to say there’s ONE person in the NZ government that is not an idiot?

davidf
Reply to  AGW is Not Science
December 12, 2022 1:58 pm

The political landscape in New Zealand is very depressing – we have to get rid of the current bunch, who are beggaring us, dividing us, and reverting to a form of aristocratic rule based on race. Problem – the other potential party of Government is little better on most of these issues. We do have a minor party that speaks some sense, but they will only ever be a support role. What passes for the Conservative Party here has to get a spine, and start rolling back these fanciful ideologies that currently best us on all sides. I am nor particularly hopeful that they will.

Last edited 1 month ago by davidf
Duker
Reply to  AGW is Not Science
December 12, 2022 7:17 pm

In parliament , yes . That was 2019. he was an electrical engineer but never practiced otherwise he too would be loving alternative energy.
Luckily the country is at 80% non fossil fuel already with wind being a small fraction despite being a long narrow country with a power grid to match which should be ideal for taking on more wind power generation ( plus the benefits of hydro providing the frequency stability from the synchronised water turbines)

May Contain Traces of Seafood
Reply to  Duker
December 12, 2022 9:45 pm

You don’t ‘practice’ engineering. It isn’t medicine. You do engineering.

Also, can you check your keyboard? The comma and full stop key seems rooted.

Dean S
Reply to  May Contain Traces of Seafood
December 13, 2022 1:50 am

No, but you certainly can practise engineering. I did so myself for three decades.

May Contain Traces of Seafood
Reply to  Graham
December 12, 2022 9:56 pm

To be honest, if it wasn’t for the All Black and the warm fuzzy of the ANZAC Spirit we would throw rocks at New Zealand.

She has no idea about economics

There was a statement the South Sea’s Tyrant made around mid 2020 (back when ‘Flatten the Curve’ was still said with a straight face) in which she said that to restore the West Island’s economy it would require New Zealand labor.

Yup. Her plan to manage New Zealand employment levels was to export them to Australia. New Zealand – Land of the Long White Labour Hire.

Face it, New Zealand exists off sheep, Hobbits and tourists. The Hobbits went elsewhere (before being farced up quietly by Amazon), tourists got locked out (along with actual NZ citizens) and now it seems she wants the sheep herded out to sea and disposed of.

Rocks.

Remember there is no Z in AUKUS. Muse on that.

ResourceGuy
December 12, 2022 10:16 am

Not sure which government interventions have been worse for Shell, Putin’s asset seizures in Sakhalin or Europe or Australia?

DonRT
December 12, 2022 10:47 am

Ordinary Australians will pay the price for the incompetence and arrogance of our leaders.”

Well, they voted for these idiots, let them learn the hard way why you don’t vote for statist control freaks.

Editor
Reply to  DonRT
December 12, 2022 12:27 pm

Australian voters had a problem at the last federal election. There was an incumbent leader who had to be removed, and an obviously disastrous alternative leader. What the best democracies do in these circumstances is to concentrate on getting rid of the one who has to be got rid of, because they know that they can get rid of the other one next. They understand that is better than letting a bad leader think that they are liked by the electorate.

The reality is that the western democracies need better systems, but does such a better system exist? For local councils, here in Australia, the state government can remove a disfunctional council and replace it temporarily with an administrator. Maybe we need something like that federally – an extra box to tick for an administrator for a few months to allow the major parties to change tack. Who would be the administrator? The Governor-general? Wow, that would be a fun system!

Eng_Ian
Reply to  Mike Jonas
December 12, 2022 1:19 pm

And the Governor-General is appointed by the government. Do you want to guess who the government would appoint? It would clearly be someone who is fully aligned with them and at a moments notice, roll into the job delivering the same as before. Maybe even heavier handed due to the ‘special’ conditions that saw the GG appointed.

The solution is not oversight. It’s recall. Let the people remove from office anyone who is not keeping up their end of the bargain. Do it one candidate at a time, not in a general election.

Duker
Reply to  Mike Jonas
December 12, 2022 1:29 pm

Laughs out loud ! Administrator is just another name for a dictator

US has long had export controls on LNG – so the domestic supply isnt harmed

Section 3 of the Natural Gas Act (NGA) (15 U.S.C. § 717b) prohibits the import or export of natural gas, including liquefied natural gas (LNG) from or to a foreign country without prior approval from the Department of Energy (DOE). 

https://www.energy.gov/fecm/how-obtain-authorization-import-andor-export-natural-gas-and-lng

MarkW
Reply to  Duker
December 12, 2022 4:02 pm

Why am I not surprised to find that you approve of the idea of government controlling buying and selling.

