AGL regrets gas sales to GLNG
Friday, Oct 13, 2017
Australian power generator and retailer AGL Energy has publicly regretted its 2015 decision to sell domestic gas to the Santos-led Gladstone LNG (GLNG) project, on the grounds that it has hindered its ability to service more profitable domestic customers.

“AGL would profit more from not selling to GLNG but making the gas available to the Australian market,” the energy company’s senior manager of sustainable strategy, Richard Clifton-Smith, said on October 6.

“Clearly, if AGL had not sold the gas to GLNG, we would have been in a better position to service our customers,” he underlined.

The comments came in response to news articles that AGL said had implied the company was making an ongoing decision to hand the reserves to GLNG instead of the domestic market.

The wider background is one where three Curtis Island-based LNG export projects have come under fire for exporting gas while Australian customers face significant shortages.

AGL signed a deal on December 24, 2015, locking it in to sell 254 PJ (5.8 bcm) of gas to Santos’ A$17.5 billion (US$13.64 billion) GLNG venture for export between 2018 and 2020.

This followed a March 2015 deal to buy up to 198 PJ (4.6 bcm) of gas from the Bass Strait fields owned by ExxonMobil and BHP Billiton.

As a result of the GLNG deal, AGL did not have enough gas to supply existing customers coming off contract at the beginning of this year, let alone make offers for new domestic contracts.

Meanwhile, an Australian natural gas shortage, which was generally unanticipated, has been exacerbated by plans at ExxonMobil to cut its gas production at Bass Strait next year to 86 PJ (1.98 bcm), down from a record 330 PJ (7.6 bcm) this year.

The March 2017 closure of the 1,600-MW coal-fired Hazelwood TPP in Victoria has also significantly increased Australia’s domestic demand for gas for power generation.

AGL said that since Prime Minister Malcolm Turnbull’s threats in recent months to restrict Australian LNG exports, short-term contracts had become available.

“Consequently, AGL has reduced the price at which it quotes customers,” Clifton-Smith said.

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