Today’s Blog – Wednesday 18th May 2016

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Australia’s federal Labor party (apparently in close cahoots with the Australian Workers’ Union) today announced a policy with respect to the country’s gas export industry.  In a nutshell, it is proposing setting up a new Federal body that would vet new and expanded gas export projects to determine if they were in the national interest – and could apply restrictions thereon.

This is a political response to rising East Coast gas prices – that arguably tries to dodge as much as possible issues associated with developing on-shore unconventional gas resources such as CBM in New South Wales.

In our view it is a closing-the-door-after-the-horse has bolted policy that effectively ignores where Australia’s discovered but undeveloped gas resources actually lie (mostly to the North of Western Australia in the Browse Basin) compared to the population/demand centres in the South East of what is a mid-sized continent.

We are the first to agree that the East Coast LNG projects failed on the ego and testosterone fronts, were over-developed and that Governments should have tried to nudge their proponents into being more sensible.  However, these are in production now – and are physically currently exporting not only Queensland CBM but also gas from the far away offshore Victorian fields.

The policy is therefore meaningless given:

  • There are no East Coast credible gas resources that could fit with Labor’s policy.
  • There are no West Coast gas resources that are currently economic to develop.
  • There are no West Coast gas resources that could realistically supply the East Coast.

Commodity prices

Crude prices ran up ~1% overnight, with Brent edging closer to the psychologically important US$50 mark at US$49.47.  WTI is close behind at US$48.31 – the highest price for 7 months.

Ongoing developments on the Canadian wild-fire front threaten more or longer shut-ins of production – and developments in shaky OPEC nations seem unlikely to get better any time soon.

Henry Hub also climbed 1%, closing at US$2.05.

LNG and international gas

The industry website OilPro today contained an interesting graphic indicating that the US’s largest shale gas field – the Marcellus – now produces as much natural gas itself as the likes of major gas producing nations Qatar or Iran.

That US gas is now making its way to new countries almost by the week – with Argentina recently joining the ranks.

Also making news on the customer front were recent plans by the South African Government to establish a body charged with importing LNG into the energy short country. The US’s Cheniere Energy was named as an interested potential supplier.

If this plan goes ahead, all the BRICS nations (other than Russia) will become LNG importers.

The second order BRICS-type country of Turkey has its own problems dealing with potential gas imports from on-again-off-again enemy Russia, with never ending commercial and political delays with its Turk-Stream pipeline plans.

In that context we note with interest a recently announced farm-in deal by Norwegian Major Statoil into some shale gas exploration acreage in Thrace held by a small Canadian company.  This is not a common type of deal in these cash-constrained times, which shows faith in the Turkish gas market’s possibilities as well as in the art of exploring for unconventional gas.

Company news

This is very thin on the ground today – no money tends to constrain activity somewhat.

Quote of the day

ASX listed E&P companies might not be doing very much, but we can always rely on The Donald for some quote action:

British PM David Cameron on Trump’s policies last year:

“divisive, stupid and wrong”

His Hairness hits back:

“Number one, I’m not stupid, okay? I can tell you that right now. Just the opposite. Number two, in terms of divisive, I don’t think I’m a divisive person, I’m a unifier, unlike our president now, I’m a unifier.”


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