Via the ABC:
There’s a battle of ideas over how to reinvigorate the economy after the shock of COVID-19, but the make-up of the advisory body the Federal Government has set up to lead the recovery gives a good indication of which way it’s leaning.
Amid calls for new investment in clean energy to cut greenhouse gas emissions and revive the economy, the Government’s given the task of leading the recovery to a committee that’s overweight with business leaders from fossil fuel industries, and gas in particular.
The National COVID-19 Coordination Commission — a hand-picked panel of business leaders and trusted bureaucrats charged with facilitating the “fastest recovery possible” — is headed by Nev Power, the former CEO of iron ore miner Fortescue Metals.
Mr Power is now a director and major shareholder of oil and gas company, Strike Energy.
When asked on ABC TV’s The Business about a push by some business leaders to boost growth while cutting carbon emissions, renewable energy didn’t feature in his response.
Key to kick-starting the economy and manufacturing, he argued, was cheap energy — and the best cheap energy was gas,” Mr Power said.
“We have the opportunity to increase the supply of gas, bring the price down to competitive price levels where they are around the world and to put those manufacturing businesses in place.”
This echoes comments from Energy Minister Angus Taylor, who believes Australia should have a “gas-fired recovery”.
When asked if this presented any conflict of interest given his role at the commission and his focus on energy, Mr Power said he supported all types of energy.
He described Strike as “an emerging player in the gas market in Western Australia”.
However, company documents show Strike has substantial exploration permits in the South Australian corner of the Cooper Basin, which forms part of the east coast gas network.
Mr Power has also publicly supported the increased manufacture of gas-dependent petrochemicals, fertilisers and agrichemicals.
And he’s backed the development of an ammonia plant in the NSW town of Narrabri, put forward by West Australian businessman Vikas Rambal, that could kickstart Santos’s contentious Narrabri Gas Project.
One of Mr Power’s early acts was to bring into the commission as a special adviser Andrew Liveris, former global chairman and CEO of The Dow Chemical Company.
Mr Liveris is deputy chairman of Worley, the world’s biggest engineering consultancy for the oil and gas industry, and also a director of the world’s biggest oil and gas company, Saudi Aramco, which is looking at gas development in Australia.
Mr Liveris — who advised both the Obama and Trump administrations on building up US manufacturing — is pushing the idea that a big lift in gas production is key to revitalising heavy industry.
Deary, deary me. Only in Australia would we put the recovery of manufacturing in the hands of a gas cartel whose only goal is to lift the price of its only product.
As I have chronicled exhaustively, an Australian manufacturing revival is possible with cheap energy. The problem is the gas price is too high and that flows on to electricity prices given gas sets the marginal cost in the National Electricity Market.
The more gas supply argument doesn’t even make sense on paper. There is no more cheap gas to extract. The Narrabri project is very expensive gas at $7-8Gj. It’s the same in Victorian unconventional gas. If these sources become the new marginal supplier to the east coast then prices will double and probably triple from the traditional $3Gj gas that used to support manufacturing of scale.
Perversely, there is a current policy platform that will crash the gas price and revive manufacturing. It is the plan agreed with Centre Alliance by the Morrison Government to get its $158bn tax cuts package through the senate.
By using domestic reservation to link the local price to the Japan/Korea Marker export net-back, this would crash the price. This is largely the case because today the gas cartel has linked all new gas supply contracts to a slope attached to Brent oil and is it recovers the gas price will soar. It is already at $6.50Gj today whereas JKM netback is at $3Gj.
The thing is, there is still lots of cheap gas on the east coast of Australia. But all of those reserves are now trapped inside the gas export cartel. So under the Nev Power unplan, the cartel will keep shipping these super-cheap volumes to Asia while we’ll be stuck with the expensive new supply.
Not only will manufacturing not recover, it will keep hollowing out, right along with every other business and household on the east coast which is currently subsiding the gas cartel and all of Asia.
The only solution is domestic reservation that forces the cartel to sell the cheap gas here, like every other energy supplier on earth does, from Trinidad and Tobago to Mozambique.
But not in the Banana Republic Downunder.
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