IMO,despite all the noises and protests, it was never about if...

IMO,despite all the noises and protests, it was never about if NSW will develop gas or not.

It is about WHEN, and that time is NOW.
BOF was the bottleneck.

Go drill some gas n oil MEL!

Baird’s gas challenge
April 18th, 2014 | Author: Keith Orchison

It would be ever-so-interesting to know what is on new Premier Mike Baird’s private “to do” list for the 11 months running up to the March 2015 New South Wales election.

“Energy” has to be there but is it solely with respect to the privatization of the State’s network businesses, which he has promised to put to the voters next year if he decides to pursue the potentially $30 billion sales, or does it include trying to make a better fist of the gas supply situation than did his predecessor, Barry O’Farrell?

There could be no certainty about which way O’Farrell would have jumped on the first and only a sense of gloom about what he spent his three years in the top job doing with respect to coal seam gas development and would have gone on doing right up to the next poll.

Baird’s instinct is clearly to pursue privatization, but it is a political hot potato and how far he will be willing to grasp it after Grange-gate has cost the Coalition government the high ground remains to be seen.

People will have many issues on which they will judge Baird in his first year as Premier. For me, it will be par excellence how he manages the gas imbroglio.

O’Farrell seemed to me throughout his three years in office to be either unaware or unworried about the effect his poor handling of the CSG issue was having on investors, not just those directly involved in gas development but any business considering NSW for a project that might draw the ire of the Greens and their fellow travellers.

I can think of no aspect of the CSG issue over the past three years where the O’Farrell government’s management was not cack-handed or, in some aspects, craven. Nor does it have the excuse that the way things have panned out caught it by surprise – it was fully aware from the get-go of its term in office of all aspects of this issue.

What has been missing for three years is genuine leadership and pro-active thinking. Now the leader’s baton passes to Baird and the situation is much worse than it was when O’Farrell was sworn in as Premier.

Not to put too fine a point on it, O’Farrell allowed the Greens and radical sideshows, as well as a radio commentator and some other media elements, to dominate this debate and there is now insufficient time to ward off at least some serious affects when present supply contracts run out over the next three years.

By accident or design, the upstream petroleum industry moved as Baird was transferring in to the NSW top job to drive home the point that management of the CSG issue has delivered Queensland development “underpinning the State economy” at the same time that south of the Tweed a failure of management has gas activity at a standstill in a State where, if this continues, the consequences will be real and unpleasant.

The Australian Petroleum Production & Exploration Association issued a media statement hailing the number of land agreements signed between gas companies and Queensland farmers and pointedly comparing this with NSW in a range of ways.

For example, there are now 6,821 direct employees of the industry in Queensland versus 201 in NSW – and 40,583 direct employees and contractors’ staff versus 258 in NSW.

The Queensland numbers will change, of course, as the $70 billion worth of Gladstone LNG projects move from construction to operation, but APPEA sees “enormous potential” for further gas exploration and production in Queensland.

The Queensland developments have so far seen 4,516 land access agreements written in the State (versus 285 in NSW) and 5,228 wells drilled (versus 232 in NSW).

Down the track, both the Queensland government and the federal government are going to benefit substantially from royalties and taxes. The gas industry contributed eight per cent of Queensland gross State product in 2013 and this has a flow-on effect for the national economy.

The overall impact of a gas crisis in NSW on that State’s economy and on the national economy has still to be spelled out, but “non-trivial” will sum it up nicely.

The main APPEA thrust at present is that more than 4,000 farmers have over time started to trust the gas industry in Queensland and that the same can happen in NSW, but this requires a very different approach from Macquarie Street to the one O’Farrell pursued.

There is another aspect of this issue that will have to start taking up Baird cabinet time: to quote federal Industry Minister Ian Macfarlane, NSW now faces a gas shortage from 2016, with consequences in particular for manufacturing and other industries that rely on gas for their operations – and for jobs in these industries.

As AGL Energy pointed out in its most recent economic paper, the onus in this situation falls on the State government to manage who gets gas in shortfall periods.

If I was Baird, I wouldn’t bet on the Labor Opposition not making a meal of this threat in the political jockeying ahead of next March’s election. Soothing noises won’t wash with voters if a scare campaign gets traction.

Even if the new Premier can oversee the start of CSG activity by March next year, it will be close to impossible for adequate new production to be at hand by the 2016-17 winters – and this is in addition to the issue of substantial retail price spikes, which we know will start in mid-2014.

Mike Baird is going to have a great deal on his hands over the next year.

His highest priority, no doubt, will be to limit the Coalition’s Legislative Assembly seat losses – it is near impossible for Labor to win the next election but a Baird government mark two will be severely hampered if it takes a hammering at this poll – and to engineer a majority in the Legislative Council (which is not impossible but a tricky endeavor).

How he rates the State’s gas challenge amongst all the rest facing him will more than just interesting.