For an industry entering its sunset years, Australian gas certainly is attracting an enormous amount of attention and money.
Last week, that great laggard of the investment world, Santos, was rumoured to be in the sights of two of the world's biggest fossil fuel outfits, Saudi Arabia's Aramco and the UAE's Abu Dhabi National Oil Company, in a potential $25 billion break-up.
Late last year, Australian giant Woodside approached the group as well, proposing an $80 billion merger that would have catapulted the pair into the top tier of global petrochemical giants. But the deal went nowhere.
And for much of 2023, two huge North American investment groups sought to capture Origin Energy in a $20 billion deal that would have split the Australian energy giant.
That deal was stymied at the final post by Australian Super, which marshalled enough support to vote down the deal on the floor at the extraordinary general meeting just before Christmas.
Since then, there's been talk Canadian infrastructure group Brookfield, one of the bidders, may return with a counteroffer, given the super fund's objections centred primarily around value.
This has all coalesced at a time when the federal government has given the nod to extending the life and expanding the role of Australia's major gas projects in its plans to reduce carbon emissions.
For much of the past 15 years, however, the east coast gas market has been a disaster, prompting emergency market intervention from each of the Turnbull, Morrison and Albanese governments.
Despite all the threats of wielding "a big stick" right through to price caps, the cost of gas is prohibitive and forecast shortages will ensure electricity prices remain high.
That's now a primary factor behind what economists quaintly refer to as "sticky services inflation" and why we may be hit with even higher interest rates.
Clearly, what this renewed global interest demonstrates is that fossil fuel majors see little if any danger from federal government regulation or intervention and have their eyes on the potential profits to be made from sending gas offshore over the next 20 years.
Why is gas so important?
One of the great disadvantages of coal-fired electricity generators — apart from spewing huge amounts of CO2 and other pollutants into the atmosphere — is that they are inflexible.
They can't be turned off and on easily or quickly. That means they have to run at close to full capacity to be economic. Politicians mistakenly praise this as a benefit, arguing the need for base-load power.
But with a vast array of our energy demand now being met by renewables, coal-fired generators are going broke. During the middle of the day, when renewables kick in and wholesale prices crash, expensive coal generators simply can't compete.
The same goes for nuclear.
What's required is a flexible and immediate form of power generation that can be turned on and off in an instant.
In the medium term, batteries and other forms of energy storage, such as pumped hydro, will fill that need.
But in the meantime, the only viable source of quick and flexible energy is gas, which is why it is seen as the interim fuel in the energy transition.
Unless, of course, green hydrogen can be produced in enough volume and cheaply enough to take the place of liquified natural gas.
Price caps? Where?
Back in February this year, the federal government put in place its Gas Market Code, which put a price cap of $12 a gigajoule on east coast gas market contracts.
That replaced the emergency measures slapped on the industry in 2022 in the wake of Russia's ham-fisted Ukraine invasion that threw global energy markets into chaos.
LNG prices doubled, averaging more than $16 a gigajoule that year, sending electricity prices into orbit. And that sent the earnings of each of our big gas exporters, including Santos, Origin and Woodside, soaring.
According to the Australia Institute, the industry amassed windfall profits of between $26 billion and $40 billion that financial year.
As this graph illustrates, LNG exports have become a major industry. The yellow line charts gas volumes and the blue bars measure revenue.
Exports now dominate the industry and domestic gas prices — which once were cheap — are now set by global markets. And despite the government-imposed domestic price cap, local gas now is around 400 per cent higher than before we became captive to global markets.
More alarmingly, even with the cap in place, prices routinely are negotiated with industry and retailers at higher levels. The average price from producers right now is $14.32 a gigajoule.
According to the competition regulator, that's because the code "provides a range of exemptions from its pricing rules."
Where once Australia had a natural advantage for energy-intensive manufacturing, we routinely pay more than international customers for Australian gas.
According to the ACCC, the local market is facing shortages out to the end of the decade despite being one of the world's biggest exporters.
Would big global players be more sympathetic to local customers?
A fortnight ago, Squadron Energy, which operates in Andrew Forrest's green energy orbit, announced it was close to completing its first gas import terminal.
Located in the inner harbour at Port Kembla, the company plans to help fulfil Australian energy demand by importing gas at the same time we're exporting it in massive quantities.
The company argues that with global gas production likely to double within the next few years, it makes more sense to import it rather than develop new fields and gas infrastructure that will be obsolete once the transition is complete.
And the facility is destined to have other uses, according to chief executive Rob Wheals.
"This is a transitional solution until green hydrogen becomes commercially available at scale," he said.
Given the chaos that has plagued our domestic energy markets for the past decade and a half, which has seen industry depart the country, job losses and price spikes for households and businesses, it would be unlikely that any government would simply green-light a land grab by global energy giants.
Western Australia insisted that gas exporters reserve 10 per cent of all gas production for the domestic market.
The failure to do so on the eastern seaboard has come at a huge cost.
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