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Saturday 19 Aug 2017 | 08:20 | SYDNEY
Saturday 19 Aug 2017 | 08:20 | SYDNEY

Ask the readers: Business risk



10 March 2009 09:20

A couple of weeks ago I asked learned readers to clear up my confusion about the business of satellite launches: wouldn't it be a good idea to build a second, identical satellite to protect against the risk of launch failure, I asked? I did get a response, which I flat out forgot to post until now. Here's what Dr Morris Jones had to say:

It's been more than 50 years since the first satellite launch, but rockets still fail regularly. For some of the major launch vehicles, the failure rate is higher than 10% of all launches. As for building a spare, consider the costs. Space science isn't very well funded. You just have to take your chances. If your launch is commercial, you can always take out an insurance policy before you fly.

Today I have another question for readers, about the risks of building new LNG plants. Here's yesterday's SMH (nb. oil prices matter in this case because, according to the story, LNG prices reflect those of oil):

A prolonged slump in oil prices is casting a growing shadow over the time frames of several huge gas export projects planned for the east coast, as the world recession hovers over sales negotiations. The global giants BG Group, ConocoPhillips, Petronas and Shell have pledged about $20 billion to turn Queensland into the Asia-Pacific region's new energy hub through rival gas export plants. Most of the deals were signed when crude oil was approaching $US150 a barrel.

It seems improbable in the extreme that these companies would commit to decades-long, multi-billion dollar investments without considering the fluctuating price of oil and gas. So how could this particular oil price drop — which took place largely inside a period of just six months — have such a big impact on decision-making? Wouldn't the companies assume that oil prices could rise just as sharply, and build that into their business plans? More to the point, isn't the long-term demand trajectory a far better guide to the success of their LNG venture?

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