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Page added on December 4, 2016
Australian Energy bosses called to crisis talks on gas threat
Greg Hunt has summoned the nation’s leading energy executives to Melbourne for crisis talks today on looming gas shortages that are causing spiralling prices and threaten manufacturing jobs.
The Industry Minister will use the meeting to increase pressure on the Victorian and NSW governments to ease restrictions on gas exploration and development that has tightened supply as Queensland liquefied natural gas exports move into full swing.
Today’s meeting comes ahead of a Council of Australian Governments meeting on Friday at which the federal government will tackle rising concerns about energy security sparked by the recent blackout in South Australia and steep increases in contracted gas prices for manufacturers.
Mr Hunt has taken aim at “blanket” moratoriums on gas exploration onshore imposed by Victoria and NSW, which means the country is facing supply constrictions when there “is no shortage of supply”.
State bans were restricting release of significant new reserves of conventional and non-conventional gas, the minister said.
Today’s talks will also place energy executives on notice to maintain competition in a market where manufacturers are complaining of difficulty getting more than one company to bid for supply contracts, in the face of price rises between 50 and 300 per cent.
Chief executives from producers Santos, Esso, Shell and Origin will attend the meeting.
Welcoming today’s meeting, Australian Industry Group chief executive Innes Willox said the states needed to address the “dwindling” supply of gas, or industry would not invest and jobs would be lost.
“We are getting to a point where Australia has lost its energy advantage and we are now at a point where energy is becoming a huge issue when it comes to investment,” Mr Willox said.
“It is becoming a massive issue of confidence for Australian business that needs to be addressed quickly. The states need to recognise that without a gas industry, we will not invest in their states, and if they want to create jobs they need to be able to guarantee gas supply.”
Mr Hunt last week warned of a manufacturing crisis arising from the gas supply shortage as he hit out at “negligent” state bans on exploration. Mr Hunt said the talks, also attended by Resources Minister Matt Canavan, were aimed at developing strategies to ensure a reliable and affordable supply of gas to meet domestic needs.
Mr Hunt sees reliable gas supply as crucial to the government’s bid to integrate climate change and energy policy while maintaining energy security. “Gas is the single energy source which manages to achieve energy security, affordable energy and emissions reduction — it represents the holy trinity of energy,” he said.
NSW, which has effectively banned onshore exploration because of strong opposition to coal-seam gas fracking, imports about 95 per cent of its gas, while Queensland exports most of its production under long-term foreign contracts.
In Victoria, 30 per cent of all gas is used for manufacturing, and firms signing new supply contracts are reporting price rises of 50-300 per cent. With the imminent close of Hazelwood coal-fired power station, the state will become a net power importer.
Today’s talks come ahead of potential strike action by 600 Esso workers in Victoria this week that could shut down gas supply to southeast Australia and trigger immediate domestic shortages.
“This is about supply to unlock any barriers and to try to work effectively to put pressure on all of the states and territories to move quickly to release more gas,” Mr Hunt said.
Manufacturing Australia chairman Mark Chellew, who has called for “urgent” action in response to the Australian Competition & Consumer Commission report into the east coast gas market released earlier this year, said the sector faced an “alarming” set of circumstances.
“My view is that this is the greatest public policy failure since federation,” he said. “The significant problem is that Australia has allowed its gas to be sold offshore without significant gas being available for the domestic economy. That, coupled with our renewable energy target has led to electricity prices spiking and very, very high natural gas prices.”
Mr Chellew warned the problem was set to become significantly worse, with new supply contracts potentially needing to be met by imported gas in only two years’ time.
National Secretary of the Australian Workers Union Daniel Walton said the idea of a national gas shortage was “pure garbage” and renewed calls for a domestic gas reservation policy.
“We have plenty of gas already for both our own needs and for export. The only problem is we’ve allowed multinational gas exporters to completely set the terms,” Mr Walton said.
“Australia gets the world’s worst deal from multinational gas exporters: no special access to our own gas and pathetic tax revenue.”
AWU Victorian state secretary Ben Davis, who has criticised the Andrews Labor government’s moratorium on new conventional gas exploration and extraction onshore for the next four years, said the gas supply problem was deterring investment in the state.
