Could it be that sense will finally prevail? ABC.
Gas giants would be forced to supply more energy to the domestic energy market under gas reservation plans that could be adopted by both sides of politics in an election shootout over how best to secure more energy and drive down prices.
In moves that would unsettle some of Australia’s biggest export partners led by Japan, the Coalition is close to announcing details of its “prospective” gas reservation plan in exchange for easing environmental and carbon emissions regulations on developers.
Sources told the ABC that Peter Dutton was originally expected to announce the policy during the election campaign. But there is now speculation the opposition leader could make it a key element of his budget reply speech on Thursday.
“It’s becoming imminent,” one source said.
There is widespread industry expectation that Labor is poised and ready to immediately counter Mr Dutton with its own version of a reservation aimed at boosting the supply of gas to the east-coast energy market.
A domestic reservation has long been regarded as a bridge too far for the major parties, which are fearful of being accused of generating “sovereign risk” for global investors and energy giants that have sunk hundreds of billions of dollars into gas export infrastructure.
However, with a hung parliament seen as increasingly possible, the idea has been given fresh weight because many teals and independents are in favour of garnishing a greater portion of gas production for domestic users.
The Coalition will announce its reservation policy alongside a wide suite of promises that it says will “flood” the market with gas by 2028, which is when the Australian Competition and Consumer Commission says the market will suffer a supply shortfall.
Gas consumption in Australia is falling faster than anticipated, helping to avoid the risks of seasonal shortages in the next few years, according to energy commentators.
Energy experts warn that the devil is in the detail of any reservation policy, which economists regard as an effective subsidy because it effectively shifts supply destined for export markets, where prices are higher, to domestic buyers who are being guaranteed a lower price.
Grattan Institute energy expert Tony Wood said the problem with a gas reservation policy was that it effectively forced producers to put supply into the market at a loss.
“The difficulty for the reservation policy is working out what the number should be so the market is oversupplied and prices come down,” he said.
“In some way, you end up subsidising domestic use of gas. If that’s what you want to do, that’s fine. Could it be made to work? Maybe.”
Are you bloody serious, ABC? The gas export cartel sponsors Tony Wood and the Grattan Institute via Origin Energy, where he used to work. At least provide a disclosure. Better still, don’t interview him at all. Use IEEFA.
Wood has been making this broken argument for twelve years while gas prices kept going up in the East, with stable prices in the West using gas reservation.
If it is done right, of course reservation will work. And it does not force anybody to sell “at a loss”.
But doing it right means blanket reservation. If you do it project by project, then the export cartel will juggle its assets so that cheap gas goes overseas and more expensive gas stays here.
For now, reserving uncontracted gas is probably enough, but, over time, the East Coast will need to retain about 15% of currently exported gas.
We should also be discussing an export levy. If it is set at $7Gj, then it will raise about $10bn per annum. That will automatically crash the local price to $7Gj.
As for a “flood” of gas, the only place that is going to come from is QLD, where the export cartel rules supreme. Nobody knows if there are onshore reserves in VIC and NSW’s Narrabri project is not big enough.
Stop talking to Grattan about gas. Its arguments have all but destroyed the energy transition, industry, living standards, and five prime ministers.
It’s goddamned toxic.
