Trade with Asia – price points of gas

We are part of Asia, and an island. We are isolated and that works for and against our security. Energy Security that is, our trading partners have different views on what is a benefit. As an island we need to transport singular purpose vehicles with product from point A to Point B in the most direct line and this method does not share any of the wealth or contribute to other points and their economy.

If you did not know Russia is on top of this issue and they intend to supply gas to Asia and have been into the driver’s seat in the last two years, to do so: A related project to the gas deal announcements is the intention to build a railway transport system from South Korea though to North Korea into Russia, and then connecting to the Trans-Siberian Railway. The intention is to create high-speed rail connections directly from South Korea to the markets of Europe.

“If such a natural gas line and railway were to be built — and there is strong support for this in parts of the South Korean establishment and business community — it would not only provide South Korean producers direct land access across Central Asia and all of Europe.

It would also provide the impetus for transforming the North Korean economy — and change that region’s frozen geopolitics in the process.

In short, if its vision comes to pass, Russia would become anchored in Asia as it never has been in the past. Better yet for Moscow, all major economies of East Asia would become linked to Russia in a way few had previously imagined possible. And that would be truly a pivot to Asia.” Source The Russia-China Energy Agreement Is the world’s largest commercial deal ever. By Kenneth Courtis, May 25, 2014

What about our (Australia’s) great trade hopes? We are deliberately killing off our innovation capabilities, our industries are moving out – even New Zealand seem more preferable! Even the US learnt it lesson that being a service industry country is a lesson of folly. It takes innovation and small innovations to grow into big to be great. So the question must be asked: Do we think we will be rewarded for thinking Asia revolves around Australia? I guess Russia is laughing uncontrollably at this time at such a thought. After all we have our leader saying I am confident, and the advisors or facts did not substantiate that. It seems that Russia will become enmeshed in East Asia in ways to pose new challenges for Russia and Australia.

The opening paragraph of this post said there are differing views on energy supply within Asia. This evolves around the fact that the new Russian Deal on Gas supply to China has been based on an oil price reference formula. Meaning when oil prices are high, the oil-based price formula for natural gas allows the sale of gas at a higher price than if it were based on spot-market natural gas prices. The implications are the entire world’s gas price will follow this formula. The only difference will be transport costs!

Should have mentioned earlier “the size of the Russia China Deal The largest previous natural gas deal which China has signed was with Australia, a dozen years ago. That was a $25 billion deal and runs through to the end of the next decade. The China-Russia natural gas deal is about 16 times larger.

By any measure, it is a big, big deal. Indeed, it is the single largest trade deal ever.” Again the source is Kenneth Courtis.

Now it seems the odd one out of this deal is Japan, our shining light, maybe:

“Japan is the world’s largest importer of natural gas. It continues to seek to diversify its sources of supply.

Japanese buyers are less focused on price than is China, as they also include in their calculations security of supply, stability of supply and consistency of the composition of imported natural gas. Japan also has accepted an oil reference formula for pricing its natural gas purchases.

Now comes the big question: Who in Australia is talented enough to head us in the right direction?

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