September 29, 2017 Read More →

Big Proposed Australian Gas Project Faces a ‘Zero Value’ Problem

The Northern Star (News Corp. Australia):

Prime Minister Malcolm Turnbull is playing into the hands of the gas cartel ‘ripping off Australia’ by encouraging the NSW Government to approve a controversial gas project in the state’s north, according to an energy analyst.

The Prime Minister’s comments “strongly encouraging” the Berejiklian government to approve the Narrabri Gas Project are “unbelievable”, said Bruce Robertson of the Institute for Energy Economics and Financial Analysis.

In fact, the massive project – which environmentalists say threatens the Pilliga forest – is literally worthless on Santos’ books.

“This project is valued at that level because at the moment it has zero reserves of gas,” Mr Robertson said.

But Santos  is in a life and death struggle over billions of dollars in mounting losses incurred by its gamble on the East Coast gas export industry, particularly its share in one of the three Gladstone LNG “trains” worth a combined $70 billion.

The Gladstone plants and related gas fields came online just as world gas and oil prices went into freefall. There is now a huge global glut which could last years.

And yet Australia is paying through the nose for gas because the cartel – Shell, Santos, Origin, and BHP-Exxon – have pushed up prices by exporting the bulk of domestic gas overseas through Gladstone.

The industry is now desperate for gas – anything, even a gas project which has zero proven reserves.

“What they’ve got to do is keep feeding the beast,” Mr Robertson said.

“In the last result pre-tax (Santos) wrote off over a billion dollars.

“They’re basically hoping for a war in the Middle East to get them out of this.”

Mr Robertson argues this economic disaster could push Australian manufacturing to the wall in a “second wave” of deindustrialisation.

“According to the ACCC we should be paying $5.30 a gigajoule, and we are currently paying $10.16. We’re paying two times what we should be,” he said.

“The employment consequences of this are dire. Action simply has to be taken to reduce the costs (of gas) to reasonable levels.”

More: Narrabri gas project has zero book value: analyst

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