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Santos accused of using cynical strategy to lift gas price in Australia Santos accused of using cynical strategy to lift gas price in Australia
(about 2 hours later)
The energy giant Santos has been accused of employing a “cynical strategy” to increase the price of gas in Australia. Energy company Santos has been accused of having a “covert strategy” to deliberately raise the domestic price of gas.
The anti-coal seam gas activists, Lock the Gates, made the comments on Tuesday after presenting what it said was an “internal industry report” from Credit Suisse to the Independent Pricing and Regulatory Tribunal (Ipart). The anti-coal seam gas group Lock the Gate said a report by the finance firm Credit Suisse shows that Santos pressed ahead with an export facility in Queensland to raise the price of domestic gas, therefore increasing the value of its Australian assets.
The group cited a March 2014 Credit Suisse report as saying Santos's aim with its Gladstone LNG project “was always as much about raising the domestic gas price, and therefore re-rating large parts of its portfolio outside of [Gladstone LNG], as it was about the project”. The report, which was presented to the NSW Independent Pricing and Regulatory Tribunal (Ipart) on Tuesday, analyses Santos’s $19bn liquefied natural gas (LNG) export facility at Gladstone, known as GLNG.
A Lock the Gates campaigner, Georgina Woods, urged Ipart to rethink a proposed 17 per cent rise in NSW gas prices from 1 July in light of the allegations against Santos. Credit Suisse’s report says “quite clearly at face value this has been a materially unappetising project”.
“[Santos] entered into a cynical strategy to push up our retail gas prices to re-rate their existing portfolio,” she told reporters after presenting the report to Ipart. The report adds: “Santos now argues that its aim in GLNG was always as much about raising the domestic gas price, and therefore re-rating large parts of the portfolio outside of GLNG, as it was about the project.’
“We don't think it's fair or equitable for NSW households to be asked to pay for those business decisions.” The report says there is a negative impact to Australian GDP of 0.8% for each $2 rise each gigajoule in the domestic gas price, which “certainly wouldn’t have been terribly popular with politicians who approved the project”.
But a Santos spokesperson dismissed the claim. Credit Suisse said the GLNG project “has the potential to materially disappoint”, noting that “the recent environmental issues” at its contentious Narrabri gas project “must raise some serious questions about the political challenges to commercialising that gas”.
“The main driver for the rising gas prices is not the export market – it's the rising cost of getting it out of the ground,” the spokesperson said. The Narrabri gas project, which has been opposed by environmentalists and farmers, could affect groundwater through leakage, cross-contamination and subsidence, according to Santos’s environmental assessment.
“The only way to place downward pressure on rising gas prices in NSW is to develop the natural gas reserves that are trapped in the ground.” Lock the Gate said Santos was conducting a “deliberate and covert strategy” to push up the price of domestic gas to increase the value of its assets. Analysts have predicted that Australians’ gas prices will rise, despite an increase in LNG production, due to exports being connected to the higher international price.
“The Ipart report shows that domestic consumers will be footing increases in gas bills of up to $162 per annum for households and up to $625 for small businesses from July 2014,” said Georgina Woods, a Lock the Gate campaigner.
“We are being asked to tighten our belts while our gas prices soar just so the gas giants can revalue their domestic assets to make their companies look better on paper.”
Woods said the NSW government should introduce measures to “restrain gas prices and end price gouging”, including a reservation of gas for domestic use.
Santos denies it was deliberately driving up gas prices. The company argues that reserving gas for domestic use would not lower costs, but would provide a disincentive to any company looking to extract it.
“The main driver for rising gas prices in Australia is not the export market but rather the rising costs associated with the development of those reserves,” a Santos spokeswoman said.
“The only way to place downward pressure on rising prices in NSW is to develop the natural gas reserves trapped in the ground.”
The spokeswoman said supplies of easily accessible gas in Australia were running out and new resources are more expensive to develop.
“The higher prices available on export markets have enabled the development of significant gas resources that would otherwise have remained in the ground – and that in turn is facilitating the delivery of new supply sources for the domestic market,” she said. “But exports alone have not ‘pushed up prices’.”