Duker
Reply to  MarkW
December 12, 2022 7:20 pm

Politics means the export market wont be allowed to domestic inflate gas prices like Australia- which are higher than the export price
. At least in Australia the various governments own the gas in the ground unlike the US where its the land owners or whomever they sell the rights too.

MarkW
Reply to  Mike Jonas
December 12, 2022 4:01 pm

I’ve read of proposals to add a None of the Above box on ballots. If None of the Above wins, a new election is called immediately and all candidates who were running are banned from running in the new election.

Hivemind
Reply to  MarkW
December 12, 2022 4:40 pm

That’s an amusing idea, even though we all know it’ll never happen.

Dena
Reply to  Mike Jonas
December 12, 2022 6:19 pm

The problem with a system of government that isn’t free is you can’t get rid of a bad leader. The problem with a free system is who is to judge the leader. Here in the U.S. we have Biden. About half of the population thinks he is a great leader while the other half think is is about the worst leader we have ever had. Names that come to mind are Woodrow Wilson, Jimmy Carter, FDR, Obama and and probably a few out of the 19th century. Now of that list, all were voted into office and all but one had a second term. Somebody had to have thought they were good leaders or we wouldn’t have had to suffer with them.
What ever you think of the bible, it states we were ruled by God until we asked God for a king. If true, we have been suffering for that mistake ever since.

lyndoes
Reply to  Mike Jonas
December 13, 2022 3:14 am

LotteryISM
1/3 hat draw to choose candidates every 2 years.
No elections
Serving is compulary
PM chosen by parliament every 3 years

Tony_G
Reply to  Mike Jonas
December 13, 2022 9:23 am

I think that strange women lying in ponds distributing swords looks like a promising approach. Probably better than what we have now.

Rod Evans
December 12, 2022 11:00 am

If the voters in Australia are prepared to vote for and put up with idiots for their political leaders, then they have to accept their part in the outcome of those idiot leaders decisions.
It is long past the time when commercial energy companies make a stand. They have provided almost limitless amounts of fossil fuel energy that has built the civilisation we now enjoy. The fossil fuel industry need to make a stand for free markets and demand state authorities keep out of the way of commercial energy matters which ministers have no understanding of.

Joe Crawford
Reply to  Rod Evans
December 12, 2022 2:23 pm

I was in Houston, Texas back in the early 70’s during the first major OPEC oil crunch. All of the national media were asking people to save on natural gas and heating oil because the upcoming winter was going to be excessively cold and the North East was very short of supplies.

Houston Lighting & Power Co. put up an ad on TV telling it’s customers to not worry about conserving, use all you wanted. They had enough natural gas stored in the local salt mines and stored heating oil to last several years. And, since the North East wouldn’t let anyone build pipe lines or oil terminals they could damned well freeze to death.

Last edited 1 month ago by Joe Crawford
Denis
December 12, 2022 11:17 am

And yet “your leaders” are the ones you collectively voted for.

Moriarty
Reply to  Denis
December 12, 2022 12:40 pm

Australia has a parliamentary system. Voters vote for the party and not directly for the leaders.

Does that make much difference in the end? I dunno, voters in the US selected Biden, so maybe not.

Duker
Reply to  Moriarty
December 12, 2022 1:33 pm

They dont vote for the party directly either. They vote for a local representative who is or isnt from a major party

The leader can be changed regularly , and in Australia is famous for a revolving door leadership of major parties as the various factions jostle for their own interests

Nick Stokes
December 12, 2022 11:56 am

The shortages and price hikes could be resolved very quickly, if the Aussie Government restored confidence by liberating the energy market. But this would require politicians to abandon their Net Zero fantasies, and admit they were wrong.”

Liberating? The market has been free, and we’ve been having shortages and price hikes. There is no liberating from the present situation that could fix that.

It has nothing to do with Net Zero. Australia produces about three times what it consumes. The surplus goes to export, at current high world prices. There is no actual shortage of gas. The only question is what share the Australian public are allowed to have.

Duker
Reply to  Eric Worrall
December 12, 2022 1:34 pm

You would know that wont happen as the state and federal governments OWN the gas in the ground, not the explorer, who merely have a license .

