GAS and electricity prices look likely to remain a burden on reliant industries, despite a raft of new initiatives which are laying claim to ease supply pressure and reduce electricity price pain.
Yesterday, Santos announced it has lodged its development approval documents for the Narrabri gas project in the Pilliga forest with NSW Planning Department.
On Tuesday, Malcolm Turnbull flagged subsidising the construction of clean coal power stations and compensating farmers to encourage states to lift coal seam gas bans, when he laid down a fresh agenda for energy security and affordability.
Australian Petroleum Producers and Explorers Association chief executive Dr Malcolm Roberts said his company’s Narrabri coal seam gas project had a “a vital role to play in delivering energy security” and the transition towards clean energy.
“In NSW alone, more than one million homes and 33,000 businesses rely on natural gas as a source of energy,” Mr Roberts said.
Last week, Queensland has a a trial program underway to investigate if reservation for domestic supply can help curb high electricity prices. The Palaszczuk government opened a tender for gas production on a 5800 hectare tenement in the Surat Basin, under the condition that all gas produced is supplied to the domestic market.
With gas and power prices on the peoples’ minds, and a Qld state election due in 2018, the Labor government said it would test “how the market reacts” to a supply reservation. Gas prices rose to export parity in October 2015 when the Gladstone Liquefied Natural Gas exported its first shipment, linking domestic prices to the global market.
Last year, the Queensland Competition Authority delivered up to a 16 per cent price hike to electricity prices, which could significantly increase bills for heavy consumers. A typical irrigator, who could be paying $50,000 a year for power, would now pay $57,000 under the new rates.
“Gas is a significant transitional energy source as we head to a renewable energy future… Secure energy supplies is growing as a critical factor when businesses make decisions about when and where they invest, expand and create jobs,” Natural Resources Minister Anthony Lynham said when he announced the pilot program.
But lobbyists on both sides of the power price debate have questioned the initiative.
Shortfall call
Australian Petroleum Production and Exploration Association chief executive Dr Malcolm Roberts said the “unnecessary” domestic reservation condition attached to the tenement “can only discourage development”.
APPEA has forecast a gas supply shortfall in the East Coast market in 2019, driven in part by population growth, restrictive gas exploration regulations and the expected decline in coal fired power.
“The best – indeed the only – way to put downward pressure on local prices is to expand supply,” Dr Roberts said.
While Qld had released new land for onshore gas development, Dr Roberts said “we need to see state governments striving to expand gas supply by releasing more acreage and cutting regulatory costs”.
Victoria has banned coal seam gas development and NSW government, which hosts one small CSG project, has withdrawn all but bar Santos’ exploration licences from gas developers.
Supply reservations
But according to Bruce Robertson, from the pro-renewable energy Institute for Energy Economics and Financial Analysis, the looming gas shortage is a furphy.
“Australia is swimming in gas. There is no supply shortage. How can I say that? Well, the companies won’t disclose the reserves they’ve identified, or their production capacity so the can’t contradict me. And as far back as 2012, BHP said it could supply the east coast indefinitely with gas from Bass Strait.”
The Sydney Morning Herald quoted then BHP Petroleum chief Mike Yeager at an APPEA conference in May 2015, when he indicated the size of the company’s reserves.
“We want to make sure that the market knows that the Bass Strait field still has a large amount of gas that's undeveloped. We have a lot of gas in eastern Australia that's available.
“It's more important to let the citizens of Victoria and New South Wales, and to some degree, you know, even Queensland .. there's plenty of gas to supply those provinces for - you know, indefinitely.”
Mr Robertson said the “reservation policy only works to drive down prices if you reserve more than the existing demand” - which equates to roughly one-third of east coast gas production.
The gas from Narrabri would be expensive to extract, according to Mr Robertson, “and would do absolutely nothing to reduce prices.”
“The industry is aiming to free up the cheaper supply available in Australia to sell into the international market, whilst fobbing off high-cost CSG onto Australian households and businesses,” he said.
Left wing think tank The Australia Institute analyst Rod Campbell said that “the east coast gas market is linked across the same states plus Tasmania, so managing it could be even harder”.
“Everyone knows how hard agreement on the Murray Darling Basin is,” he said.
