Page 13 - AsianOil Week 29 2021

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However, if the government’s intent is to when export gas markets sneeze, eastern Aus-
reduce local gas prices, then limiting domestic tralian gas users catch a cold.”
development and leaning on gas imports seems While higher than usual East Coast whole-
somewhat counterintuitive. sale and spot gas prices have made headlines in
The Australian Petroleum Production and recent weeks, robust LNG prices have rattled
Exploration Association (APPEA) highlighted the country’s biggest gas buyers. Large-scale gas
this on July 21, when it noted that local buy- consumers tend to sign long-term supply agree-
ers would have to pay well in excess of AUD20 ments, with smaller outfits leaning on the whole-
($14.74) per GJ for imported gas based on cur- sale and spot markets.
rent international prices. Asian demand for LNG cargoes has driven
APPEA NSW director Ashley Wells argued benchmarks to multi-year highs in recent
that the decision to limit future gas development weeks, with traders telling Reuters last week that
to the Narrabri project would lock NSW cus- spot prices for September delivery cargoes into
tomers in higher gas prices over the long term. Northeast Asia were around $13.30 per mmBtu.
“It is pretty simple, the cheapest gas is “[Local buyers] won’t be hit immediately by
the gas closest to market. This shortsighted spot fluctuations, but these acute surges and the
decision will mean higher gas prices in NSW chronic rise in gas prices are clearly going to hit
are the norm, not the exception,” Wells said. new contracts,” Willox said.
“For the NSW government to effectively ban Australian Competition and Consumer
a proven, safe and highly regulated industry Commission (ACCC) chairman Rod Sims,
doesn’t make sense.” meanwhile, said the LNG netback price had
He warned that both increasing gas demand risen from AUD9.30 ($6.85) per GJ in May to
and limited upstream development options more than AUD11 ($8.12) in June.
would see manufacturing jobs either shift to “We’ll be watching very closely to see that
other states or overseas. prices are still guided by the international price,
East Coast manufacturers are already com- and we’ll be hoping the price heads back down,”
plaining over high gas prices, noting that the he told the SMH.
federal government’s gas-fired recovery was at The NSW state government seems content
risk of failing. with relying more heavily on other states as
well as the international market to meet local
What next demand. Either way carries its own cost.
Sydney and Adelaide’s wholesale markets saw Wells argued that transporting gas from
gas trades of AUD20 per GJ last week, which the Queensland to southern customers already
Sydney Morning Herald (SMH) noted was three added AUD2-4 ($1.47-2.94) in costs. A greater
times higher than pre-pandemic levels. Spot gas reliance on imports will require greater invest-
prices in Victoria, meanwhile, were around ment in import infrastructure, with supply
AUD13 ($9.58) per GJ. pricing directly trending to the international
“Gas users are intensely worried by the price markets.
surge,” the CEO of Australian Industry, Innes Asian gas demand is only set to grow in the
Willox, told the local daily on July 15. coming decades, as various governments across
He added: “None of the gas-fired recovery the region strive to deliver upon recently pledged
policies look capable of changing the fact that net carbon neutrality targets.™

Week 29 22•July•2021 www. NEWSBASE .com P13