Essay by Eric Worrall
Gas companies appear to be hinting they might halt exploration and drilling in Australia, unless the government backs off from imposing price controls.
East coast gas supply pact at risk as price controls loom
By Nick ToscanoUpdated December 12, 2022 — 4.23pm
Global energy supermajor Shell has suspended its role in a landmark gas supply deal designed to prevent shortfalls on the east coast next year as it assesses the impact of the Albanese government’s plan to cap fossil fuel prices.
Queensland’s three LNG exporters – Shell’s QCLNG joint venture, Origin Energy-backed APLNG and Santos’ GLNG – are set to hold talks this week to determine whether their September agreement to supply 157 petajoules of gas – about 25 per cent of annual east coast demand – can go ahead after the government announced a series of interventions in the energy market.
The government last week announced a series of initiatives designed to reduce soaring power bills. They include temporary price limits of $12 a gigajoule on uncontracted wholesale gas and $125 a tonne on coal, and powers to influence the price of gas contracts beyond next year. The proposals have sparked a furious response from gas producers, and analysts have described the initiatives as a “declaration of war” on the industry.
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If the agreement falls over, Resources Minister Madeleine King may be forced to step in and trigger for the first time the Australian Gas Security Mechanism – a policy that would force producers to hold back certain volumes for domestic sale only – to avert fuel shortages or blackouts.
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The shortages and price hikes could be resolved very quickly, if the Aussie Government restored confidence by liberating the energy market. But this would require politicians to abandon their Net Zero fantasies, and admit they were wrong. So I don’t see that happening anytime soon.
Instead, Australian politicians seem hell bent on punishing fossil fuel companies for keeping the lights on.
It is not just price controls which energy companies are facing. A few days ago, the Queensland Land Court made history by citing climate change as one of its reasons for recommending a coal mining permit be rejected – a decision which sent shockwaves through the Aussie fossil fuel industry.
Fossil fuel companies don’t have to put up with this abuse. Why should they tolerate price caps, mandatory price controlled quotas, and regulatory hostility in Australia, when they can divert billions of dollars investment to that promising new gas field which stretches from Ghana to the DRC? Why should they deal with an Australian political class which hates them, when they can deal with African governments which are desperate for investment and jobs?
Money is already pouring into projects like the East African Crude Oil Pipeline, along with existing projects like the operational West African Gas Pipeline, so multinational energy companies are already deeply involved in African energy projects. Any additional provocation could be the final straw which convinces them to pull out of Australia completely.
Australian politicians are about to receive a hard lesson on who is really in charge when it comes to Australia’s energy supply. Fossil fuel companies don’t need Australia, but Australia needs fossil fuel companies.
Ordinary Australians will pay the price for the incompetence and arrogance of our leaders.
