Power Up: Sky high gas prices hitting Victorian pockets

A cold winter, an outage at the Langford gas plant and high international gas prices have conspired to send Victorian spot gas prices up to $20 per gigajoule, the highest price since 27 June 2016.

It’s not any easier for the rest of Australia’s East Coast with gas at the Wallumbilla hub going for $18.20/GJ while Sydney is paying $15.44/GJ.

EnergyQuest noted that Victoria’s total gas demand is currently over 1,000 terajoules (1 million GJ) per day thanks to the cold winter with Melbourne’s maximum temperature forecast to be just 13 degrees on Wednesday.

To make things worse, one of the three gas processing trains at ExxonMobil’s Longford plant has been offline since 28 June, reducing its gas output from 981TJ/d to 877TJ/d.

The energy consultancy added that high international gas prices could have added more fuel to the fire.

Asian spot liquefied natural gas prices are at an eight-year seasonal high, with the Platts JKM Asian LNG spot price trading at US$14.31 ($19.10) per million British thermal units (about 1.055GJ).

This is due to LNG buyers rebuilding stocks after a colder than usual winter.

Oil takes a step back

Meanwhile, oil prices have retreated after reaching a six-year high earlier this week.

The US benchmark West Texas Intermediate crude fell 1.9% to US$73.24 on Tuesday after gaining 4.2% over the prior five days.

Barron’s quoted Oanda senior market analyst Edward Moya as saying that bullish bets had become overcrowded while optimism remained that OPEC+ would not allow the oil market to become too tight.

OPEC, which controls nearly a third of the world’s crude oil production, has thus far been unable to agree on any production increases.

While the Saudi Arabia-led oil cartel had voted on a proposal to gradually increase oil production by roughly 2 million barrels per day between August and the end of 2021, the UAE preference for a higher baseline to its quota meant that no agreement was reached on any increase in output.

Uranium continues to lift

Uranium continues to grow in strength with Kazakhstan uranium producer Kazatomprom noted that the market was showing signs of improvement with a growing interest in long-term contracting interest, thinning spot market and slightly improved pricing.

However, the world’s largest producer of uranium noted that adding production into market in 2023 would be unlikely to maximise returns and as such, it plans to maintain its 2023 output levels at a similar level to 2022.

Far East Capital analyst Warwick Grigor told Stockhead earlier this week that nuclear power remained the most environmentally friendly source of base-load electricity available to man as the drive to shut-down coal power gained more momentum.

This view was shared by Microsoft founder Bill Gates, who called on the US to stop shutting down nuclear reactors and start building new plants.

Energy small caps

While the high gas prices are seasonal, they do reflect concerns about the gas supply situation on Australia’s East Coast.

That’s good news for Metgasco (ASX:MEL) and its operating partner Vintage Energy (ASX:VEN) who have cased their Vali-3 appraisal well in the Cooper Basin for future production.

The joint venture now has four wells that can form the basis of a gas production hub that could help supply the East Coast.

Gas reserves at the Vali field are also expected to be increased from the previous estimate of 33.2 petajoules.

Over in the West, Norwest Energy (ASX:NWE) and Mineral Resources (ASX:MIN) are gearing up to drill the Lockyer Deep-1 exploration well in the Perth Basin.

Lockyer Deep-1 will test a very large, fault-closed three-way dip structure at the Kingia and High Cliff levels within the Permian gas play’s “sweet spot”.

Drilling at the Waitsia, West Erregulla and Beharra Springs Deep areas have all resulted in successful gas discoveries.

Meanwhile, FAR Limited (ASX:FAR) has sold its entire interest in the Senegal RSSD joint venture to Woodside Energy (ASX:WPL) for US$126m ($168m) with additional payments of up to US$55m – contingent on future oil price and timing of first oil – targeted for 2023.

The company will now commence discussions with the ASX on reinstating its securities.

FAR is preparing to participate in the drilling of the Bambo-1 well offshore Gambia later this year that targets 1.1 billion barrels of oil.

Uranium play Lotus Resources (ASX:LOT) noted that the initial phase of ore sorting test work for its Kayelekera uranium project had exceeded expectations.

Testing on ore from the project showed uranium grades increasing by up to 100% when compared to the feed sample.

At Stockhead we tell it like it is. While Metgasco and Lotus are Stockhead advertisers, they did not sponsor this article.