MarkW
Reply to  Duker
December 12, 2022 4:08 pm

Since government ownership is such a good idea, why not have government own everything?

Duker
Reply to  MarkW
December 12, 2022 7:24 pm

Worked out well for Norway where they used the government owned entity to develop offshore gas deposits and reap the profits rather than just royalties.
heard of the Tennessee Valley Authority the Fed power producer or the Bonneville and Hoover dams
1/3 of US consumers get their power from a municipal ultity.
Its just an option for some , and they certainly dont get screwed by the private firms

Nick Stokes
Reply to  Eric Worrall
December 12, 2022 1:45 pm

flooding Australia with more gas than it can export”
We can build export facilities much faster than we can increase the gas supply. And if drilling yields more gas, that is where it will go.

old cocky
Reply to  Nick Stokes
December 12, 2022 2:43 pm

New production can have local reservation conditions similar to WA. If the project is viable, it will still proceed.

Nick Stokes
Reply to  old cocky
December 12, 2022 3:16 pm

Old production has similar conditions. The previous government gave a period to end 2022 when they wouldn’t require this. That time has arrived, and the current argument is whether the provisions should be exercised.

old cocky
Reply to  Nick Stokes
December 12, 2022 3:44 pm

My limited understanding is that the WA setup is functionally similar to a call option, but the Federal government would have to exercise emergency powers.

Nick Stokes
Reply to  old cocky
December 12, 2022 3:55 pm

The legislation governing this actually dates back to 1958, but has more recent provisions relating not exactly to emergency, but to “shortfall years”, which Eric insists we are having. It says:

13GC Export prohibited during domestic shortfall years
            (1) The exportation from Australia of liquefied natural gas is prohibited during a domestic shortfall year unless:
                    (a) a permission in writing to export the liquefied natural gas has been granted by the Resources Minister or an authorised officer; and
                    (b) the permission is produced to the Collector.
Note:         A permission may be granted for a period that is longer than a domestic shortfall year.

old cocky
Reply to  Nick Stokes
December 12, 2022 7:36 pm

Okay. Thanks.

Graeme4
Reply to  old cocky
December 13, 2022 3:02 am

And the gas exports from Western Australia are definitely profitable, despite the gas reservation scheme.

sherro01
Reply to  Nick Stokes
December 12, 2022 4:12 pm

Nick,
As you know, “ownership” of Australian mineral resides in the State or Federal government, depending on location. It is known from past exploration that we have many resources in known or potential abundance.
Minerals sitting in the ground, untouched, are nice to know about, but they have very little value until they are developed. Historically, governments here have seldom done their own development. The private sector has been dominant.
The success of failure of development depends rather much on the agreement between the government owner and the corporate miner. Agreement involves legal aspects in documents, but it also involves the spirit of the agreement. In classical terms there is a willing buyer, a willing seller and a benefit to both parties. When that benefit is eroded, bad outcomes arise as sure as the sun rises and sets.
In the specific case of gas, one cannot see a non-negotiable government price cap as being a benefit to the operators. If you need an analogy, it is something like the owner of a house and relations with the person renting it. If the owner suddenly increases the rent outside the agreement, the tenant might depart. The owner then has the task of finding a new tenant or suffering financial loss. In short, parties to an agreement should avoid unexpected changes to terms that can affect goodwill.
Goodwill, from our government to our fossil fuel operators, has declined. There have been many, many political statements that net zero targets by 2050 mean farewell to that industry, but also many insulting “glad to see the end of fossil fuel exploiters” have really poisoned the waters.
The fossil fuel corporates have done their homework about continued use of fossil fuels. They will continue to operate globally.
If this means that they will leave Australia, we will end up with a catastrophic mess. It will resemble the scarcity induced in global wars.
It will be caused by illogical beliefs from poor science about global warming resulting in drastic, sudden, bad political decisions.
A decision to go for net zero should never have been considered, given the scientific uncertainty.
Australia should cease political action on this topic until there has been a review of the science, a review of the true economics of renewables and a better understanding of the fate of other countries who have decided to try net zero. It is not a pretty picture but the real ugliness is not being shown to the people. Geoff S

