Former Labor stalwarts Greg Combet and Craig Emerson appear at Gina’s Financial Review today to mount another empty argument about gas:
Without urgent new coal seam gas development in NSW the state’s industrial gas users will face uncertain supply and price volatility during peak usage periods from 2016. Gas-intensive manufacturing is already migrating from Australia to the United States to take advantage of cheap American shale gas. Supply uncertainty in NSW, combined with sharp price rises associated with the development of LNG export facilities at Gladstone, would cause plant closures and job losses in urban and regional centres of eastern Australia. Withholding the development of coal seam gas reserves in NSW and Victoria would make the job losses worse.
Based on existing proven and probable reserves, NSW has enough coal seam gas to supply the state for at least 20 years. The gas is there but the political sensitivity of coal seam gas extraction is making its utilisation difficult.
And? Making more NSW gas available does not in and of itself solve the problem. The first in a series of unasked and unanswered questions is what would NSW coal seam gas cost to extract? The MB estimate for east coast export net back prices in 2016 is $6-7mmBtu as the regional supply glut weighs on Pacific prices. Is NSW gas cheaper than that? If not then digging more up solves nothing.
If so, then why would it stay here? We already know that Gladstone is short of gas. Any extra will just get shipped north to North Asia where the profits are higher. Moreover, more LNG trains can very easily be added if more cheap gas is available. There most certainly is not enough gas in NSW to suppress North Asian prices!
If cheap NSW gas really is your objective then what is needed is a new policy regime that ensures a certain amount of gas stays in east coast Australia, much like the US has for its domestic consumption, a domestic reservation policy in other words, in tandem with new development if that’s cost effective.
Why nobody puts any hard numbers on this debate is beyond me.
Updated
The GFR byline is:
Craig Emerson and Greg Combet, former cabinet ministers, are economic consultants. Their clients include AGL, but the opinions expressed here are their own.
Jeez…
