The CEO of consultancy EnergyQuest claims that the “only” solution to a looming gas supply crisis is to import LNG from offshore into the southern states.
At Port Kembla, a little more than 100 kilometres south of Sydney, the energy company controlled by iron ore magnate and climate evangelist Andrew Forrest—Squadron Energy—is building a $1 billion terminal to import LNG.
Squadron wants to start importing gas within two years — in time for the winter of 2026.
The company wants the government (read taxpayers) to guarantee purchases of imported LNG via a “buyer of last resort”.
EnergyQuest claims that the pipeline connecting southern states to gas-rich Queensland is already at capacity at critical times (i.e., winter, when southern demand is highest). It claims that “this import terminal presents the only available solution to avoid that supply crisis”.
In the below weekend interview with Luke Grant at Radio 2GB, I explained why importing LNG into Eastern Australia is a moronic idea that would lock in even higher prices than the $12 a gigajoule that we are currently paying (which is about triple what Americans – the largest gas exporter – pay).
The simple solution is to reserve East Coast gas for domestic use, cap its price at an affordable level using traditional cost-plus pricing, and build a few southern storage tanks that can be filled cheaply in the warm months and used in Winter.
Edited Transcript:
Luke Grant:
We now have an appetite for importing gas. We are the second greatest exporter of gas on the planet, but we are now set to import gas. This has got to be gee-up, doesn’t it?
Leith van Onselen:
Yeah. Can you imagine a Middle Eastern country importing oil? Because Australia is about to do that with gas.
East Coast Australia exports over 70% of its gas, predominantly to China and Japan. We actually give more gas to these countries than they need and then they re-export it for profit.
We have got them on cheap long-term contracts. Meanwhile, at home we’re paying as a Friday about $12 a gigajoule for gas on the East Coast, which is about three to four times what Americans pay, who are the biggest gas exporter in the world.
But instead of reserving gas for domestic use and clawing back some of that gas from China and Japan, which they do not need because they’re getting too much, and caping prices at a reasonable level that is a little bit above the cost of extraction, there is now talk of us now building import terminals.
The reason that been put forward is because the north-south gas pipeline that runs from Queensland to Victoria runs at capacity during the winter months.
In the winter months, Victoria is really cold and we use a lot of gas for heating. And as a result, our demand for gas is more than can be supplied through the north-south pipeline.
So, the solution now is to import LNG. It is completely stupid because the optimal solution is to build a few more storage tanks. We already have one storage facility in Victoria.
Europe, the USA, and other places around the world use storage tanks. They fill them with gas during the summer months when they don’t need as much gas and then they draw down on them in the winter months when demand’s high.
But instead of doing the simple thing, which might cost maybe a couple hundred million dollars, the solution is to spend a billion dollars to import gas from overseas into an East Coast market that exports over 70% of its gas to China and Japan and gives more gas away than our customers actually need. It is idiotic policy.
Squadron Energy, which is owned by net zero evangelist and iron ore miner Andrew Forest, is building a $1 billion terminal to import LNG in New South Wales at Port Kembla.
Squadron is also demanding that state and federal governments guarantee purchases of this imported LG and become the “buyer of last resort”.
So what this basically means is that taxpayers would guarantee that we will buy a certain quantity of this expensive imported gas, which is going to cost us money and will peg East Coast gas prices at a forever high international level.
Instead, the federal government should do the simple thing, work in our interest, and reserve the gas like Western Australia, the United States, and every other gas exporting place in the world does.
We just need to build a few storage facilities to see us through those winter months.
It is not rocket science. The solutions are there. It is what every other country does. But for some reason, our politicians cannot get this right.