Graham
Reply to  sherro01
December 12, 2022 7:43 pm

Well said shero01,
The eagles are coming home to roost .
How many of us here at WUWT have predicted exactly what is happening now around the world .
The UNIPCC have so much to answer for introducing false and
unsubstantiated theories to try and de-industrialize the world by demonizing fossil fuel .
Argue all you like you true believers but this is a war on energy .
Take a minute before you choke with rage and ask your self just one question.
Why are the people pushing the Paris Agreement asking all countries to reduce their GHG emissions by very large amounts NOT PUSHING FOR NUCLEAR POWER ?
We now have 8 billion people on this planet and they cannot be fed, housed or clothed without fossil fuel .Then there is shipping ,transport ,health care and education .
Then there is constant replacement of bulldings machinery and infrastructure.
Massive amounts of energy are required to just maintain the worlds living standard and without fossil fuel there is only one alternative .
Nuclear Power

Hivemind
Reply to  Nick Stokes
December 12, 2022 10:34 pm

The problem is that the companies aren’t allowed to increase the supply. The state of Victoria doesn’t allow drilling for gas at all.

Editor
Reply to  Nick Stokes
December 12, 2022 12:31 pm

The market has most certtainly not been free, thanks to all the wind and solar subsidies and mandates. The market is grotesquely and destructively distorted. Remove all subsidies and mandates, and let all energy sources compete on their merits. Then you could see what a free market really looked like.

Nick Stokes
Reply to  Mike Jonas
December 12, 2022 1:42 pm

The market has been free. Licensees are perfectly free to sell their gas. They have competition. Damaging the competition won’t make gas any cheaper.

MarkW
Reply to  Nick Stokes
December 12, 2022 4:11 pm

Removing subsidies and requirements that their product be bought whether needed or not, is merely “damaging the competition”?
What a weird, upside down world you live in.

Reply to  Nick Stokes
December 13, 2022 6:19 pm

Nick,
How has the market been “free” when one is not allowed to explore or extract in certain regions, because of laws?
Geoff S

YallaYPoora Kid
Reply to  Nick Stokes
December 12, 2022 1:00 pm

Stupid governments limiting access to gas field exploitation causing high prices. Government heavy handed market manipulation backfiring on ultimately the consumer which is exactly the opposite to what the government wish to achieve – who knew?

Duker
Reply to  YallaYPoora Kid
December 12, 2022 1:41 pm

Not the case its world wide demand thats pushed up prices and the local supply is squeezed as theres more money to be made by supplying fixed price contracts offshore along with spot market prices…where does the higher priced spot market supply come from ? The local users who unlike in West Australia dont have a guaranteed quantity reserved for them

https://www.afr.com/companies/energy/paradise-wa-has-cheapest-gas-in-oecd-20220902-p5bete
‘The findings support the effectiveness of WA’s domestic gas reservation system and capacity market for electricity, which the state’s minister for mines, petroleum and energy, Bill Johnston, says has brought significant benefits by keeping the market well supplied with affordable energy.
Previous criticisms of the policies – including that it could deter investment in new gas supply and push up electricity prices by prioritising supply security over efficiency – do not appear to have been borne out by experience in Western Australia, a market that is transitioning to low-carbon power.’

It doesnot add up
Reply to  Duker
December 12, 2022 5:00 pm

To be able to export has you have to build and operate a multi billion set of LNG liquefaction trains and a port. Those costs mean that export prices must be higher than domestic prices in a free market for onshore gas produced in Eastern Australia.

NW Shelf gas is a different matter: it is a long way from centres of demand, such that getting it to market will mean shipping it as LNG because pipelines are not economic over the distances. Using it in Eastern Australia would require the added costs an LNG terminal and regas facility.

Duker
Reply to  It doesnot add up
December 12, 2022 7:29 pm

I understand its because the export market has lower priced longer term supply contracts while local market is more spot pricing.
.
The WA domestic market supply IS from the NW shelf offshore fields and yet most domestic supply in SE states is normal piped supply not LNG and its costs, and this supply isnt even exported at all. Strangely they now have to pay higher than world market…because the the supply is limited even though prices are higher

It doesnot add up
Reply to  Duker
December 13, 2022 4:29 am

NW Shelf has floating LNG which is never piped ashore. The WA market is fed by two main pipelines, one along the coast to Perth, and the other inland feeding mining sites. The pipelines have to be paid for, increasing the cost of gas in Perth.

The Eastern gas market has a common hub at Moomba deep in the interior, which feeds to Queensland, where there is a dense network connecting up local fields and also the LNG export terminal at Curtis Island. The QLD grid is otherwise effectively isolated, with no connection to NSW, which is mainly fed by Moomba, with a third pipe heading down to SA/VIC, where there are the remains of production from the Gippsland basin. Lack of new drilling is what is keeping the SE states undersupplied.

