Labor’s gas interventions have ground market to a halt, Beach Energy’s chief says

The Albanese government’s gas price cap has backfired spectacularly, freezing projects and conditioning buyers to expect further political intervention, Beach’s Brett Woods says.

The Moomba gas plant in South Australia’s far north which is jointly owned by Beach Energy and Santos. Picture: Brenton Edwards

The federal government’s effort to tame Australia’s eastern seaboard gas market has paralysed investment and encouraged customers to gamble on more government intervention, Beach Energy chief executive Brett Woods says.

Mr Woods has told The Australian that federal Labor’s market interventions – introduced during the global energy crisis in 2022 – created a belief among commercial and industrial gas buyers Canberra would continue to suppress prices, prompting many to abandon long-term contract negotiations in favour of opportunistic spot-market purchases.

His comments come as the Albanese government prepares to unleash the most consequential shake-up of gas regulation in decades.

“When the government set out that price cap, it effectively shut down all execution, all new developments,” Mr Woods said.

“And then all the projects got an exemption anyhow. Only then people started entering into the market.

“But people are just playing short term, hoping that the government will hit our industry one more time.”

Beach Energy managing director Brett Woods.

The $12 per gigajoule cap, rushed through after the steepest energy price volatility since the early 2000s, was the centrepiece of Labor’s emergency gas package. But Mr Woods said the cap and related market powers had delivered significant unintended consequences, freezing projects and conditioning buyers to expect further political intervention.

The tactical shift away from multi-year supply agreements has left major manufacturers – many of which are large employers – dangerously exposed if prices were to spike again as they did in 2022. The government’s willingness to insert itself directly into the market had, Mr Woods argued, tacitly created an expectation it would step in again if conditions deteriorated.

The government is now considering a sweeping overhaul of the market as it prepares to release the results of its east coast gas review. The Australian has revealed the government is poised to install an eastern seaboard gas reservation scheme which would explicitly tie the export capacity of Queensland’s three LNG producers to their ability to first supply domestic users. However, the industry is on alert for a possible shock, most notably from the imposition of a levy on the three LNG exporters.

Such a system would have profound implications for the Santos-backed Gladstone LNG project, which is the only Queensland exporter that does not produce enough gas to meet its own LNG contract positions. Under the emerging model, GLNG would be forced to either boost capital spending on new exploration or buy compliance credits from its rival LNG operators in Queensland. GLNG already spends around $1bn a year on exploration.

Santos says that the proposal threatens the sanctity of export contracts relied upon by key trading partners like Japan, Korea and China which is a point of contention in Canberra’s management of the gas market. But other industry players have struck a more measured tone, saying they could live with a reservation system if it restored predictability.

Mr Woods confirmed Beach Energy would back a reservation policy as long as the government committed to ending its cycle of intervention and reset the market on stable, long-term foundations.

“I believe a well-functioning gas market without intervention will serve Australia the best,” he said.

“I would love intervention to be limited as just having a domestic gas reservation policy across the east coast. Once those rules are set, we can understand how to play in that space.”

He said the design of the policy would be critical to avoiding further distortions. Mr Woods said that under certain configurations Queensland LNG exporters could opt to channel gas into the domestic market only when it aligned with their commercial interests – particularly during low-demand summer periods – while exporting aggressively during Asia’s high-priced winter.

Such behaviour might meet headline reservation obligations but would destabilise the domestic market and complicate investment decisions for upstream producers.

“It needs to be flat levels across the year. Not arbitrage between the high-price winter versus the low-price summer. Because for me we need to have the environment where we can invest as well,” Mr Woods said.

“It would be dangerous for all domestic producers if northern producers were forced to push gas to the south and that made it impossible for us to invest.

“We have got to be careful of all these interventions and then all the unforeseen outcomes that they can deliver.”

Originally published as Labor’s gas interventions have ground market to a halt, Beach Energy’s chief says