‘Horse has bolted’ on cheap gas, even with reservation
Poppy Johnston |
Australian gas users will be hoping for lower prices under a national reservation scheme but any reduction is expected to be dampened by dwindling supplies of the cheapest stuff.
A long-awaited scheme to force east coast exporters to set aside some of the gas they extract for domestic use has been billed as a way to avoid shortfalls and ease energy costs.
Energy and Climate Change Minister Chris Bowen says the planned regime is the “best way” of putting downward pressure on prices but is no “panacea” to fix all problems.
By forcing producers to reserve 15-25 per cent of the gas they extract for domestic use, the government hopes to engineer a slight oversupply to edge prices lower.
But he acknowledges there are other drivers of price, including the availability of gas that’s inexpensive to pump out of the ground, such as the reserves found in the fast-depleting Bass Strait.
“Gas to exploit in Queensland and Northern Territory is much more expensive to get out of the ground and to move around the country,” Mr Bowen told ABC radio on Tuesday.
Principal adviser at The Australia Institute think tank, Mark Ogge, said the vast majority of Australia’s inexpensive reserves were already gone, suggesting the “horse had bolted” on cheap gas, even with a reservation scheme.
“You won’t get to bring down gas prices very much, but you can probably limit the rise of gas prices to some extent,” Mr Ogge told AAP.
“That’s the best that can be hoped for at this stage.”
Between disappearing cheap gas supplies and an east coast export market that has opened Australia’s domestic market to international fluctuations, Australian energy users have been paying a lot more for the fuel.
Vastly higher prices have put pressure on energy-intensive manufacturers, which use the fuel to produce goods, as well as households that use it for heating and cooking.
Mr Ogge, who has studied the gas market extensively, welcomed the government’s acknowledgement that the “the problem isn’t a lack of supply, the problem is exports”.
A “huge amount” was being exported annually from existing gas fields to the global spot market, he said, and there was also the supplies Santos was taking from the domestic market to fulfil its own contracts.
“If that gas is supplied to the domestic market, then problem solved.”
He says the success of the reservation scheme will be in the details, which will be fleshed out over years of consultation with industry.
The resources industry have been broadly supportive of an east coast gas reservation scheme of late, provided it will not disrupt existing contracts and that it is “linked to new supply”.
Acting chief executive officer at the Queensland Resources Council, Judy Bertram, said boosting new supply and streamlining approvals was central to putting downward pressure on gas prices.
“Queensland has long done the heavy lifting for the east coast supply along with our role in export markets,” she said.
“The next six months of consultation with Queensland’s gas and LNG producers must be genuine to open new opportunities for the state and ensure the long-term sustainability of the sector.”
AAP
