Gas export restriction ‘poses risk’
THE Federal Government’s plan to restrict gas exports will damage Australia’s reputation among Asian investors, according to Korean energy giant Kogas.
Kogas Australia director Insu Woo told an Australia-Korea Business Council conference in Brisbane yesterday that plans for a domestic gas reserve would impact on Australia’s sovereign risk.
Sovereign risk refers to unforeseen changes in government policy that hurt the profitability of investments by foreign companies.
“Australia is a very strong and stable country,” said Mr Woo, whose company is a joint venture partner in Queensland’s GLNG project.
“(However,) the gas reservation will create some concerns for investors who are looking for opportunities in Australia.”
The Australian Domestic Gas Security Mechanism (ADGSM) was introduced on July 1 in response to gas short- ages for local manufacturers and households.
It requires LNG projects drawing gas from the domestic market to limit exports or find offsetting sources of new gas in the event of a shortfall.
Kogas, the world’s secondlargest corporate buyer of LNG, holds a 15 per cent stake in the $24 billion GLNG project near Gladstone, alongside partners Santos, Petronas and Total.
There are industry concerns long-term gas export contracts could be in jeopardy because of the reservation policy in the ADGSM. Former Santos executive Peter Cleary told the conference that the move to restrict gas exports would be incredibly damaging to Australia’s reputation in Asia.
“A quarter of Australia’s gas goes to Korea but with this reservation policy we are just saying the foreigners can deal with it,” said Mr Cleary (pictured), who now runs his own energy consultancy business.
“It is almost xenophobic. I think we owe our gas customers an apology.”
Mr Cleary said the possibilities of domestic gas shortages had been known about in 2010 but nothing had been done by various governments.
“It is a pity in Australia that we need a crisis before we act,” said Mr Cleary. “The result is a policy that is ad hoc.”
Concern over the reservation policy’s impact on exporters such as GLNG comes as domestic manufacturers such as Incitec Pivot continue to fret over a shortage of local gas supply.
IT IS ALMOST XENOPHOBIC Peter Cleary