The Australian Petroleum Production and Exploration Association (APPEA), which represents more than 60 exporters and producers, pushed back on Tuesday against possible government intervention in the natural gas markets.
Possible governmental intervention comes as eastern Australia faces gas shortage projections because of the country’s liquified natural gas (LNG) success. Australia, with a liquefaction capacity of 80 million metric tons/year (mmty), recently bypassed Qatar (77 mmty of liquefaction capacity) to become the global LNG leader.
The APPEA made its remarks shortly after Resources Minister Matthew Canavan and Energy Minister Angus Taylor said they would review a range of policies, including gas reservation, pipeline access and price transparency to come up with options by February 2021. If no agreement is reached with the states by then, Canberra plans to develop policies targeting future gas export proposals.
Canavan and Taylor said past approvals of large gas export projects did not adequately consider the impact on the domestic gas market and that the country can’t afford to repeat the past mistakes. The ramp up in LNG production has also caused a three-fold increase in wholesale gas prices on the country’s east coast over the past five years. Higher gas prices have hurt manufacturers’ profits and led to numerous plant closures.
The APPEA said increased gas supply remains the most pragmatic response to ensuring competitive prices are available. The industry group also warned against unintended consequences of market intervention. “Sensible reforms can improve the efficiency of the gas market and its operation,” said CEO Andrew McConville.
“But market interventions can adversely affect confidence in the oil and gas sector and discourage new market entrants and supply diversity. We will work closely with the government to ensure confidence is restored, not undermined. We have consistently highlighted that while governments may seek to intervene in markets for political purposes, there should be no illusion that intervention is without costs -- not least of which that sovereign risk can adversely affect confidence in the sector.”
McConville said the government was right to highlight that measures already taken, matched by real action from industry, have worked to place downward pressure on gas prices and increase domestic gas supplies.
Although the Australian Competition and Consumer Commission and the Australian Energy Market Operator have stated that there is enough gas supply to meet demand, the APPEA maintains that new resource development is needed to ensure continued supply.