Gas producers accuse ACCC of demonizing them to justify export control – Michmutters
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Gas producers accuse ACCC of demonizing them to justify export control

The Australian Petroleum Production & Exploration Association (APPEA) acting chief executive Damian Dwyer said the industry was already acting to cover supply next year. “There has never been an actual shortfall and there will not be one next year,” he said.

But the move by the Albanese government puts gas producers on notice that export controls could be in place by the start of 2023 for LNG shipments from Gladstone – one of China’s biggest LNG supply sources – unless the industry can guarantee enough uncontracted gas will be diverted to avoid a domestic shortfall.

Electricity futures fell after Ms King’s announcement, sending benchmark prices in NSW for the June quarter of 2023 down towards $200 a megawatt-hour, from about $230/MWh.

Also known as the gas trigger, the ADGSM starts with the issuance of a “notice of intent”, which Ms King indicated could occur at the end of August.

If the minister carries out her threat, exporters would then be subject to government intervention next year to prevent uncontracted gas being shipped to customers in Asia.

Once the notice of intent is issued in coming weeks, gas producers will have the opportunity to provide information on gas production, plant export volumes and the market outlook.

“This is their opportunity to demonstrate that there won’t be a domestic shortfall next year,” Ms King said in Canberra.

Her move follows the release on Monday by Treasurer Jim Chalmers of a damning ACCC report that warned next year could see a 10 per cent gas shortfall if all the industry’s uncontracted gas is shipped offshore instead.

‘Safeguard supplies’

Other changes announced by Ms King in response to the report include extending the ADGSM trigger from January next year to 2030, and renegotiating a heads of agreement with the industry that is due to expire at the start of 2023. Among changes the government will consider is the potential for the trigger to be price-based rather than volumetric.

“These measures announced today will safeguard Australia’s energy supplies,” she said.

“The Albanese government will do whatever is needed to make sure Australians have ongoing access to the gas and energy sources that belong to the people of Australia.”

Opposition resources spokeswoman Susan McDonald said Ms King’s hands were “tied behind her back” and that the crisis was driven by a lack of new supply.

”She knows the answer is more supply, but she’s not supported by her cabinet colleagues. The Labor government must put aside their politics and support projects like the Beetaloo Strategic Basin Plan introduced by the Coalition,” Ms McDonald said, referring to the undeveloped Beetaloo Basin in the Northern Territory.

“Short-sighted bans on developing unconventional onshore gas are coming home to roost.”

The step towards triggering the ADGSM was welcomed by large energy users, manufacturers and trade unions.

“Australia cannot allow our economy to be hollowed out, our manufacturing sector to be savaged, our transition to cleaner energy stalled and our household energy bills to skyrocket because of the planning and market failures of Australia’s gas export industry,” said Ben Eade, chief Executive of Manufacturing Australia.

“Intervention is now urgent and necessary.”

However, one of the nation’s biggest manufacturing bodies, the Australian Industry Group, cautioned the government against holding back gas from international markets, saying that “it will increase global economic pain and worsen the perils facing our allies”.

“Australia must safeguard our energy security but the less we need to rely on export cuts, the better,” said AiG chief executive Innes Willox.

“Prices are likely to be high despite these policy responses, and gas demand reduction will take time and be unevenly distributed. In the short term especially, vulnerable business and household energy users will need financial help.”

windfall tax

Australian Workers Union national secretary Daniel Walton urged the Albanese government to look at a UK-style windfall tax “to capture some of the extraordinary profit gouging that the gas exporters are enjoying as a result of Putin’s aggression in Ukraine”. Prime Minister Anthony Albanese has ruled out such a tax.

The government seized on the ACCC’s report, which it said had set out patterns of behavior that were unacceptable.

Industry Minister Ed Husic slammed the gas giants, effectively accusing them of appropriating unearned profits after spot prices jumped from $8 per gigajoule to $44.

“That is a huge increase and the reality is we have multinational companies extracting an Australian resource to sell to international clients at a price that is squeezing Australian industry and jobs. Something has to be done.”

Ms King urged state and territory governments to step up and “look at what is available to them” to boost supply.

She added that Australia would not have the gas industry were it not for international partners that built the industry with foreign capital and on the basis of long-term supply guarantees.

“We have to respect the investment they have made, the commitment they have made to our country, the jobs they have created in this country,” she said. “By the same token, we have to be assured that Australians will have access to gas.”

Gas industry sources said they expected a revised voluntary agreement to be finalized within the next several weeks that would involve a renewed commitment by Queensland’s three LNG exporters to keep the domestic market supplied.

Ms King outlined seven key principles that would drive the ADGSM changes, including sufficient supply for domestic manufacturers, downward pressure on domestic prices, supporting the energy transition and, maintaining Australia’s position as a “leading contributor to global energy security”.

“Australia needs to be very mindful of any signals sent by any policy changes to our longstanding trade and investment partners around the world who have invested in the Australian economy because of our stability,” said the APPEA’S Mr Dwyer.

“It is even more important to demonstrate consistency, certainty and market stability for the cleaner energy future given these same trading partners are those Australia will work with to build our future hydrogen export industry.”

Damage reputation

Concerns are growing that any move to cap LNG exports would damage Australia’s reputation as a destination for foreign investment, given the reliance on Australian LNG by significant investors and customers in the Gladstone LNG projects from China, South Korea and Malaysia.

That would overshadow the individual financial hit to Queensland LNG players such as Santos and Origin Energy, said MST Marquee analyst Mark Samter.

“As a country the downside risks of haphazard intervention are almost unlimited, but from a corporate perspective, whilst not ideal, they are relatively immaterial in my view,” he said in a note.

A spokeswoman for Australia Pacific LNG, one of the three Queensland exporters which is partly owned by Origin Energy, said that broader actions are needed to solve the east coast’s energy crisis.

“We need to look beyond LNG producers, who invested billions of dollars to develop the LNG industry underpinned by long-term LNG offtake commitments to overseas buyers,” she said.

“To solve energy challenges on the east coast of Australia, it remains important to take steps to encourage investment in new supplies near southern markets closer to demand centres.”

Credit Suisse energy analyst Saul Kavonic pointed to “a noticeable deterioration in the objective quality of the ACCC report” which he also said “appears to be written with more of an attempt to provide ammunition for greater regulatory intervention, rather than to inform market participants” .

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