According to one source, the emergency measures taken by the Australian energy market operator on Wednesday led all three LNG exporters in Queensland, including Santos’ GLNG, to divert about 100 terajoules of gas per day to the domestic electricity market.
However, the pipelines south of Queensland are now full and Mr Gallagher said that this is by no means a good solution given the foreign partners who have invested in LNG exports to ensure their own energy security. He warned that this would discourage the large investments needed by Asian investors to build a hydrogen export industry in the long run.
Santos’ GLNG partners include Korea Gas Corporation, the world’s largest importer of LNG, Malaysia’s Petronas and French energy giant TotalEnergies.
Mr Gallagher said it was “too early to say” the impact of the AEMO gas diversion on Santos and GLNG, but said maintaining it would send “bad news” to overseas investors.
“I have not had the opportunity to discuss with my joint venture partners at the moment and I hope they understand that a short-term remedy is needed,” he said.
“We will work together and do the right thing for Australia. In the long run, if this is the solution, I don’t think any of the foreign investors who have invested in these LNG projects would think it’s a good solution in the long run … in terms of energy security, I think it would was bad news for foreign investors when we need this investment.
“Without Japanese, Korean and Asian money, we will not build a hydrogen export industry, I can assure you that, like the LNG industry, we need these investments from these countries if we are going to build this infrastructure, because our own markets will never be big enough to justify this investment. on their own.
AEMO issued a “threat to system security” in the Victoria market on Wednesday and launched a gas supply guarantee mechanism for the first time since its launch in 2017 due to low electricity supplies in Victoria, South Australia and Tasmania on Thursday. This obliged LNG producers in Queensland to make gas available for electricity generation in order to prevent electricity shortages under a voluntary agreement signed with the federal government.
‘There is no offer’
“It’s a supply, there is no supply.” We don’t have gas, we can just turn it on. We don’t have stored gas: we’ve exhausted it all in the last few years. These are projects like Narrabri, “said Mr Gallagher, just before an interview with Federal Resource Minister Madeleine King about the rapidly evolving crisis.
“The solution is, if you want more gas, you have to … develop more gas.” You can’t just conjure it up when coal-fired power plants shut down and renewables don’t work. “
While Industry Minister Ed Husic also talks to industrial gas users about their supply needs, Santos put forward a proposal for a broader meeting involving the government, gas producers and industrial users to find ways to address the crisis that threatens critical production.
Mr Gallagher said he spoke to Orica CEO Sanjeev Gandhi on Thursday morning and received a report on how critical Orica’s operations were for the global mining industry.
He said the tense domestic gas market and price shocks of recent weeks “have nothing to do with the behavior of gas producers or exporters, who do everything they can to support the market”.
Rather, the root of the problem lay in underinvestment in new supplies under climate activist pressure and activists’ influence on investors.
“On our east coast, we have a prime example of what happens when energy transformation focuses only on halting new oil and gas projects,” Mr Gallagher said earlier at lunch at the Melbourne Mining Club.
The producers accused the gas producers of profiting from high prices, which have been limited by AEMO in three states in recent days, because prices in Melbourne threatened to rise to an extraordinary $ 800 per gigajoule, but Chief Santos refused. .
“I can assure you that Santos does not make any money at these high prices, all our gas 99 percent of our gas is sold on a long-term basis, not on the spot market, and that is a way well below cost. which you see in the spot market today. “
Mr Gallagher said the lack of new developments was “scary” today, with limited supply forecasts coming in the coming years, and noted that all production from Narrabri was destined for the domestic gas market.
Santos, who intends to reach a final investment decision on the first phase of the Narrabri project in 2023, lost one of his customers to the project last week when Weston Energy of NSW lost its retail license, but said demand for gas from the company in has risen in recent weeks.
“We could sell gas from Narrabri two or three times, we have a lot of demand for this gas, I’m sure you can imagine that demand has been growing in recent weeks,” Gallagher said.
“Customers are calling for this gas with more demand than we can satisfy when it comes to market around 2026. And I’m trying to bring Narrabri to market sooner if possible.”
However, he said Santos would “need the governments to help us with this,” given the processes that Santos has yet to complete in terms of final approval, which is likely to lead to further legal issues.
So far, Santos has spent more than $ 1.5 billion in about 10 years on his Narrabri project, which could cover up to half of NSW’s gas needs and which has faced numerous legal challenges through its approval process. While the last major legal challenge was resolved earlier this year, it still has a secondary permit to secure and also evaluate wells before drilling can give permission to develop.
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