Thursday, 1 December 2022

Shadow Resources Minister, Senator Susan McDonald, has foreshadowed a collapse in industry confidence resulting in job losses and long-term investment downturns if the Federal Labor Government implements price caps on gas.

Senator McDonald highlighted evidence from EnergyQuest which showed a $10-per-gigajoule cap could remove or delay more than 700 petajoules of new gas supply in less than eight years.

“Price caps in the gas market would be a disaster. As we’ve seen in other countries, when supply ultimately shrinks, rationing becomes inevitable,” she said.

“A number of gas projects would be at risk, including Santos’ Narrabri and Senex’s Roma North projects. The Narrabri development has the potential to supply half of NSW’s gas demand, yet is stuck in an endless approvals process. The Roma North project in Queensland has the capacity to rapidly bring 60 petajoules of gas supply to the domestic market every year – 10 per cent of the annual East Coast domestic gas requirements.

“However, Labor clearly does not support the gas industry and does not support bringing online more supply. Labor’s October Budget slashed over $100 million of investment for gas exploration, development and infrastructure for projects like the Beetaloo Cooperative Drilling Program, the Cooper Adavale Basins Plan, and the National Gas Infrastructure Plan.

“The Beetaloo sub-basin alone could supply over 200,000 petajoules of gas – 200 years of supply.

“To make matters worse, Labor has showered green ‘lawfare’ offices like the Environmental Defenders Office and Environment Justice Australia with almost $10 million in handouts which will be used to hold up any new resources projects.”

Senator McDonald pointed to the real-world historical examples of Argentina and the United States which implemented price caps.

In the 1990s, Argentina was a hub of private investment into gas and energy resources development but heavy regulation and price caps resulted in private investment disintegrating.

Producers left the market, and with domestic production sharply decreasing, Argentina was forced to import huge amounts of gas.

The situation worsened, and eventually the Government had to heavily subsidise producers to rebuild Argentina’s domestic gas industry.

Price caps in the United States also heavily exacerbated the effects of the 1970s oil crises.

With soaring inflation, price caps discouraged domestic production and exploration.

This led to shortages, rationing, huge imports and costs, and a massive reduction in domestic supply, until the U.S.

Government eventually abolished price caps in the 1980s.

“The previous Coalition Government was able to negotiate with gas companies to ensure domestic supplies at reasonable prices without the need for heavy-handed intervention, but we now have Labor refusing to help bring more supply online,” she said.

“All the feedback I am getting from industry and our international partners is negative and tinged with frustration and surprise, but this Labor Government has got form for not listening and just bulldozing through people’s concerns.

“Labor is facing a revolt from their Labor premiers, with the Queensland Premier warning the Government to keep their hands off Queensland revenue, and South Australia calling a price cap ‘stupid’.

“Price caps are a bad idea, it’s bad governance, it’s bad for Australia’s royalties, it’s bad for economic growth and it will destroy regional communities.”