“I am certain it is impacting on jobs, even if we are not hearing about it yet. If you increase any input cost, that obviously affects any company’s profitability, which has to have an impact on jobs,” Mr Davis said.
Australian Food and Grocery Council chief executive Gary Dawson said major food processors were grappling with “savage” price hikes that were flowing through to food manufacturing costs.
“Australia has ample gas reserves but we have got this crazy situation where there is no prospect of new gas supply coming on, and most of the available gas is going to export,” Mr Dawson said.
“(Australia’s gas reserves) should be a source of comparative advantage for Australian processors and yet in fact the exact opposite is true.”
He warned that job losses were inevitable as production costs rose, with the “highly competitive trade-exposed sector” making it impossible to pass on costs to consumers through price increases.
“For manufacturing states like Victoria and NSW, it is going to result in job losses across the manufacturing sector and that is going to hit the state economies if they don’t act,” Mr Dawshe said.
Energy Minister Josh Frydenberg said the Coalition had been steadily opposed against gas reservation policies and that option was not under government consideration.
“The federal government has been consistently against a federal gas reservation policy as it acts as a disincentive to further investment, exploration and development of resources,” he said
17 Comments on "Australian Energy bosses called to crisis talks on gas threat"
Boat on Sun, 4th Dec 2016 3:12 pm
The lesson? Cut down on long term contracts. How? Threaten multinationals with huge taxes if they don’t find the needed gas for the home country. Seems the nat gas complex needs to be regulated a bit different. Lol
Dredd on Sun, 4th Dec 2016 4:27 pm
“A friendly culture of mine was bewildered by her shrink who suggested that to cure her mental illness she should have an election.” – Quotes
rockman on Sun, 4th Dec 2016 7:30 pm
Not sure the problem is? Th oil and NG in Australia belongs to the govt and thus its cvitizens. The national, state and territorial govts decide how and by whom its developed and whether it’s allowed to be exported. At the moment Australian NG consumers compete with foreign buyers…just like US NG consumers. If foreign buyers outbid either group then they don’t get that NG.
The US is in the process of becoming NET NG EXPORTERS. And like Australia it isn’t because we have an excess of NG. US NG imports had been decreasing since their peak but the trend had recently begun to reverse itself.
brough on Mon, 5th Dec 2016 4:49 am
Anyone who has visited Ozz will be staggered by the amount of natural and mineral resources this nation has got in proportion to it’s population. The main problem the Australian government has got is pulling all these resources together for the common good of the state/people. I have put state/people, because it may be possible that the centralist government in Canberra have’nt a ‘bloody’ clue whats going on in the rest of country, where the people actually live.
Davy on Mon, 5th Dec 2016 6:31 am
Brough, too bad they lack water or the place would be a paradise. I wish I could move to New Zealand. They have plenty of water and low population. They are situated as far south as one can get in a civilized way. The southern Hemisphere clearly is a better situated region than much of the rest of the world. Anywhere around the equator and north has a miserable life ahead before the worst hits the south. At least that is how it is looking.
makati1 on Mon, 5th Dec 2016 6:36 am
brough, those ‘resources’ require someone to buy them at a profitable price. They are worth zero until that time comes. If China stops buying…
rockman on Mon, 5th Dec 2016 7:01 am
Mak – FYI: Since last summer Aussie coal has almost doubled in price increasing from $50/ston to over $90/ston. Apparently China cut back domestic production too much. BTW they killed another bunch of miners last week.
makati1 on Mon, 5th Dec 2016 8:15 am
rockman, so what? in a few months, it could drop again, just like the see-saw oil prices. Someone sneezes and the prices change. When the SHTF, the whole system is going to collapse and never recover. The 1st world is going to join the 3rd in a very fast manner.
China is buying up everything it can with it’s almost worthless dollars, just like preppers are stocking up for the bad days ahead. They have to work to spend even the interest on the trillions of USDs in their reserves, not to mention the multi-billions per month in their positive trade with the U$. If 50% of their investments fail, they will still be ahead when the dollars is worthless. They will own real things, not fancy toilet paper.
