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Falcon Oil and Gas (OTCPK:FOLGF) is in a “Catch-22” situation in Australia. In fact, you could argue that natural gas consumers down the entire east side of the country is in the same “Catch-22”.
A “Catch-22”-the name of the famous 1961 book by Joseph Heller-is “a dilemma or difficult circumstance from which there is no escape because of mutually conflicting or dependent conditions.
You see, natgas prices in heavily populated eastern Australia have soared-up to $25-$30/GJ, or 6x North American pricing–as LNG exports have created international competition for demand. In fact, just yesterday, the Australian Energy Market Operator said they forecast there will not be enough natgas to meet summer demand at any price as early as next summer, through to 2025.
Falcon and Aussie partner Origin Energy (OTCPK:OGFGF) (OTCPK:OGFGY) have found a COLOSSAL natural gas shale deposit in Australia’s Northern Territory that could supply the east coast with much needed gas.
But the government of Australia’s Northern Territory-which has a population density less than Siberia-has imposed a moratorium on fracking.
That’s a Catch-22-shale gas is the solution to the problem but it’s also THE problem-at least according to the Northern Territory.
THE BACKDROP
Natgas pricing in Southern Australian has become volatile-due to LNG exports (is there a lesson here for North America?).
In July of 2016 natural gas prices in Southern Australia spiked as LNG exports in Queensland almost tripled total gas demand on the East Coast of the country.
Source: reneweconomy.com.au
Southern Aussie gas prices reached daily average prices of more than A$25/GJ which is 600% higher than the price of gas in the United States when converted to greenbacks.
