Energy giant would be 'better' off without LNG supply contract
AN AUSTRALIAN energy company says it is financially worse-off because of its decision to lock in a long-term deal to sell gas to Santos to ship internationally from Curtis Island.
AGL said in a blog this week it would profit more from selling gas to Australian customers, instead of Santos' $17.5 billion GLNG venture.
It's because AGL, like most in the industry, did not anticipate the extent of the gas crisis and partly blamed its poor deal-making decision on the closure of Hazelwood Power Station.
The comments were in response to a Daily Telegraph news article that AGL said implied the company was making an ongoing decision to hand the reserves to GLNG instead of the domestic market.
According to its first quarter report for 2017, 58% of Santos' international exports are sourced from third party gas, like AGL's.
"The fact is, AGL would profit more from not selling to GLNG but making the gas available to the Australian market," AGL's Richard Clifton-Smith said.
The three Curtis Island-based projects, known as the "big three", have come under fire for filling six LNG trains with international exports while Australian customers seemingly cry dry.
AGL's comments come off the back of the kingpins of each Curtis Island site making good with Prime Minister Malcolm Turnbull about their commitment to the domestic gas market.
The gas exporting trio signed a deal with the Federal Government confirming their promise to supply 54 petajoules of gas, and more if needed, to shake off the predicted shortage.
On top of the tight domestic market, Mr Clifton-Smith said the big change was caused by the closure of Hazelwood Power Station in Victoria.
"...Which significantly increased the demand for gas power generation," Mr Clifton-Smith said.
He said if AGL had known of the 1700 MW power station's closure the GLNG deal may not have been made in 2015.
"Clearly if AGL had not sold the gas to GLNG, we would have been in a better position to service our customers," Mr Clifton-Smith said.
"At the beginning of 2017, AGL was in a position where it no longer had adequate gas available to supply to its existing customers coming off contract."
Mr Clifton-Smith said since Mr Turnbull's warning of a gas export cap or ban, new short term contracts have been made available.
Meanwhile AGL, which is copping pressure to keep its coal-fired power station Liddell open, plans to build a $250 million LNG import project to help supply the Victorian market.
Shell chairman Zoe Yujnovich shed light on the gas export industry yesterday, telling a crowd at an energy summit, Australia can not have a thriving export industry without a well-functioning east coast domestic gas market.
"Blaming the LNG industry alone for recent issues with the supply and price of gas is in itself a selective intentionally misleading reading of the gas market," she said.