KOGAS is having a good old whinge at LNG robber baron HQ.
State-owned Korea Gas Corporation has contradicted the Albanese government’s claim that Labor’s proposed domestic gas reservation scheme would not impact long-term LNG sales contracts, saying it imposes “a direct obligation” on the world’s largest LNG buyer.
KOGAS Australia, a 15 per cent owner in Santos’ GLNG venture in Queensland, said it was “undoubtedly disappointing” new rules were being established about LNG exports that were not in place when it sanctioned its multibillion dollar investment in the project, one of three large export ventures in Queensland.
“The framework as drafted contemplates outcomes that were not, and could not reasonably have been, within scope of KOGAS’s investment thesis,” KOGAS Australia head of legal Jee Yoon told The Australian Financial Review.
“It is clearly not a case where existing long-term LNG contracts are being respected, notwithstanding the government’s stated commitment to do so.”
Sorry, you lost me at “State-owned”. Why are we concerned about the poor investment decisions of a foreign government?
KOGAS has two major investments in Australia, both of which are duds, if not rorts.
The first is GLNG, which lied about having enough gas and foisted that lie directly on every household and business east of WA as “a direct obligation.”
Indeed, KOGAS bought into GLNG in December 2010, only two weeks before Santos expanded its one-train development into two trains, with a KOGAS contract and equity.
This was the fateful moment that gave rise to the gas export cartel and East Coast shortages.
As Santos worked toward approving its company-transforming Gladstone LNG project at the start of this decade, managing director David Knox made the sensible statement that he would approve one LNG train, capable of exporting the equivalent of half the east coast’s gas demand, rather than two because the venture did not yet have enough gas for the second.
“You’ve got to be absolutely confident when you sanction trains that you’ve got the full gas supply to meet your contractual obligations that you’ve signed out with the buyers,” Mr Knox told investors in August 2010 when asked why the plan was to sanction just one train first up.
“In order to do it (approve the second train) we need to have absolute confidence ourselves that we’ve got all the molecules in order to fill that second train.”
But in the months ahead, things changed. In January, 2011, the Peter Coates-chaired Santos board approved a $US16 billion plan to go ahead with two LNG trains from the beginning….as a result of the decision and a series of other factors, GLNG last quarter had to buy more than half the gas it exported from other parties.
…In hindsight, assumptions that gave Santos confidence it could find the gas to support two LNG trains, and which were gradually revealed to investors as the project progressed, look more like leaps of faith.
…When GLNG was approved as a two-train project, Mr Knox assuredly answered questions about gas reserves.
“We have plenty of gas,” he told investors. “We have the reserves we require, which is why we’ve not been participating in acquisitions in Queensland of late — we have the reserves, we’re very confident of that.”
But even then, and unbeknown to investors, Santos was planning more domestic gas purchases, from a domestic market where it had wrongly expected prices to stay low. This was revealed in August 2012, after the GLNG budget rose by $US2.5bn to $US18.5bn because, Santos said, of extra drilling and compression requirements.
Now these Korean robber barons have the nerve to whine about Australians taking some of their own gas to undo the Korean government’s monopoly of our market.
One could go further and impute ill intentions to Kogas from the start. Its other major Australian gas investment was in Prelude FLNG.
Prelude is a giant gas pirate ship designed to process gas at sea without ever making landfall, thereby avoiding royalties.
It is a floating royalty arbitrage that has value solely for this reason, given that it barely functions and is just as likely to sink.
In short, the Korean government designed its gas investments in Australia to capture monopoly rents in the eastern market and dodge royalties in the western market.
That’s about as bad a record of uncivilised behaviour for any foreign investor in Australian history.
My advice to KOGAS is to recontract its lost GLNG gas from the US and shut down its second GLNG train for scrap.
While you’re at it, drydock Prelude and retrofit it as the Titanic II cruise liner.
Then #$%@ off along with the AFR.
