Cooper Energy boss to use power wisely

AFR - extract only

Fast-growing Cooper Energy says it won't be milking short-term profits from the strong negotiating position it has as the $355 million Sole gas project off Victoria comes on stream just as industrial and manufacturing customers are scrambling to find gas suppliers.

The company is now a much bigger player in the gas market and has a market capitalisation of $520 million after acquiring the Sole project, 65 kilometres off the Victorian coast, from Santos, and has been aggressively tilting its business mix towards gas and away from oil.

Cooper managing director David Maxwell said on Thursday after the company's annual meeting the company had identified five or six years ago that gas shortfalls were on the horizon. The Sole project, which comes on stream in 2019, is the flagship but the group also has a range of other Australian assets including its oil business in the Cooper Basin in northern South Australia.

Gas now represents about 85 per cent of total reserves at Cooper Energy, with oil at 15 per cent. Oil had been at 100 per cent only a year ago.

Mr Maxwell said the company was aiming to move its contracted share of its current gas reserves from 60 per cent to between 80 and 90 per cent over the next 12 to 18 months.

He said the broader east coast gas shortage meant it was in a strong position, but it would be playing a long-term game and not squeezing potential customers.

"It's not milking it for everything we can tomorrow," he said.

The federal government dropped its threat to curb LNG exports from Queensland on October 3 after the three LNG producers in Queensland, Origin Energy, Shell and Santos, assured Prime Minister Malcolm Turnbull they would provide enough supply to fill a looming domestic gas shortfall. The three LNG ventures spent a combined $80 billion on their projects in the past decade as Australia's gas industry tilted heavily towards being a gas exporter.

Mr Maxwell conceded that while Cooper had been building its business in a strategic manner, the big-picture macro-shifts in energy markets and the uncertainty around energy policy at both a federal and state level had exacerbated the potential shortages of gas. Cooper was in a sweet spot. "That's been vacant, which has further accelerated the demand for gas," he said, referring to the lack of certainty around energy policy.

"We are in a much stronger position than we expected," Mr Maxwell said. The Sole project is already 75 per cent contracted to four principal customers: AGL Energy, Alinta, Energy Australia and glass maker O-I Australia, the local unit of a United States conglomerate.
Cooper chairman John Conde said the energy policy uncertainty had made it much more obvious to all players in the gas market and their customers where supply and demand were headed.

"I think it's made it more obvious," Mr Conde said. "The shortfalls are real and accepted widely."

Mr Maxwell said industrial customers needed to accept that much longer contracts were required in the market in order for new gasfields to be developed. "You can't support a gas project by writing a one-year contract.

"They've got to make some commitments," he said. A minimum of five years was a starting point to help bankroll the new fields.

Mr Maxwell declined to say whether he expected the solid rise in oil prices over the past few weeks would continue, although the company was working on the basis that oil would be somewhere in the range of $US45 to $US60 per barrel.

"We stay out of forecasting oil prices," he said. "What we do is make sure we can survive at very low prices."