Experts are queuing up to shoot down the Coalition’s bold plan to remould Australia’s gas sector. That’s no consolation to some of the critics, who say the proposal was insufficient and doggedly late. The strategy includes some initiatives to increase the domestic gas supply in eastern Australia. It focuses heavily on punitive actions such as fast-tracking development approvals and defunding the Environmental Defenders Office. The burden of any reservation policy would fall heavily on two suppliers: the Queensland Curtis LNG plant operated by Shell and the Australia Pacific project run by Origin. Though seemingly appealing on paper, academic experts told the Coalition that the Coalition’s approach could result in severe pitfalls that would likely backfire entirely.
Our Eastern States’ gas export industry has been a freewheeling success for a good decade now. At the same time, domestic prices have remained depressed, averaging only a few dollars per gigajoule. Unfortunately, the exposure to global markets has pushed prices even higher, with international speculators now bidding up consumers’ energy bills to shockingly high levels. The Coalition would like to see these prices come down from more than $14 per gigajoule to below $10. Experts warn that achieving such a goal would be difficult and could be years in the making.
The Challenges of Increasing Domestic Gas Supply
So even with friendlier policies, bringing that extra gas to the domestic market is years away. We should have done the legwork to negotiate aggressively with gas companies long before those projects became a reality. Unfortunately, the current state is tough to amend. The opposition has pledged to green light a large Western Australia gas development within 30 days of coming to power. This scheme may not stand up to judicial scrutiny.
“What will happen over time is the amount of gas you need for them to divert domestically to keep the price down will increase,” – Saul Kavonic
The Coalition’s plan calls for “use-it-or-lose-it” provisions for offshore fields, intended to make way for new gas supplies. Critics insist this move is entirely politically motivated. They caution that it would be damaging to the Coalition Liberal/National Parties, energy consumers and the national economy.
Impact on Eastern Australia’s Gas Market
Fallout from the new Eastern States’ domestic gas market, which used to take advantage of consistently low prices. Experience with foreign pricing has completely flipped that calculus. Australian Energy Regulator local customers currently consume around 500 PJ of gas per year. The Coalition’s policy to dump more gas into the domestic market, at volume and with the expectation of a magic price lowering, is delusional.
Despite these efforts, experts highlight that within three to five years, there may be no volumes left beyond what is already contracted in foundation agreements. For over 10 years, the multinational gas cartel has been massively overcharging Australian consumers. Breaking this cycle will be an intimidating undertaking.
“The devil is always in the detail,” – Tim Buckley
That makes the APLNG project in Gladstone, Queensland, one of three huge LNG projects in the region, a shining exception. While its contribution to supplying domestic gas will be critical. International contracts and commitments make wading through these muddy waters a steep hurdle.
Legal and Political Implications
Peter Dutton’s pledge to approve a major WA gas project within a month of assuming office may encounter legal difficulties. The opposition’s counter grant big project proponents relief by fast-tracking approvals and defunding the agencies that provide critical environmental oversight would invite regulatory chaos and hefty public blowback.
“The Coalition has proven a weak, populist hypocrite on gas.” – Saul Kavonic
Critics have explained that the Coalition’s policy solution is rooted in political self-interest and not a genuine desire to address the crisis. Though it attempts to mitigate the impact of increasing domestic prices, the long-term effects would be dangerous for policymakers and energy consumers on both sides of the aisle.