Rockman on Mon, 5th Dec 2016 9:28 am
Mak – I suspect you’ll be correct about the price volitility. But it doesn’t change the FACT that both coal production and consumption have increased over the last 15 years faster then during any other comparable period IN HISTORY. IOW the first two decades of the 21st century are truly the Golden Age of coal compared to any other period since we began burning it.
King Coal didn’t “die” this century: he had a great coronation. LOL. As I mentioned to Looker you would think the greenies would be screaming about that FACT. Instead they are downplaying coal and actually providing a bit of cover for the big coal producers (like the US) and consumers.
brough on Mon, 5th Dec 2016 9:45 am
Davy
Ozz has plenty of rainfall, ‘up-top’. Darwin and northern Queensland is regularly under several metres of the wet stuff. The problem is how to distribute it to the rest of the country. If you ever have a chance, visit the Kakadu in the ‘wet’, nearest there is to paradise, if you are a Croc.
brough on Mon, 5th Dec 2016 10:24 am
makati1
The Australian problems is this: On one side we need to find a market for our natural resources on the other side we have sufficient to significantly change the chemistry of the Earth atmosphere as to make it virtually uninhabitable. A dilemma, that is almost unique amoungst the nations with a modern democracy. They have sufficient idealist in government to try and do the ‘right thing’. Unfortunately doing the right thing is probably putting the lights out in the southern parts of the country at the moment. No worrys, though, put another steak on the ‘barbie’ and open another ‘tinny’. I suspect the last human on the planet will be some Ozzie in the outback doing just that.
penury on Mon, 5th Dec 2016 10:58 am
It is a conundrum, those who have the resources must find buyers to prevent the collapse of their economy. Buyers are finding that demand for these resources is sinking fast. Meanwhile leaders are formulating and signing meaningless treaties promising that by some date sufficiently far away that they will be gone that the problems will be managed. Meanwhile the economies of the producers are rotting from lack of sales, the buyers economies are rotting from lack of sales, the consumers are faced with the death of the economy and can no longer consume at an ever increasing rate. Welcome to the end of what we call the age of affluence.
Kenz300 on Mon, 5th Dec 2016 1:31 pm
No shortage of wind and solar energy.
Solar Cost Hits World’s New Low, Half the Price of Coal
http://www.ecowatch.com/solar-price-chile-1982242311.html
Seems like Solar energy with battery storage should supply more than enough power for the whole country.
rockman on Mon, 5th Dec 2016 2:40 pm
p – “Buyers are finding that demand for these resources is sinking fast.” For some resources perhaps. But not oil, coal or NG: globally all three are selling near or at all time historic high volumes. And all are projected to increase in the coming decades. We’ll have to wait to see how true that prediction might be.
Kevin Cobley on Mon, 5th Dec 2016 4:13 pm
Both the Australian and Queensland Governments at the time of the GFC thought it would be a good idea to have a bunch of very large companies built a string of very large LNG exporting plants along the coast of Queensland to generate jobs.
However the “Gas Supplies” unknown to the constituents were to be supplied by fracking coal seams. On completion of the plants the “fracking” operations began,the political constituency, farmers and rural towns people then demanded fracking to be banned and they were supported by city based greens. Politicians want to remain in office and with the conservative rural constituency rebelling against fracking and the city vote drifting to the greens. Politicians then began backtracking on fracking so the gas that was previously sold to Australian businesses and consumers had to fulfill the export contracts. Now the alleged domestic shortages are being used as a political weapon to resume coal seam fracking.
It’s not going to work, Farmers and rural towns people use little gas, the conservative political movement is dependent on this constituency to remain in office.
What happened was a big mistake politicians promises gas reserves to Foreign Governments they were unable to deliver, the also had fantasies in regard to the volumes available.
Hubert on Mon, 5th Dec 2016 4:33 pm
Australia may become the next Venezuela.
rockman on Mon, 5th Dec 2016 9:15 pm
Kevin – Mucho thanks for the update. Makes sense. The MAJOR serious predicament with the LNG game is the many tens of $billions needed to build the infrastructure. Neither buyers or sellers. No one is going to risk such capex without a guaranteed supply AND price. I assume your govt has the same type of guarantees in place. Bottom line: Australians, including your farmers and country folk, are going to pay huge for the LNG program: either in money or supply. And probably both.