Australian Policy Failure Causes High Prices, Bad Decisions: Conference

Poor regulation, environmental pressure groups and the slump in oil prices have contributed to the alleged gas shortage in Australia's gas industry, two speakers told a conference in Sydney organised by the Committee for the Economic Development of Australia.

The CEO of Santos Kevin Gallagher, and of pipelines giant APA, Mick McCormack, criticised governments for reacting in the wrong way to the wrong problem, with one plan being to limit gas exports from Queensland, despite contracts to buy the output.

Australia could be seen a risky place to buy gas, Gallagher told the August 3 event.

Three gas export projects have been approved at Queensland, but the upstream side has been under-performing and in some cases the operators have been buying gas on the market. As gas prices have risen, the government has considered limiting exports. However, Gallagher said, "this is contrary to what the market is telling us. As part of its East Coast Gas Inquiry, the Australian Competition and Consumer Commission has found that there was sufficient gas in the East Coast market to satisfy domestic demand and LNG contract commitments to 2025. And the Australian Energy Market Operator recently concluded that there is currently no gas shortage."

There was no shortage of gas, they said in separate speeches, but the cost of producing it had gone up, while access to it had gone down, the latter being the result of governments giving way to pressure brought by environmental groups – despite, they said, the lack of evidence to show that shale gas production could never be safe.

One such project is Narrabri. Gallagher said: "The Narrabri Gas Project is an important opportunity to supply a substantial share of New South Wales gas needs. Santos has spent nearly 10 years and over a billion dollars trying to develop Narrabri in the face of significant opposition. This is despite scientific research consistently proving that this type of development can go ahead safely with appropriate regulation."

Santos has lodged its Environmental Impact Statement and is continuing to evaluate the possibility of an economic development, he said.

And McCormack said: "Our political leaders are elected to make decisions for the public good, even if the decisions are difficult and unpopular with certain interest groups. The consequences of poor policy decision making has a real cost for ordinary Australians, and in the case of blanket gas production restrictions and moratoria, it can mean the difference between someone being able to heat their homes or not."

He also had words to say about pipeline regulations. Conceding that it was "completely appropriate that each part of the industry be looked at," he said the policy development processes "have been truncated, submissions left unread, concerns not considered, regulatory impact statements, impact modelling and cost benefit analysis all seem to have been side stepped when it comes to this round of energy regulatory reforms." 

As an example, he said pipeline operators "had to comply with an entirely new regulatory framework that commenced on Tuesday this week, which it only got to see in final form later that day. The public resources dedicated to these efforts have been vast and the process is clearly not conducive to effective government policy development."

William Powell