Nick Stokes
Reply to  It doesnot add up
December 13, 2022 12:11 pm

Lack of new drilling is what is keeping the SE states undersupplied.”

Here, from here, is a chart of the East coast gas balance. Supply on the left, what happens to it on the right. The yellow is export, blue is local consumption. Exports are twice what is needed locally. That is what keeps us undersupplied. The white bit at the top, “excess gas”, is gas from recent production increase that hasn’t yet been committed. As the report notes, if only a fraction of that goes to domestic, balance will be OK, but it will probably be exported too.

comment image

It doesnot add up
Reply to  Nick Stokes
December 13, 2022 3:54 pm

That analysis fails to look at the realities of the pipeline network. QLD is where the big surplus is, and it has no connection to NSW and other points South: only diversion at Moomba is available. Bans on gas development mean that potential fields are not being exploited to supply NSW, VIC and SA. So the picture is both incomplete and misleading.

Nick Stokes
Reply to  It doesnot add up
December 13, 2022 4:48 pm

it has no connection to NSW”
It does. As you have pointed out, Moomba is the hub, and is connected to SE Qld and Sydney. These are high capacity connections; they were built to supply both locations from Moomba. But pipelines can carry gas both ways. On occasions, gas has been flowing from Sydney to Moomba. That gas originated in Victoria. And even when there is no inflow to Moomba from Sydney, it still means that most of the gas which used to supply Sydney is now going to export in SE Qld. The tail end of the Bass Strait field is now the main supply for Sydney as well as Victoria.

It doesnot add up
Reply to  Duker
December 13, 2022 10:18 am

I should add if that if export gas is so much cheaper, then just buy some and ship it to Sydney and Melbourne by tanker, and re-gasify it there. If that doesn’t happen, then your theory is wrong.

Nick Stokes
Reply to  It doesnot add up
December 13, 2022 12:46 pm

 ship it to Sydney and Melbourne by tanker”
There are no facilities to do that, although some have proposed it. But it would be absurd. Near Melbourne we have the Bass strait fields, which have supplied us for fifty years. An interconnector was built, which also sends gas from Melbourne to Sydney. But now that interconnector takes gas which goes all the way to Moomba via Sydney, and thence to the export terminals. Melbourne does not need to import gas. It exports it.

It doesnot add up
Reply to  Nick Stokes
December 13, 2022 4:01 pm

So where is the great domestic shortage? Surplus in VIC, surplus in NSW exported via Moomba, surplus in QLD exported as LNG.

Nick Stokes
Reply to  It doesnot add up
December 13, 2022 4:54 pm

So where is the great domestic shortage?”

Ask Eric! He’s been beating the drum about this. As here The shortages and price hikes”

In fact the main complaint is about having to pay world prices. If we pay that, there need be no shortage. There is plenty of gas, at a price.

It doesnot add up
Reply to  Nick Stokes
December 14, 2022 7:08 am

Between you and Duker you are making contradictory claims within what you each say as well as between each other. The fact is that for gas to be exported from Queensland, the price must cover the costs of the LNG plant plus all the shipping via over 3000km of pipeline. That means that it is economically available at a substantial discount to FOB prices at Curtis Island.

If you look at the situation in the US, domestic prices on the pipeline connected grid are substantially below the prices FOB Sabine or Cove Point. Only the North East, which has chosen to refuse to drill or build pipelines to tap supply from Pennsylvania finds itself paying to import from elsewhere.

The problem is simply domestic energy policy in Australia that refuses to allow more drilling.

Nick Stokes
Reply to  It doesnot add up
December 14, 2022 11:59 am

in Australia that refuses to allow more drilling”

Nowhere in Australia is more drilling banned. Victoria bans fracking, but that is 3% of Australia’s area.

The basic issue is price. The East Coast produces three times domestic needs. The local market would not be different if we produced four times what we need. We’d still pay world price, with maybe a small discount for shipping costs.

