I wonder when a government will finally awake to the fact it is at war with the gas cartel. So far, the Turnbull and Albanese Governments have applied temporary, stop-gap measures to deal with it.
But the cartel is not going anywhere and it will continue to menace the national interest until it is dealt with structurally, once and for all:
Labor has been accused by the gas industry of effectively having no plan to fix what the competition regulator warns will be a catastrophic gas shortage this decade that threatens to destabilise the energy grid and undermine export commitments.
Amid renewed signs the government’s extraordinary decision in December to cap gas prices is putting a freeze on investment in new supply and pipelines, the Australian Competition and Consumer Commission predicted there will not be enough gas in a few years to meet both domestic and LNG export demand.
Even if the government’s boldest predictions for an ambitious rollout of green and renewable energy come true, the ACCC estimates the magnitude of the gas shortfall in southern states will balloon between 2024 and 2034 to as much as 300 petajoules. That is the equivalent of more than 50 per cent of the ACCC’s entire forecast domestic demand for this year of 571 petajoules.
And in a stark warning to offshore customers, which the Albanese government has promised Australia will continue to service, the ACCC calculated that meeting multi-decade commitments to supply allies such as Japan will mean sourcing another 450 petajoules from “possible and contingent” reserves not yet on stream.
Gas lobby APPEA chief executive Samantha McCulloch called for a more conducive investment environment and policy settings from all levels of government.
There is oodles of gas to deal with this supply gap as Bass Strait production declines. The problem is, the cartel lied through its teeth to overbuild export capacity, so the 300Pj goes offshore instead. In fact 1500Pj does:
You’ve got to love how this is represented as a government-caused problem when it only exists because of this:
As Santos worked toward approving its company-transforming Gladstone LNG project at the start of this decade, managing director David Knox made the sensible statement that he would approve one LNG train, capable of exporting the equivalent of half the east coast’s gas demand, rather than two because the venture did not yet have enough gas for the second.
“You’ve got to be absolutely confident when you sanction trains that you’ve got the full gas supply to meet your contractual obligations that you’ve signed out with the buyers,” Mr Knox told investors in August 2010 when asked why the plan was to sanction just one train first up.
“In order to do it (approve the second train) we need to have absolute confidence ourselves that we’ve got all the molecules in order to fill that second train.”
But in the months ahead, things changed. In January, 2011, the Peter Coates-chaired Santos board approved a $US16 billion plan to go ahead with two LNG trains from the beginning….as a result of the decision and a series of other factors, GLNG last quarter had to buy more than half the gas it exported from other parties.
The answers to the supply gap are easy:
- apply domestic reservation and let the companies decide how to renegotiate their export contract;
- given 71% of the gas goes to China, make sure that those are the contracts that are renegotiated, not with allies;
- install use it or lose laws to force production increases because price caps are very profitable;
- start a national gas company to do it if needed.
This is where Chicken Chambers should be focussed on the stern restructuring of a failed market, not on his “co-investment” and “collaboration” claptrap.
It’s not like it is politically difficult. Everybody hates the cartel, even those that work there:
Little wonder the nation’s peak oil and gas lobby was so flat-footed in response to the Albanese government’s ukase to limit gas prices. There’s been a great haemorrhaging of staff and corporate knowledge from the upper levels of APPEA’s management – and the departures don’t seem to be under control, with the exits having only continued in recent weeks.
It seems obvious then that the Australian Petroleum Production and Exploration Association didn’t have a hope of organising itself effectively against the government’s market intervention, especially when almost half of its nine-member executive team has been slinking for the exits.
Andrew McConville left in May to head up the Murray Darling Basin Authority. He was succeeded by Samantha McCulloch…
I’m pretty sure that when Andrew and Samantha sat on Daddy’s knee and answered his question, “what do you want to do when you grow up little one?”, neither replied:
“I want to give myself cancer lying for a vicious, illiberal, China-beholden, nation-rorting gas cartel that destroys my countrymen.”
