From The Australia Institute:
The Victorian Government’s decision to ban fracking is based on sound economic and energy policy.
Queensland’s experiment in unconventional gas has demonstrated that the economic benefits promised by the gas industry largely failed to materialise, and there has been an enormous downside to other industries.
Arguments that the gas is needed have rung hollow as Australian domestic gas demand projections have been repeatedly slashed by the Australian Energy Market operator (AEMO), and a global oversupply of LNG has led to a crash in export prices.
Gas industry funded research into the impact on local communities in Queensland’s gas field areas has found that;
- Local stakeholders in gasfield areas believe resource development has led to a deterioration in local infrastructure, skills, financial, environmental and social capital. (SMI 2014)
- There were virtually no spillover jobs outside the gas industry itself. (GISERA 2013)
- For every 10 new gas jobs, 18 agricultural jobs were lost (GISERA 2014)
- Only 6% of people in these regions believed CSG development would improve their region. (GISERA 2014)
“The manufacturing industry has been one of the biggest losers with LNG exports allowing gas suppliers to drive up prices to Australian users, and suppliers exercising their market power keep Australian prices high even as global prices collapsed,” Principal Adviser at The Australia Institute, Mark Ogge said.
“We now have the ridiculous situation that Australian gas is now cheaper in Korea than it is in Australia. That’s a double-disaster for local manufacturing jobs.
“Experience now tells us that mining more gas in Victoria would not bring local gas prices down.
“Victorian shale gas is very expensive to extract, and wouldn’t be extracted unless gas companies could sell it at the current high prices.
“The days of cheap domestic gas are over – we are sending all the cheap gas overseas.
“Nor have promises of royalties materialised. Royalty projections in Queensland have been repeatedly slashed to a small fraction of original projections.
“Now the companies are even challenging Queensland Governments calculation of the emaciated remaining royalties.
“What benefits there are, have gone almost entirely to the overseas owners of global oil and gas companies licensed to export Australian gas, largely at the expense of Australian businesses and local jobs,” Ogge said.
OK, a few facts:
- part of the reason for the AEMO slashing its gas consumption outlook is that it assumes that manufacturing is decimated by higher prices so that’s hardly a reason for less gas;
- that said, I am yet to see any analysis that persuades me that NSW or VIC unconventional gas is cheap enough to make a difference;
- moreover, coal seam gas clearly does have negative spillovers and if the community is against it, and they are, then it’s not a viable solution;
- plus, if it is cheaper, then it’ll flow north anyway given two of the six trains on Curtis Island are short of gas. There’ll need to be enough gas to provide surplus to the Curtis Island trains running above name plate capacity added to local demand, and even then there’ll need to be assurances that there’ll be no more new trains (that is, domestic reservation);
- there are also unanswered questions about whether the gas ownership is sufficiently diverse to make any difference to the cartel gouge (for instance, the NSW Narrabri hope is owned by Santos which also owns two trains on Curtis Island).
In summary, the Victorian ban is no surprise at all and Mr Frydengas has more work to do. Given the rather obvious and sensible solution of domestic reservation – which is used in every other country on earth – is out of bounds on ideological grounds, let’s just get on with installing some white elephant floating LNG import terminals to make the local market contestable. I doubt they’ll ever be used, they will permanently erase Australia’s gas advantage by embedding liquifaction costs in the local price, they’ll make us the laughing stock of the intelligent world, but they’ll prevent the extremities of the gouge .