Reply to  Nick Stokes
December 13, 2022 6:24 pm

Nick,
One of the opportunities in exploration is the freedom to explore for better deposits that are more profitable. You seem to concentrate on what can be done with known resources.
If you tell people that they can continue to produce from old deposits but are denied the opportunity to seek better ones, they will often just go elsewhere.
There have been some examples here of how costs rise and profitability declines as wells age. You HAVE to keep the incentive of being able to replace them witj new, more profitable wells, or else..
Geoff S

Graeme4
Reply to  It doesnot add up
December 13, 2022 3:06 am

Even though the Western Australian gas export facilities are a long way from some world markets, it hasn’t stopped the shipping of gas to Europe, when they are prepared to pay high spot prices. I believe that around 5% of the gas is lost, powering the ship, on the voyage.

Graham
Reply to  Nick Stokes
December 12, 2022 1:29 pm

What world do you live in Nick?
You say you have a Free market and this is what free markest do .
Have you never heard of supply and demand .
Companies and corporations soon go broke selling to the lowest bidder .
The export market is paying more so that is the price that your country has to pay .
I am quite sure that the government could negotiate long term supply contracts and encourage pipelines to be installed to your cities .
The high world prices are because of the war against fossil fuel and the war in the Ukraine .
Wake up Nick.

Nick Stokes
Reply to  Graham
December 12, 2022 1:47 pm

Companies and corporations soon go broke selling to the lowest bidder .”

They won’t go broke selling at current Australian prices, which as Eric has noted, have skyrocketed.

AGW is Not Science
Reply to  Nick Stokes
December 12, 2022 3:05 pm

You’re having shortages and price hikes because the government has been force-feeding wind and solar into your energy mix.

Without government interference, pushing non-solutions to an imaginary “crisis,” and strangling coal, oil and gas development chasing net zero mass stupidity, the free market would provide reliable supply at reasonable prices.

michael hart
Reply to  AGW is Not Science
December 13, 2022 2:24 am

Yes. It really is that simple. It’s astonishing where the madness of crowds can lead us.

Moriarty
Reply to  Nick Stokes
December 12, 2022 3:05 pm

If the market was free, gas companies would be rushing to supply more gas to meet demand.

Nick Stokes
Reply to  Moriarty
December 12, 2022 3:17 pm

They are rushing to export at even higher prices.

It doesnot add up
Reply to  Nick Stokes
December 12, 2022 5:08 pm

If they can earn a higher return from exporting after paying for all the costs of making LNG and providing a loading port then surely Australia benefits from the income. With wind and solar being the cheap alternative isn’t it a wi-win situation?

Or is it the case that actually gas is needed as a balancing fuel now that renewables penetration is significant? The export value of gas is high simply because there is a shortage thanks to ESG policy around the world. Australian cargoes are occasionally fetching up in Europe on the other side of the world. If you want lower gas prices, cut the ESG nonsense, and get oil and gas companies drilling around the world. With the shortage alleviated prices would fall, and domestic gas would be cheaper still.

MarkW
Reply to  Nick Stokes
December 12, 2022 4:07 pm

Looks like Nick is still trying to push the idea that government regulation is just another aspect of the free market.

Energywise
December 12, 2022 11:57 am

Why has this net zero green crap infested some western nation leaders? The fact that 99% of their politicians have no energy sector experience may go some way to answer this, or, could it be they know all too well their green crap is impoverishing their nations, but the self serving benefits outweigh the need for science facts and common sense?

Whilst a growing portion of the worlds nations are, or plan to, developing their fossil fuel energy capabilities for decades to come, it’s as though Europe, the US, Canada, Australia, New Zealand etc, have been tampered with by aliens from the planet nut zero, leaving them completely indoctrinated to a new green god that will starve, freeze and impoverish their nations for decades to come

It defies all logic that nation leaders, of most political parties cannot see the significant self harm they are doing, like alcoholics, they just drink more and more, seeing no problem at all

How long can this silliness go on unchecked?

mikelowe2013
Reply to  Energywise
December 12, 2022 12:35 pm

We obviously need more political leaders who have come through technical careers such as Engineering. Logic and knowledge and experience seem to be the last things anyone seeks in political leaders! A childhood organiser or a burger-wrapper seem to be adequate for Canada and New Zealand – not sure about Aussie!

Duker
Reply to  mikelowe2013
December 12, 2022 1:45 pm

So what . The both major parties leaders worked in fast food after high school or while studying. One other formers leader made much of her time in the shoe department of a depratment store.

Where did you work while studying for your ‘technical career’…my places where a flour mill, a machine shop and a concrete plant and maybe others Ive forgotten

Moriarty
Reply to  mikelowe2013
December 12, 2022 2:39 pm

My field is software engineering and I can attest that many people who seem otherwise smart and insightful in their work are utterly clueless numbskulls when it comes to anything else.

