Andrew Liveras disgorges dog’s vomit on energy

At the AFR the bogus debate rolls on:

The controversial proposals from the Andrew Liveris-led manufacturing taskforce would take government involvement in the gas supply sector to a new level in Australia and have set the scene for a renewed clash between manufacturers and gas producers over prices.

…Engendering most debate in the draft report from the National COVID-19 Coordination Commission’s manufacturing taskforce is the $4 a gigajoule price target for gas delivered to manufacturers on the east coast that it says would deliver a boost of up to $20 billion or more in direct GDP, and up to eight times more on the broader economy.

The manufacturing sector could deliver up to 170,000 well-paid jobs in energy-enabled industries and up to five times more jobs in other related industries, said the draft document obtained by The Australian Financial Review.

The “three-phase” journey towards low gas prices involves an initial phase that includes scrapping the moratoria on onshore gas in NSW and Victoria, enforcing “use it or lose it” rules for licences over gas fields, imposing a gas reservation scheme for the Northern Territory and the east coast, and potential fast-track developments of projects in the Beetaloo and Perth Basins in the NT and Western Australia, respectively.

A second phase, targeting an initial reduction in gas prices to $6/GJ includes government underwriting of new gas supply ventures, “revisiting” rates of return on pipelines, and government taking “active, participatory role” in strategic pipelines.

The third phase, aiming for the $4/GJ goal, includes “proactively” attracting foreign investment in gas-using industries, coordinating with hydrogen developments and setting up an “evergreen” taskforce between the Australian Energy Market Operator and the Australian Competition and Consumer Commission to manage implementation and send “clear market signals” on prioritised basins and pipelines.

This is a political document not an economic one.

Phase one will entrench high-cost gas ($7-8Gj) as the marginal price setter on the east coast because only expensive gas is now available to develop. There is, of course, heaps of $2Gj gas but it’s all inside the export cartel so is going to Asia.

That means phase two then faces even more vested interest pressure from the gas sector as prices are supposed to fall below breakeven for the fields that were developed in phase one, meaning shut-ins and leaving us short of gas again, and at the cartel’s feet.

Phase three is bullshit given phases one and two are fantasy.

All of this is unnecessary, a waste of time and effort, and won’t deliver squat for cheaper energy or manufacturing. It is an absolute mess of interventions that tries to duck and weave through interests like slalom poles and will fall on its face at every turn.

The answer is spectacularly simple and, hilariously, is already agreed in the parliament, as well as being ignored by all. A deal between the Government and Centre Alliance exists to extend the Australian Domestic Gas Security Mechanism (ADGSM) with a price yoked to JKM net-back.

That would deliver $3Gj gas today. You can add a price cap to it at $5Gj. And it’s not likely going to be needed much anyway given the immense regional glut.

That forces the cheap gas inside the export cartel to stay in Australia and the more expensive gas goes Asia, or not at all. It’s good either way.

This is the ONLY solution for cheap east coast energy and if Andrew Liveras can’t bring himself to back it then he should step aside.

David Llewellyn-Smith
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Comments

  1. Shout out to @Senator Rex Patrick for brokering this deal, then, mysteriously, just letting it fade into silence… Seriously Rex, what do the LNP have over you ?

  2. From the article:

    The “three-phase” journey towards low gas prices involves an initial phase that includes scrapping the moratoria on onshore gas in NSW and Victoria, enforcing “use it or lose it” rules for licences over gas fields, imposing a gas reservation scheme for the Northern Territory and the east coast,