Pressure building over looming gas shortages
shortfall is not increasing exports, it’s increasing demand at home.
As old coal-fired plants shut down, energy companies need gas. Sure there will be renewables in the mix, but gas will provide the baseload supply when demand peaks. Manufacturers need gas too. Glass makers, smelters, plastics and chemical plants rely on affordable gas and simply can’t access it. This is squarely an area of state responsibility.
Geoscience Australia reckons Victoria is sitting on 27 trillion cubic feet of gas, enough to supply the entire east coast market for 40 years. Yet the Andrews Labor Government has legislated an outright ban on “unconventional” (coal seam) gas exploration. Victoria also has a moratorium on “conventional” gas development to boot.
NSW technically doesn’t have an outright ban, but the green tape and other restrictions in place have the same effect. Santos has spent a decade and $1 billion trying to develop a big gas project at Narrabri that would meet supply of half the state’s needs. While this regulatory nightmare drags, NSW imports 95 per cent of the gas it uses.
Premier Gladys Berejiklian says the policy won’t change. She’s under no pressure from the state Labor opposition either. Acting Leader Michael Daley this week even suggested “there is no gas shortage on the east coast of Australia.” What planet is this guy on?
The ACCC says gas prices would be 25 per cent lower in NSW and Victoria if they dropped these restrictions. The Prime Minister is now explicitly telling households and businesses in these states to blame the Berejiklian and Andrews governments. The Turnbull strategy is now to make that blame stick.
On Wednesday the Prime Minister had a win. He convinced the major LNG exporters to make enough gas available in the east coast market to meet the predicted shortfall for the next two years.
It’s not a permanent solution, but a start. Turnbull didn’t need to “pull the trigger” on export controls, because he didn’t need to. The threat of the trigger worked.
Labor was left looking slightly ridiculous. It was demanding Turnbull pull the trigger before the scale of the gas shortfall was actually identified. It still wants the trigger pulled now, even after the gas companies have acted. This “Yosemite Sam” approach is more about looking tough than actually getting tough.
When it comes to the states, federal Labor isn’t muscling up. Earlier in the year, Bill Shorten said the states “are producing enough gas”. He now agrees they “do need to do more”. His front bench, meanwhile, is torn over whether coal seam gas is a good thing or a bad thing.
Of course protecting the environment is important. Without delving too far into this debate, let’s just consider the view of the Chief Scientist Alan Finkel on coal seam gas mining. “It’s being used widely across America”, Finkel points out. “The evidence is that, if properly regulated, it’s completely safe.”
So if the states won’t listen to the Prime Minister, the Chief Scientist, the ACCC, struggling manufacturers or battling households, what will change their minds?
Let’s see if money makes a difference. If NSW and Victoria start to lose GST revenue because of their timidity on gas, this issue will really bite.
It’s extraordinary the political leaders of both parties in our two biggest states can’t see where this gas debate is going and re-position.