Australia: the World’s Biggest Banana Republic? 

06.03.2017 • Gold and Natural Resources

By Kris Sayce – Port Phillip Insider (Australia) –

Unkind folks would say that Papua New Guinea meets the definition of a small ‘banana republic’. It’s somewhat politically unstable, and relies on the export of natural resources, rather than ‘value-added’ goods.

But if PNG is a small banana republic, then, in this context, Australia is a big banana republic. Because the energy-export issue affecting PNG is the same issue affecting Australia.

We’re talking about the ‘crunch point’ on the East Coast of Australia. This is a subject colleague Greg Canavan has banged on about for several months.

In the case of Australia, the lower-than-expected production volumes from Queensland’s coal seam gas (CSG) sector, combined with idiotic decisions by governments in New South Wales and Victoria to ban onshore exploration, is causing natural gas to flow out of Australia, driving up local prices.

While it’s bad news for Aussie energy consumers (in other words, just about everyone), it’s creating an incredible investment opportunity. Details here.

As for PNG, what the government is really saying is that it wants to impose a new tax. They’ll say that they’re just ‘ring-fencing’ part of a company’s production for domestic use.

But the reality is that if domestic-use gas is below the global market price, the difference in price acts as a tax. If the difference is small enough, and the rewards still worthwhile, the production companies will grit their teeth.

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