States have locked away 200 years of gas supply, say business...

States have locked away 200 years of gas supply, say business leaders


Malcolm Turnbull visits the Incitec Pivot Fertilisers plant in Brisbane in yesterday.

• The Australian
• 12:00AM April 28, 2017
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• SARAH MARTIN
  
  Political reporter
  Canberra
  @msmarto
  
  ANTHONY KLAN
  
  Journalist
  Sydney
  @Anthony_Klan
  

Business leaders have lashed the states for locking up a potential 200 years of gas supply through development restrictions, sparking a crisis which threatens 65,000 jobs and has forced this week’s dramatic market intervention by Malcolm Turnbull.
The Business Council of Australia yesterday attacked the Victorian government for lacking “political courage’’ to develop its gas reserves and implicitly criticised the NSW government, which has imposed restrictions through much of the state.
The criticism came after an “unprecedented” move by the Prime Minister to give the federal government powers to curb exports in response to domestic gas shortfalls.
Mr Turnbull said the government intervention could halve the prices of $20 a gigajoule currently being offered to industry. He said about 65,000 jobs were “at risk right at the moment unless action is taken’’.
But the intervention sparked a furious response from the energy sector, which warned the new federal powers to restrict gas exports could create sovereign risk and jeopardise future investment.

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• We were told of gas crisis in 2012

Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts warned the government intervention might be counter-productive.
“At a time when we need billions in new investment to create more gas supply, any intervention that creates sovereign risk is alarming,” Mr Roberts said.
The industry body also warned that, with exploration at a 30-year low, the pipeline for future supply was “precarious”.

Ahead of next month’s budget, the government last night shelved potentially-explosive recommendations from a review of the Petroleum Resource Rent Tax. The review recommends changes to the generous tax deductions for exploration and other spending under the PRRT.
However, Scott Morrison said the government would seek consultation with the industry to ensure any changes do not discourage investment. The report, led by economist Mike Callaghan, did not recommend changes to the crude oil excise and associated commonwealth royalties.
The Australian last month revealed a Treasury-sponsored review was considering radical proposals, including a “minimum resource tax” to capture revenue from the emerging $200 billion LNG and shale gas industries.
Mr Turnbull defended his government’s move on the gas industry yesterday as “temporary’’ and “a short-term solution to a longer-term problem’’.
He said the government would be open to using the $5bn Northern Australia Infrastructure Fund to back a gas pipeline from Queensland’s Galilee Basin to the east coast network if a suitable proposal was put before it.
Resources Minister Matt Canavan said if substantial gas reserves, such as the $3.6bn NSW Narrabri project being developed by Santos, could be fast-tracked, the security mechanism may only be needed for the next three years.
He also said the commonwealth would seek states’ agreement through the Council of Australian Governments to introduce new “use it or lose it” provisions for companies sitting on acreages containing potential gas reserves that could be developed.
According to APPEA, undeveloped gas reserves in NSW and Victoria of a prospective 113,000 petajoules would be enough to supply the entire east coast domestic market for about 200 years.
The federal government has criticised NSW, Victoria, Tasmania and the NT for failing to lift moratoriums on gas exploration and fracking, warning that without an easing of restrictions supply for the domestic market would remain constrained.
The Victorian government has permanently banned fracking and coal-seam gas exploration, including for conventional resources, while Tasmania introduced a five-year ban in 2015, and the Northern Territory instituted a moratorium on fracking in October.
Raising alarm about the government’s move to impose restrictions on LNG exports, the Business Council of Australia blamed state governments for the dramatic federal intervention.
“The Australian government has today been forced to intervene to secure domestic gas supplies because many state governments have refused to support the development of new sources of gas,” BCA chief executive Jennifer Westacott said.
“Australia may now lose valuable export opportunities because states such as Victoria have lacked the political courage to stare down green groups and commit to safely developing our gas resources.”
“The proposed Australian Domestic Gas Security Mechanism is an attempt to rebalance the gas supply-demand balance in the face of blanket bans or moratoriums on the exploration and development of gas resources.’’
Ms Westacott said Queensland, which had committed to developing gas resources to support its economy and create jobs, would now be penalised for the inaction of other states which had “not shown sufficient leadership with their own energy resources”.
The gas export controls announced today by the commonwealth are a short-term measure that risk exacerbating tight market conditions unless accompanied by genuine reforms.
Senator Canavan hit out at the states for sparking a market failure through bans on gas exploration.
“Ideally you expect markets to work and the way markets work is if prices go up you get more supply. Prices have gone up but we haven’t been able to get more supply because of bans and regulatory inertia at a state and territory level.”
APPEA’s Mr Roberts said the restriction on exports could deter the billions of dollars of investment needed to create more gas supply that was the only solution to the domestic gas crisis.
“The main obstacle to developing more supply has been the opposition of some state governments,” he said.
“Queensland and South Australia have shown the political courage and economic common sense to support gas production.
“But government failure in NSW and Victoria has prevented projects that could have averted the current market conditions. The current moratorium in the Northern Territory is also preventing the development of new gas supplies.”

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