Gas firm in favour of federal backing
East coast gas producer Cooper Energy has backed the use of government support to develop infrastructure.
East coast gas producer Cooper Energy has backed the use of government support to develop infrastructure, including pipelines, but cautioned against direct investment in the sector.
The Morrison government is weighing a final report from the National COVID-19 Coordination Commission manufacturing task force chaired by former Dow boss Andrew Liveris. A draft proposal suggested a gas-led recovery involving guaranteeing gas volumes, opening new fields and building pipelines to halve the price of the fossil fuel to a $4 a gigajoule target.
Cooper, developer of the Sole gas project off the Victorian coast, said boosting infrastructure held merit but was wary of a government picking winners within the upstream segment of energy, which involves exploration and production.
“Enabling new important infrastructure makes a lot of sense. But subsidising gas supply or a gas customer is detracting from normal commercial forces and therefore you’re running the risk of getting sub-economic decisions. And people may make decisions for the wrong reasons,” Cooper Energy chief executive David Maxwell said.
“You need to draw the distinction between critical infrastructure and upstream supply where you’ve got to stand on your own two feet.
“But critical infrastructure which enables new supply or additional supply, I think there’s an argument in that. That’s why governments do get involved in establishing new pipelines and new ports. But don’t go playing in the commercial space.”
Cooper has been frustrated by delays with the start-up of its $600m Sole field given ongoing issues with completing the Orbost gas plant owned by APA Group, which will process the gas.
Cooper fell to an $86m annual loss due to impairments and said it was disappointed by the delay.
“Are we comfortable with how we’ve gone on the last 12 months? No we’re not because we know we should have done better. But what we are doing is really focusing on working with APA on getting the problem fixed at the gas plant. We will get to 68 terajoules a day, there’s no doubt, it’s just a matter of when.”
East coast contracted gas prices were likely to remain in a $8 to $10 range, according to Mr Maxwell, with the market likely to remain tight over the next half decade given the lack of new substantive supplies from the southeast states.
Spot prices of just $4-$5 a gigajoule will invariably rise with current levels uneconomic to justify new investment, Mr Maxwell said. The comments followed the release of an interim report into the Australian gas market by the ACCC last month which provoked arguments between producers and users over the state of the market.
According to the competition regulator, offers in the market for 2021 were not matching the global fall in prices with demand cut due to the pandemic.
The report shows domestic customers were slugged between $8 and $11 per gigajoule in late 2019 and early 2020. This was compared to LNG export prices of below $6/GJ since early 2020.
Cooper shares fell 1.5 per cent on Monday to 33c.