East coast gas buyers becoming resigned to price hikes
East coast gas buyers have resigned themselves to the prospect of paying around $10 a gigajoule for gas, even with Labor's gas plan signalling lower prices, said Cooper Energy chief executive David Maxwell.
"There no doubt that the mood has changed a lot in the last six to 12 months," Mr Maxwell said after the junior explorer and producer reported a 51 per cent jump in quarterly sales from a year earlier, mostly due to the stronger east coast gas market.
"Whereas people were hoping that things were going to be different tomorrow and that continually never happened, I think now people are starting to realise that prices are going to sit in the ranges that are being quoted."
Cooper has positioned itself to benefit from the tight market and looks set to see another lift to its average sales prices for gas on January 1, after signing fresh deals with Origin Energy and glassmaker O-I Australia, to be supplied from its Casino Henry venture.
The bigger impact to its business will come mid-2019 from the scheduled start up ofits $355 million Sole project off the coast of Victoria, the only new conventional gas project set to come online in the southern states next year.
The Sole project was 74 per cent complete as of September 30, and running "within budget and schedule", Mr Maxwell said.
While several rival plans are under way to import LNG into the southern states, he has said imports will merely put a ceiling on prices "a little way north of $11", while leaving plenty of opportunity to develop new local fields.
Mr Maxwell said the work done by the Australian Competition and Consumer Commission in putting out information on contract offers and prices had provided transparency on prices. The ACCC in July put prices for new contracts for supply into the southern states in 2019 at $9-$11/GJ.
Mr Maxwell said that in the past six months Cooper had seen an increase in customer inquiries, which he saw as "a sign that the market is going to have to contract in the prevailing environment".
He added he didn't expect any significant change in the approach to the east coast gas problem under a future Labor government, despite the ALP gas plan signalling controls on domestic prices to help manufacturers, that MST Marquee analyst Mark Samter said last week could be "cataclysmic" for the gas industry.
"My expectation is you might hear a lot of noise but when you peel it right back there is probably not a lot of fundamental difference between the parties and the conversations that we've had with both sides of politics would indicate that's the case," Mr Maxwell said.
Cooper's sales deals for Casino Henry gas mean that output from the field in the Otway Basin is now fully contracted for 2019, although Cooper still has some 119 petajoules of uncontracted gas reserves over the next several years.
Meanwhile, fellow junior Real Energy took a stride forward in its ambitions to develop its Windorah gas project in south-west Queensland for the east coast market, striking a deal with Santos and Beach for processing of the gas at the Moomba plant in South Australia's north.
LNG imports could be imported into the south east as early as 2020 at the $250 million Port Kembla project planned by Australian Industrial Energy, backed by mining billionaire Andrew Forrest.
AGL Energy has a slightly slower schedule for its Crib Point terminal, which is targeting a go-ahead by June 30 2019 and start-up in 2020-21. A Victorian government decision last week to require a full environmental effects statement for the project looks set to lengthen the approvals process but AGL has so far stuck to the timeline.
Thursday, October 18, 2018
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