Oil, gas and the markets that rule them

Resources Corner

AGL Energy has entered into a supply agreement with Esso Australia and BHP Billiton Petroleum to purchase gas from Bass Strait. The deal involves up to 198 PJ of natural gas and will help the company lock-in a good price and a solid supply line going forward. The deal has garnered criticism as it was only last year that the Australian gas lobby was raising fears that a gas shortage would push up prices for those in the retail market. With plenty of local supply and massive allocations for export it seems the only thing in short supply will be low-priced natural gas. 
 
Also this week Woodside Petroleum says it’s on track to reach its annual output guidance despite production falling in the first quarter of this year and Metgasco has seen the Supreme Court rule in its favor to overturn a drilling suspension.
 
Economics of oil
 
Australia imports the large bulk of its oil, and with key refineries shutting down in recent years the country’s reserves have dwindled to dangerously low levels. Current reserves can only cover 52 days worth of imports. Australia is far behind the rest of the world on this and the International Energy Agency (IAE) says we need to pull our socks up and reach the minimum standard of 90 days. 
 
It’s a risky situation, conflict in oil producing regions in the Middle East are susceptible to conflict which could impact supply with little notice. A White Paper on the issue was released this week by Industry Minister Ian Macfarlane which says a decision will be made this year. The report explains that diversity in suppliers is currently the key to maintaining reliability of supply. 
 
Gas plays
 
Liquefied Natural Gas Limited (ASX:LNG) says subsidiary Magnolia LNG has been told Meridian LNG will progress a 20 year tolling agreement with Magnolia. The deal comes after Meridian LNG executed a sales agreement to supply gas for the next 20 years to E.On Global Commodities.
 
Metgasco Limited (ASX:MEL) shares soared on news the Supreme Court has ruled in its favour. The coal seam gas explorer says the Court lifted its drilling suspension which was imposed in May last year at its Rosella site. 
 
AGL Energy Limited (ASX:AGL) has entered a supply agreement with Esso Australia and BHP Billiton Petroleum to purchase gas from Bass Strait. The contract starts from January 2018 and goes for three years allowing AGL to access a continual supply of competitively priced gas for it 1.5 million residential and business customers. 
 
Alumina Limited (ASX:AWC) says it has secured a long term energy supply for its Alcoa of Australia operations. Alumina says the new 12 year deal secures around 75 per cent of the gas needed to replace agreements which expire by 2020.
 
Dealing with oil price lows
 
Woodside Petroleum Limited (ASX:WPL) says it is on track to reach its annual output guidance despite production falling in the first quarter of this year. The oil and gas producer delivered 21.8 million barrels of oil equivalent in the March quarter, 5.2 per cent down from the year before. Also, WPL revealed a gas discovery at the Pyxis-1 exploration well in production licence WA-34-L within Western Australia’s Dampier Sub-Basin.  The oil and gas producer says the licence is located about 15 kilometres north of the company’s producing Pluto Gas Field infrastructure. 
 
Petsec Energy Limited (ASX:PSA) says it has appointed Maki Petkovski to the Middle Eastern arm of the company. Mr Petkovski is a senior Exploration and Production executive with over 25 years experience in the sector most recently with Oil Search.
 
Origin Energy Limited (ASX:ORG) has alerted its customers to potential scam calls from people claiming to be from the company. The energy giant says callers have been demanding payments and threatening to disconnect power if the payment is not made immediately.