Duker
Reply to  Moriarty
December 12, 2022 7:32 pm

Fair enough . Critical thinking and getting to the heart of an issue isnt for every one and in all situations.
Wasnt it Henry Ford who said being right 50% of the time is a good average ,

mikelowe2013
December 12, 2022 12:29 pm

How can “one party to an Agreement” suspend it? The wording must be suspect if the government cannot insist the other party complies!

Eng_Ian
Reply to  mikelowe2013
December 12, 2022 1:23 pm

Divorce is often a decision by one party. Something must be wrong with the wording there too?

Duker
Reply to  mikelowe2013
December 12, 2022 1:46 pm

Its voluntary and subject to ‘material changes’
its just wind and noise that they wont be able to rip off the the ‘real owners’ of the gas , the public of the eastern states

old cocky
Reply to  Duker
December 12, 2022 2:33 pm

They pay Royalties to the owners of the gas – the State governments, who represent the public. Landholders don’t have mineral rights in Australia.

Duker
Reply to  old cocky
December 12, 2022 7:35 pm

Thats what I meant. Being owners of the source product usually means the drillers can extract and sell under the owners terms
For a long time the iron ore was a prohibited export despite the miners wanting to do so as it was thought it wasnt too common and it could be used to create local steel mills etc. china boom changed all that

bnice2000
Reply to  mikelowe2013
December 12, 2022 1:54 pm

Seems to me that it is the government breaking the agreement by installing price caps and controls that were not part of the original agreement.

Duker
Reply to  bnice2000
December 12, 2022 7:36 pm

They can add what ever they like as the still own the gas until it goes into the gas companys export terminal

Mr.
December 12, 2022 1:46 pm

Seems to me that all the climate worriers, academics, politicians, bureaucrats and media have managed to do with their inane energy dabbling is to inflict a punishing “Rube Goldberg Machine” type of energy system on all Western economies and societies –

https://en.wikipedia.org/wiki/Rube_Goldberg_machine

rube goldberg.jpg
Chris Hanley
December 12, 2022 2:10 pm

A few days ago, the Queensland Land Court made history by citing climate change as one of its reasons for recommending a coal mining permit be rejected – a decision which sent shockwaves through the Aussie fossil fuel industry

The President of the Land Court of Queensland Fleur Kingham (an ‘environmental lawyer’): “The Paris Agreement came into force in 2016. It includes a global goal to hold average temperature increase to well below 2°C and pursue efforts to keep warming below 1.5°C above pre-industrial levels”.
There is vast industry churning out acres of nonsense based on an arbitrary and entirely speculative divination.

Fossil fuel companies don’t have to put up with this abuse

Why don’t the companies get experts to argue vigorously the overwhelming benefits of fossil fuels on the biosphere and human welfare thereby forcing courts to come down on one side or the other instead of mealy-mouthed equivocation.

abolition man
December 12, 2022 2:33 pm

Ordinary Australians will pay the price for being the targets of their ruling class! The working class and, especially, the middle class are right in the crosshairs of the 5GWarfare being waged by the wealthy elites! High priced energy is only one of their goals; loss of freedom, a gov’t controlled digital currency and vaccine passports are also coming down the pike!
Useful idiots clap their fins and bark for more!

Simon Beavis
December 12, 2022 2:35 pm

“Ordinary Australians will pay the price for the incompetence and arrogance of our leaders.”

Ordinary Australians are the ones who voted in the Greens and the so called “independant” teal senators. The sooner ordinary Australian suffer the consequences of their actions the better.

douglasproctor
December 12, 2022 6:05 pm

Gas production naturally declines as reservoir pressures are reduced through volumes removed, and by increased water co-production making lifting the heavier, combined production more difficult. The rates of decline are very rapid in the first couple of years, perhaps 70%, and then settle down to 10 to 20% annual declines. (This rapid decline is why high revenues are needed in the first couple of years to pay the initial investment back within a reasonable period of time, perhaps <6 years: only after "payout" is any true profit made.)

This means that without continued investment and new drilling, gas supplies will naturally go to unsupportable low levels within 10 years. Australia will outlaw gas exports sooner than you might think, but will still be in a deep energy crisis of some magical energy source is not invented and brought on-stream within maybe that 10 years.

Simple math: minimum 0.9exponent10 + zero new = melting on the dark.

