Senex signs ‘rare’ long-term fixed gas contract

Source: The Australian Financial Review

23rd July 2021

Gas producer Senex Energy has locked in a “rare” long term fixed gas contract with an industrial customer to underwrite the junior explorer’s expansion plans and hedge against market volatility.

Senex managing director and chief executive Ian Davies said the seven-year fixed-price contract with industrial manufacturing company, Adbri, through to 2030 would provide certainty for both parties in a “very volatile market”.

Mr Davies said he expected the east coast gas market volatility – which has seen spot prices hit extreme heights of $58 a gigajoule – was here to stay but insisted that did not suit producers nor manufacturers, who both wanted a stable gas price to make business decisions.

“I don’t believe that volatility is in anyone’s interest … [it’s important to have] a stable market where producers can make a risk-adjusted return on investment and incentivise new supply.

“It also gives customers a price that they can build into their cost base with confidence, and still have a viable and profitable business,” he said.

Earlier this month, an extreme surge in spot prices up to levels 10 times the average earlier in the year hit the gas market, driven by multiple factors including a production disruption at the east coast’s biggest domestic gas supplier, increased use of gas for power generation because of coal unit outages, and a cold snap in the southern states.

Although prices have moderated from the extreme heights of $58 a gigajoule seen in Victoria earlier this month, it remained at over $15/GJ for the past few weeks.

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