At the Australian Domestic Gas Outlook Conference in Sydney, Paul Adams, Managing Director of Jemena, has called for the Federal Government to follow the lead of other gas-exporting nations and play a stronger role in ensuring that Australia’s national interest is taken into account by considering the balance between new gas export opportunities and the impacts on domestic markets.
In his presentation, Mr Adams said:
“The potential impacts from significant shifts in east Australian market demand for gas as a result of the huge growth in LNG exports should not be underestimated. There are plenty of signs that confirm gas commodity prices are now shifting from the historical $2-3/GJ towards the $8-9/GJ mark.
“Australia’s large manufacturers, in particular those producing export competitive metal and chemical products, are heavily reliant on gas to produce their goods. These businesses are hurting and have warned of significant job losses in the not too distant future if the effects of the tightness in the domestic gas market are not addressed. This comes at a time when Australian manufacturing is already under unprecedented pressure.
“Although bringing forward gas supplies must be the absolute highest priority for Australian policy makers, this in itself will not necessarily reduce domestic gas prices. Australia needs policies that support both domestic and export markets, and due to the relatively small size of the domestic market (in 2018, NSW demand will be only 10% of the size of the east coast export market. I believe a national interest test will allow both markets to operate successfully.
“While a national interest test for new gas export project approvals may not immediately relieve the pressure on gas prices, it is important to learn from past mistakes and ensure necessary checks and balances are in place to deliver a strong, balanced and sustainable domestic economy that supports long term wealth and job creation.”
In 2018, NSW/ACT demand is expected to be 142 PJ, compared to 1393 PJ for the east coast export market (Source: Australian Energy Market Operator Gas Statement of Opportunities Nov 2013).
Mr Adams also highlighted how current policy settings are restricting access to new gas supplies rather than encouraging their development. He cited exclusion zones on the development of new coal seam gas projects in NSW and the moratorium in Victoria on unconventional gas supplies as examples of such policy settings.
“Applying moratoriums and exclusion zones which are not based in any way on scientific evidence adds to gas market uncertainty and contributes to additional pricing pressure at a time when gas commodity prices are already rising significantly.
“Governments, Federal and State, must redouble their efforts to help in the development of new supply options. In parallel, it is crucial that industry works together closely with local communities to ensure a strong social licence is obtained for future gas supply developments.”
Mr Adams also called on the Federal Government to level the playing field to promote competition between fuels and more cost-effectively achieve national emissions reduction targets.
Jemena believes action needs to be taken to address the current anomalies in the Renewable Energy Target’s (RET) Small-scale Renewable Energy Scheme (SRES) that subsidise and encourage expensive solar and electric appliances, rather than allowing the full range of technologies, including gas hot water heaters, to efficiently meet market needs.
Jemena also advocates that the current RET should be modified so that it is practically achievable and reflects the original policy intent of 20% of total electricity generated.
