Santos Says Gas Reservation May Bump Up Price

Australia may end up with shortage of gas and high prices if the country goes in for gas reservation policy, Santos’ CEO & Managing Director, David Knox said Monday while addressing the Australian Institute of Energy Conference.

“So let me be absolutely clear. Restricting the ability for Australia’s gas developers and producers to continue to meet Asia’s energy challenge and to access international markets would be simply counterproductive.  No-one should be fooled, a gas reservation policy will create market distortions, inefficiencies and would lead to a shortage of gas in Australia, and ultimately higher prices than otherwise,” Knox said.  

He said that a domestic gas reservation policy is the wrong approach to meeting Australia’s energy needs which would create further uncertainty for gas companies, their investors and lower confidence in Australia as a supplier of gas to the region.

“By allowing the free market to work, attractive international gas prices will provide the incentive to producers such as Santos to bring in more rigs, to increase supply, to compete and to apply downward price pressure in the medium to long-term,” he pointed.

The challenge today is for Australian LNG to remain cost competitive so that new projects are sanctioned to meet both Asian and domestic demand, he said.  “Without these additional projects going ahead, new investment in Australia’s LNG industry will dry up in 2017.”

Australian oil and gas industry must ensure cost competitiveness and deliver projects on time, safely and sustainably, Knox said.