It’s taken five years but the great gas smash has finally begun. The media is full of frenzied options and commentary today on how to fix it. A magnificent stoush is underway between Do-nothing Malcolm and Alan Jones:
Malcolm Turnbull and his government are headed for a showdown with highly influential broadcaster Alan Jones amid a growing view the Sydney radio figure must bear some responsibility for high gas and power prices.
Mr Jones’ public crusade of many years against onshore gas exploration and development in his home state of NSW and beyond is a significant factor in the decision of the state Coalition government, under both Mike Baird and current Premier Gladys Berejiklian, to effectively impose a moratorium.
Mr Jones, who as recently as yesterday called again for Mr Turnbull to be dumped as leader, has been using his high-rating radio show and Twitter to attack the government almost daily over energy prices.
“If we change the leader and change policies – and make energy the issue at an election campaign – the Coalition will walk in” Mr Jones tweeted yesterday.
…Mr Jones claimed on Twitter: “The problem with gas is not supply, Prime Minister, you dunce. We export two-thirds of our gas supplies. The problem is PRICE.”
Mr Turnbull struck back, accusing Mr Jones of failing to understand basic economics. Sitting alongside Ms Berejiklian following the Council of Australian Governments Meeting in Canberra, the Prime Minister singled out “comments in the media” that “the problems with gas are not ones of supply, but of price”.
“Price is a function of supply and demand. So clearly they’re connected,” Mr Turnbull said twice.
…”The big Santos project near Narrabri, that is currently going through the planning process, what we would look forward to is that planning process being completed,” Mr Turnbull chided.
I would like to see both Narrabri and Arrow reserves developed in QLD but there are three problems. Both aren’t cheap gas (proving Jones right an Do-nothing wrong):
Then there is this:
NSW Premier Gladys Berejiklian has defied pressure from Prime Minister Malcolm Turnbull to embrace controversial gas exploration, saying her state is “not budging” on the politically charged issue.
Speaking after a Council of Australian Government meeting in Canberra on Thursday, the Prime Minister stepped up pressure on his Coalition counterpart to approve the much-disputed $3.6 billion Narrabri Gas Project project by energy giant Santos, saying it would go a long way to helping meet a predicted east coast gas shortfall.
This is why both ought to be developed by a national champion oil company. To ensure best-practice and transparent environmental process, low margin extraction and to guarantee that the gas is sold in Australia to put a lid on the cartel. Apply use it or lose it laws to both or just expropriate the reserves.
But even that will not bring gas prices down enough. So this is good from the ACCC:
AGL Energy chief executive Andy Vesey must be getting used to feeling the heat from Canberra.
That’s just as well as AGL looks set to face more scrutiny of its business practices as competition chief Rod Sims cracks down on potential price “gouging” in all parts of the gas value chain.
While the Queensland LNG exporters have been the focus so far of political attention on runaway gas prices, the Australian Competition and Consumer Commission’s examination of gas contract offers on the east coast is expected to shine a light on the role of middle-men and retailers, which have until now remained in the shadows.
The east coast’s biggest domestic gas producer, the Esso-BHP Billiton venture in the Bass Strait, is already under investigation, with Mr Sims saying last week the ACCC is to decide “very soon” whether to force the partners to separately market gas – something they argue would hurt rather than help buyers.
The pipeliners have also come in for special attention from regulators, which some have vocally argued is unwarranted.
The pipelines should also be price regulated much more heavily.
There are still plenty of stupid ideas floating about, via Matthew Stevens:
Australia’s energy crisis would appear to have reached peak weirdness, with former Santos chairman Stephen Gerlach promoting a coal-to-gas project in the southern reaches of the Northern Territory as a commercial and environmentally sustainable solution to east coast supply shortages.
That Australia, a nation floating on gas of various natural derivations, might find itself with a need to manufacture the stuff, seems to me one step beyond the absurdity of plans to ship gas from the North West Shelf or Singapore to a port in Victoria so that it can be reprocessed and injected in the east coast pipeline network.
Gerlach’s starting point is that Australia is never going to return to the days of $3/gigajoule gas. He agreed with our assessment that costs would range around the $4-6/gj over the shorter term but assessed the ceiling might rise further as more and more mature fields retired from the system.
Weidemier assessed that Andado gas would arrive with a very particular advantage. Ebony is interested in long-dated contracts that offer price security to producer and customer. The market is struggling to lock in 5 or 6-year gas.
Weidemier is talking about offering old-fashioned 10-15 year contracts. And that could well be music to the ears of high-volume commercial customers that continue to complain they cannot get term gas at the right price or tenor.
So, we’re along way yet from the real solutions, which are very simple:
- much deeper gas reservation;
- expropriation of reserves and nationalisation where necessary;
- a national gas champion;
- price controls wherever they are needed.
But, gas is now the hot topic. The renewable and coal blame is gone. And the pressure on the government to act in the national interest is mounting as households and businesses reel across the economy.
