The papers are full of stories about Australian companies being gouged and charged top dollar for LNG supplies at the same time as a bunch of international companies extract our gas reserves and ship them offshore to sell in foreign markets for peanuts.
There are even loony ideas circulating whereby we build a new terminal to re-import the gas those companies are selling offshore for nickles and dimes.
Why import what should never have been exported in the first place?
Worst of all some industry clowns are trying to use this massive policy failure and incompetence induced gas shortage as a reason for demanding that every farm gate be forced open and every paddock be made available to the agricultural vandalism of fracking.
The solution is simple and no different to the one required for iron ore.
A National Export Volume Auction – NEVA.
Set the total volumes nationally of LNG that may be exported and then let industry bid for tradeable licences to part of that volume.
If they dont have an export licence they will be limited to the domestic market.
The only real difference between an Iron Ore NEVA and one for LNG is that the objective for the Iron Ore NEVA is to prevent international miners competing with each other with OUR ores rather simply competing against foreign competition.
Of course we still need to compete with alternate foreign producers like Brazil but it is NOT in Australia’s interest to allow foreign mining companies operating in Australia to drive prices down by competing between themselves in international markets.
With LNG the issue is even simpler – work out how much gas we want available for domestic purposes. Subtract that from a conservative estimate of production capacity – i.e. one that does not require every bit of farmland to be screwed with fracking – and the remainder can be the national export volume for which licenses will be available for purchase via public auction.
No sovereign risk involved at all.
A wonderful free market solution! What better selling point can there be for our ideologically obsessed political classes in Canberra.
If someone tries to suggest that setting a national export volume and auctioning off rights to it is beyond the competence of the national government they are barking mad.
Sovereign risk is just a cloud of bull dust spun by international companies who fear the ‘natives’ are on to their scams.
I agree. A NEVA should be adopted for all our non-renewable, natural resource exports. Such a system would ensure that only genuinely competitive, fully financially viable, extraction operations would start up, & continue operations in a demand recession. It would dampen the extremes of the commodity price cycles. It would minimise waste and environmental degradation caused by mining, as the price mechanism would ration these scarce resources in a demand boom.
Some of the secondary (recycled scrap) value of hard commodities (Copper, Iron etc) could also be captured in the NEVA price. Once global exponential growth ends (as it must, for nothing tangible can grow exponentially forever) the demand for make-up supply of hard commodities must plateau at some fraction (perhaps as low as 5-10%) of the recycle rate, then our raw materials can be valued at their intrinsic finished-product value minus the cost of processing (mainly energy). This value will equate to the value of recycled product.
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All this mess has to have been designed. The chance of an overleveraged household debt coinciding with energy diversion, pricing out Austn industry and bringing inevitable inflation to a centrally planned RBA with no accountability, will not be good for Australians. There is hope, I listen to the radio and plenty wish for change, they just don’t know how to get it. Good on you PFH for suggesting Australians interests be put ahead of others.