Energy giant ExxonMobil lashes ‘unhelpful rhetoric’ on gas prices
Energy giant ExxonMobil has lashed manufacturers demanding gas at unrealistically cheap prices.
Energy giant ExxonMobil has lashed manufacturers demanding gas at unrealistically cheap prices and has revealed plans to scour fields for new supply after canning the multi billion dollar sale of its 50 per cent stake in Victoria’s Bass Strait.
Big east coast energy users complain they can’t find gas on a contracted basis for less than $8 to $10 a gigajoule, more than double historic levels, which could force some facilities into importing products rather than producing Australian made goods or even shutting their doors.
But calls by manufacturers that gas should be available for $4 to $6 a gigajoule were unworkable given the costs of exploration, development and production, according to Exxon.
“There has been some unhelpful rhetoric on somewhat arbitrary price levels which in many cases are simply below the cost of production,” Exxon’s Australian chairman Nathan Fay said.
“That detracts from the shared objective of how do we take unnecessary cost, red tape and bureaucracy out of the system and how do we get new gas on stream that allows both the supply and demand side to make the investments they need to support gas-fired manufacturing.”
Exxon will announce on Thursday the $400m development of its offshore West Barracouta gas field in the Bass Strait will start first production in 2021, a vital step in topping up depleting gas reserves from the Gippsland Basin venture which supplies 40 per cent of the east coast domestic market. A subsea vessel recently arrived in Victoria to complete the final infrastructure for the West Barracouta project.
The looming arrival of new gas follows a decision by Exxon in late November to reverse a planned decision to sell its half share in the Bass Strait gas fields in a move that would have brought an end to a multi decade partnership with BHP which is also weighing up a sale of its own 50 per cent stake in the venture.
Exxon confirmed prices from potential bidders fell short of expectations.
“We had a lot of interest in the assets but ultimately it’s a question of value and I would come back to the production levels we see today and the remaining potential we see,” Mr Fay said. “We determined the assets were of more value in our portfolio and I think it comes back to maintaining our position as a significant domestic gas supplier.”
The producer is now weighing up future investment in prospects spread across the Bass Strait including revisiting existing growth opportunities.
“The nature of a depletion business such as oil and gas is that in a situation with constant or growing demand you continue to need new investment to replenish supply,” Mr Fay said.
“There is plenty of potential left in the Bass Strait and that potential should be some of the most competitive supply out there. We have a range of developments we are looking at after West Barracouta in terms of the right sequencing in bringing gas on.”
Still, users are likely to hedge their bets on the longevity of Bass Strait remaining the premier Basin with the southeast of Australia expected to be more reliant on importing gas through pipelines from Queensland or from the various LNG import terminals being developed along the east coast.
Exxon said it remains opposed to Australia’s first ever national gas reservation system that would apply to future rather than existing developments while remaining in talks over a voluntary code of conduct being developed with industry.
“We don’t believe domestic gas reservations are necessary. Ultimately, anybody on the supply side seeking to make investments will be looking at certainty of offtake and assumptions around pricing and invariably if the right conditions and the demand are there, providing gas domestically will always make sense,” Mr Fay said.
Exxon also operates Victoria’s Altona refinery, one of only four refineries still operating in Australia, but has signalled doubts over its future with the facility trading at a loss.
The company is still weighing up a government assistance package and has made no decisions over Altona.
“Right now we continue to evaluate that package and what that means for the future of operations at Altona,” Mr Fay said. “It can be a tough business at times and the impact of Covid have been felt more on liquid fuels rather than gas.”
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