The idea of a shortage in Australia — one of the largest gas exporters in the world — is an “absurdity”, according to energy analyst Bruce Robertson of the Institute for Energy Economics and Financial Analysis.
“We are swimming in gas, the idea that we cannot provide for our own population is just a total failure of our energy policy,” Mr Robertson told news.com.au.
The Australian Energy Market Operator on Thursday warned of future power supply shortfalls, which could cause blackouts in South Australia, NSW and Victoria unless gas production is boosted and supplied to electricity generators.
Prime Minister Malcolm Turnbull will hold meetings with the chief executives of east coast gas companies soon to address what he’s labelled as an “energy crisis”, laying the blame on state governments for not allowing the development of gas resources.
“We are facing an energy crisis in Australia because of these restrictions on gas,” he said in Sydney on Thursday.
But Mr Robertson disagreed and said the problems Australia was facing were due to companies sitting on gas reserves and not releasing enough of their product.
“There’s plenty of gas around, even on the east coast,” he said.
Companies are sitting on permits, not developing them and restricting supply so they can make a lot of money.”
It’s created the bizarre situation that sees Australian gas being sold in Japan for a wholesale price that is cheaper than the price it’s available for in Australia.
This is despite the fact it costs an estimated $3.70 a gigajoule more for the gas to be shipped there.
Mr Robertson blamed state and federal governments for failing to develop a proper energy policy in Australia to avoid these problems, despite being warned as far back as 2009 that this could happen.
Part of the problem dates back to the approval of three export terminals in the Queensland port town of Gladstone, which allowed companies on the east coast to ship their gas overseas for the first time.
Mr Robertson said a government report Blueprint for Queensland’s LNG Industry published in August 2009 noted that allowing gas to be converted from coal seam gas into liquefied natural gas (LNG) for export, might not deliver enough gas for domestic use.
It advised the Queensland Government, under the leadership of Labor’s Anna Bligh at the time, to ensure there was enough gas available to met domestic demand. It listed options including holding back production in certain areas to supply Australia’s needs.
“There is a real problem that the availability of gas in the ground may not translate into gas supplied to the domestic market,” the paper stated.
Despite this potential problem being flagged, Mr Robertson said the government took a “cavalier” attitude of pushing forward with the project.
He said any other country that allowed a company to dig up its resources and profit from this, would also have ensured its own domestic supply was covered.
“Australia is unique in its sheer stupidity in allowing companies to exploit our resources and not insist they provide for our domestic market,” he said. “We are uniquely stupid.”
The Santos liquefied natural gas plant in Gladstone, Queensland has enabled companies to ship gas from the east coast of Australia overseas. Picture supplied by SantosSource:Supplied
CAN WE FIX THIS?
Mr Robertson said there needed to be transparency around how much gas could be produced by existing reserves, something that the Australian Competition and Consumer Commission also noted was lacking in its 2016 report.
The ACCC found gas was being removed from the Australian market and shipped overseas instead, leading to uncertainty about future gas supply on the east coast.
Suppliers had also taken advantage of this uncertainty to increase prices.
Mr Robertson said a global glut of gas, which is predicted to continue until 2030, had added to this because companies were under more pressure to make money domestically.
This is helped by the fact there is little competition in Australia so companies can charge higher prices locally.
“The market on the east coast is controlled by a cartel of producers and is restricting supply to the domestic market to drive up the price, and they’ve been very successful at doing this,” he said.
Mr Robertson pointed to the fact that gas provided by Exxon Mobile subsidiary Esso and BHP Billiton is marketed through one company, the Gippsland Basin Joint Venture.
This means anyone wanting to buy gas in Victoria gets one quote, even though the gas is coming from two competing companies.
The ACCC is currently investigating whether this arrangement is uncompetitive and a spokesman said it was expected to announce an outcome later this year.
Mr Robertson said there needed to be political will to crackdown on cartel behaviour and force companies to provide information about how much gas they could actually provide.
“The government has to step in and it has to step in forcefully, to ensure the national interest,” he said.
While there’s much discussion of an “energy crisis” in Australia at the moment, Mr Robertson said it was going to get a whole lot worse.
“People will get made redundant, people will lose their jobs, there will be blackouts. All these things will happen because the government’s let a cartel run riot,” he said.
“The government has got to act and it’s not and there’s no sign they will. And we’ll bumble on in an energy policy void.”
The Australian Petroleum Production and Exploration Association (APPEA) declined to answer specific questions but referred news.com.au to its statement blaming possible gas shortages on many years of policy failure from Victoria and NSW governments.
APPEA chief executive Dr Malcolm Roberts said onshore exploration was at its lowest level in more than three decades.
“Only this week, the Victorian Parliament passed legislation that effectively bans all onshore gas development in that state,” he said.
Dr Roberts said NSW projects including Metgasco at Bentley, AGL at Gloucester and Santos at Narrabri, along with Victoria projects at Lakes Oil and Gippsland had all been blocked, withdrawn or delayed.
“Australia has more than enough gas to meet its export and domestic needs. It just needs the political will to develop it,” he said.
But he said several east coast gas producers “as recently as today” said they had available gas and they “can and do sell into the domestic market”.
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