Graham
Reply to  douglasproctor
December 12, 2022 10:51 pm

New Zealands off shore Maui gas field is still producing after 43 years .Gas wells can be extended by vertical and horizontal drilling using fracking .
The company that owns the license has reassessed the field
and they are still finding more reserves .
Every field is different .
New Zealand has a lot of untapped oil and gas in deep water around the coasts .
We have a political problem as our government has banned any further oil and gas exploration off our coast

It doesnot add up
Reply to  douglasproctor
December 13, 2022 4:44 am

The performance of gas fields depends on the nature of the reservoir. There are a number of super giant fields in high permeability structures where production has been sustained for many years, including e.g. Groningen, South Pars (Qatar), Tyumen (Siberia). Shale gas needs constant drilling and fracking to exploit its volumes because porosity is low nd need fracking to increase it and release the gas.

SteveG
December 12, 2022 10:23 pm

Nut-Zero + Chris Bowen + Intervention in Australia’s Energy Market — What could possibly go wrong with that? I’m looking forward to my $275.00 savings!!

SteveG
December 12, 2022 10:47 pm

Of course Labor does the opposite of what makes sense. Price caps?, how attractive to fossil fuel corporations in Australia, or those companies considering investing in Australia.

What needs to be done, — increase the competition in the gas market. Make Australia an attractive place for new gas exploration, approve all gas projects, lift the ban on fracking, get more players into the market. Consumers will benefit, businesses will benefit. Prices will be driven down.

Increased competition is what is needed, not socialist/left green government intervention.

Graeme4
December 13, 2022 2:56 am

A recent comment is that Santos are preparing to move a rig from the northern Australian coast to Malaysia.

ozspeaksup
December 13, 2022 3:18 am

minor detail? its OUR oil and gas
we allow oseas corps in to make n take rather nice profits, they sold our gas to japan and elsewhere for a pittance and bumped aussie prices up far higher back ages ago
they already make hefty profits pay reduced taxes and get “handouts” probably =to the royalties paid( i dont know but it does seem how deals get done)
Id bet theyve already more than covered costs for setup and ongoings.
the present ripoff is due to pricegouging the idiots in EU who had a sweet deal with Russia they should have sat tight with. FFS! Russia was STILL offering gas to EU at less than shipped usa frakgas and they got all huffy followed the devious ussa and said no to Nord2
morons
and when germany looked like deciding to allow Nord2 to stop the rolling fustercluck now underway?
gee someone…with some very vested interests managed to broach the supersensitive security and blow up ! and 2..brandon was that you?
coal wont be an issue to keep the lights on
the ruination OF coalplants from greentards and EU powerplays however makes them doubtful for longterm use unless we get asses into gear for new builds asap.
amusing thought SA is ONLY running the poor ageing gasturbines at Torrens island for any reliable power at all if things go as they have been with lines down to interstate.
dunno WHY? you think bigbiz of ANY kind is there for anything but max profit and will leave as soon as a cheaper source of anything appears?
ethics fairness or equity…not in their vocab
personally Id love to see the one Aussie company do better and maybe call shells bluff and take it over ourselves!
qld pollies have always been strange and warped and thats being [polite re coal etc

observa
December 13, 2022 4:04 am

Must be the Rona addling brains everywhere-
https://www.msn.com/en-au/money/other/france-requests-emergency-cut-in-electricity-exports-to-uk-as-nuclear-crisis-deepens/ar-AA15awLr

Yep some of us can remember the seventies and the queues at the servos-
https://www.msn.com/en-au/news/other/australia-has-historical-amnesia-of-previous-fuel-caps-in-1960s-and-1970s/ar-AA15cWyE

Got news for you young Gretaheads. The energy is no use to anybody in the ground and when the ACTU under a naive young Bob Hawke decided the ACTU would step up to save the working man from being ripped at the bowser with ‘ACTU Solo’ petrol brand it sank like a stone and quickly forgotten in the annals of Labour and up the workers. Here they go again.

Andy Pattullo
December 13, 2022 9:47 am

Power rightfully belongs to the citizens, not the politicians. The politicians are hell bent to learn that lesson the hard way and very soon.

Patrick MJD
December 15, 2022 12:29 am

One of the wealthiest countries on this rock with an abundance of resources that are extracted and sold over seas. The emissions from burning that is estimated and added to the carbon tax burden Australian pay. Aussie politicians are really smart.

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