Cloud over Feds’ gas blueprint

We need some clarity, says CEO

BILLIONS of dollars of Beach Energy’s potential developments in the East Coast gas market face an uncertain future while the rules of engagement with the federal government remain up in the air, chief executive Morne Engelbrecht says.

Mr Engelbrecht said the company was forging ahead with its Waitsia Stage-2 and offshore Otway developments, the latter of which will bring another 100 terajoules of gas into the East Coast market when it comes online later this year. But developing financial models for new projects beyond the end of 2023 is problematic.

The sentiment was backed up by Allan Gray Australia analyst Dr Suhas Nayak, who said on Tuesday that companies such as Santos and Woodside Energy that had the potential to develop major projects offshore could find that more attractive than investing in Australia. The government’s emergency $12-agigajoule gas-price cap will remain in place until December this year, while final submissions on the structure of new legislation to govern the operation of the East Coast gas market are due next week.

Consultation on the pricecap element of the government’s proposals closed in mid-December.

Mr Engelbrecht said Beach had decisions to make at some point about how to progress new major developments such as further investment in its BassGas assets and more drilling in the Otway, but it needed some certainty around pricing and what sort of interventions the government would institute before it could go ahead with confidence.

“What that might look like, and therefore what economic returns can be assumed, and therefore how we look at the returns on the potentially billions of dollars of investment,’’ Mr Engelbrecht said.

“We just need some clarity on how that will actually work going forward.’’

Dr Nayak said the government’s interventions would likely have only a small impact on listed company earnings in the short term, but over a longer timeframe might disincentivise investment in Australia.

“I think for large companies like Woodside and Santos that have operations outside of Australia, it really does bring into question whether it’s worth making significant new commitments into this market,’’ he said. “I’m sure that’s something that they’ll work through as some of these provisions become clearer. But I think it does change the pay-off profile for them, making investments into Australia versus elsewhere.’’ A lack of domestic investment could also flow through to large energy users, Dr Nayak said, “because that may mean there isn’t enough gas in the domestic market ... and that’s a problem for all of us’’.

Mr Engelbrecht told an analyst call on Tuesday that production guidance would be updated when the company released its half-year results in February.

Beach shares were 4.2 per cent higher at $1.56.