Gorgon getting closer....
- Thread starter Ausprop
- Start date
a little birdy told me about some development sites in that region last night.
well, actually, he's probably king birdy of all birdy land - or at least will be when Mr and Mrs Birdy sell....!!!!
well, actually, he's probably king birdy of all birdy land - or at least will be when Mr and Mrs Birdy sell....!!!!
yes a ton of investors at work. i had my info from one of the guys close to landcorp.
oh no! a glut for a few years....?
gee....
gee....
Gorgon won't actually produce anything until 2012 (or later?) so I don't think a glut in 2009 during the world's worst recession since WW2 will make them too anxious.
By the time they are ready the recession should be over, and the glut will be wearing off nicely.
By the time they are ready the recession should be over, and the glut will be wearing off nicely.
Luckily you can put you money where your mouth is and you can buy Gas futures if you believe the glut is temporary. Wonder if gas user would think the same and hedged possible oscillations in buying the futures. It can be that at present the demand for years ahead is much higher then what would really be.
The risk is that it is usually difficoult to find funds for developing something that at present is in oversupply. I would expect works at gorgon to proceed slower then previously forecast
The risk is that it is usually difficoult to find funds for developing something that at present is in oversupply. I would expect works at gorgon to proceed slower then previously forecast
That is not correct. Developments of this nature don't happen without certainty on offtake pricing and volumes. That is why us Perth residents have been enjoying very low gas prices for so long (well under market now) as those prices were locked in at the time of the NWS development. It's also why Woodside et al are still exporting gas to their Japanese customers at well under the current spot market price. Those offtake agreements underwrote the existing NWS development at the time and can be very lucrative for the entities that sign them as they are effectively a hedge on future gas prices.
No-one spends $40bn of their own money on a prayer for future gas prices...
They have price and volume certainty for the next 25 years (along with their customers). The project is going ahead regardless of the gyrations of the spot / hedge market. Twenty five year deals consider more than the short term under / over supply balance.
High equity
I think you will find that mining co's spend millions without having made a sale. It happens all the time. thats the risk!
The project may go ahead but unless the market maintains a certain level for customers to also make money then it will just blow up!. Look what happend to Twiggy when the iron ore market collapsed last year - half his customers just walked and he was left holing 500 mill in shipping contracts. he also then had to re negotiate supply contracts. :Lucky for him the market bounced back.
There are never any guarantees - even when contracts are signed - just ask Dubai!
I think you will find that mining co's spend millions without having made a sale. It happens all the time. thats the risk!
The project may go ahead but unless the market maintains a certain level for customers to also make money then it will just blow up!. Look what happend to Twiggy when the iron ore market collapsed last year - half his customers just walked and he was left holing 500 mill in shipping contracts. he also then had to re negotiate supply contracts. :Lucky for him the market bounced back.
There are never any guarantees - even when contracts are signed - just ask Dubai!
Of course I don't...
Really? I guess the fact that Chevron waited for those gas contracts to come through before announcing the project means nothing. Or that their counterparties have excellent credit ratings, often backed by national governments. Thank you for dazzling me with your detailed knowledge of this industry.
Half? Really half? I guess that sounds like the credit worthiness of his counterparties left a little to be desired. Much like FMGs own balance sheet I suspect. Funny how Rio and BHP only reported relatively minor issues on this front. I guess they had the luxury of dealing with customers who could meet their obligations and therefore valued dealing with companies who could do the same...
And I might add the ructions of the GFC and the iron ore market over the last year would typically be seen as an "outlier" event for the industry over the last twenty years.
And you would of course know the most important point that pricing certainty on supply agreements in the iron ore industry is typically of much shorter duration than the LNG industry. Something to do with the much lower cost and risk of building iron ore mines and ports in comparison to offshore LNG platforms I understand... but of course you would know that!
Please do inform me how Dubai World defaulting on its debt has any relevance to this discussion? Were they contracting with Japanese electricity utilities?
High equity
You could be right according to wikipedia
"Approximately A$200 billion in LNG sales agreements (out of an expected total of A$300b) have been reached between the joint venturers and customers in China, India, Japan and South Korea."
Thats a great result for them.
I work in the xport of iron ore and coal and bauxite and I can say that most future agreements (from mining companies as yet into production) are nothing more than MOU's and not really firm contracts. Maybe this is different.
Sorry if I was misinformed. Go Perth!
You could be right according to wikipedia
"Approximately A$200 billion in LNG sales agreements (out of an expected total of A$300b) have been reached between the joint venturers and customers in China, India, Japan and South Korea."
Thats a great result for them.
I work in the xport of iron ore and coal and bauxite and I can say that most future agreements (from mining companies as yet into production) are nothing more than MOU's and not really firm contracts. Maybe this is different.
Sorry if I was misinformed. Go Perth!
hiequity - i'm not allowed to give you any more kudos unfortunately - otherwise youd have had 3 from me in ths thread alone.
Nice link Boz!
gees if Gorgon and other LNG projects were cancelled we would be in real strife... economy will plunge into recession but at least we may finally get some decent IRs! The financial cost to the partners for their breach of contracted orders would be huge
the north west development is too far committed, strange that this article is only 6 weeks old yet many contracts had already been let by then.
the north west development is too far committed, strange that this article is only 6 weeks old yet many contracts had already been let by then.
http://au.news.yahoo.com/thewest/business/a/-/business/6595852/chevron-signs-gorgon-gas-sales-deal/
some more offtake... barely makes the headlines now!
some more offtake... barely makes the headlines now!
Love those contracts...
Doesn't seems that hard to work out the value of the new deal, the problem is that all those deals will be eventually valued at prices when gas is supplied. Unless you hedge future prices, but, of course, none is going to hedge all the gas prices now for so many years ahead, all those values are worth not much more then a gamble at the casino...
but the casino's not empty!!
you're arguing that they're betting and that's the problem, i'm arguing they're betting and no matter what, money is flowing.
you're arguing that they're betting and that's the problem, i'm arguing they're betting and no matter what, money is flowing.
