Gas crisis a consequence of coupling energy and climate policies: Santos boss

Kevin Gallagher is the latest energy industry executive to urge Australia to follow the US lead and embrace the comparative advantage of abundant gas reserves.

Tying energy policy to climate strategies has led to the looming east coast gas supply crisis, Santos chief executive Kevin Gallagher has declared, as he called for Australia to follow the US example and decouple the two.

Mr Gallagher on Tuesday joined other Australian energy ­executives in urging the nation to embrace its comparative advantage of abundant gas reserves.

He said current policy meant it was very hard to develop new sources of supply – unlike in the US where Donald Trump has made affordable energy the cornerstone of his economic agenda.

“The drive of the current US administration is the recognition that climate policy needs to be separate from your energy policy,” Mr Gallagher said. “In Australia, we’ve suffered from the two being co-mingled now for a number of years. And that’s impacting on our energy markets and the ability to develop new gas resources.”

The Santos chief’s comments sharpened warnings from the gas industry about a looming shortfall that could emerge across the east coast as soon as winter.

Shortages could lead to substantial increases in bills and threaten the viability of manufacturers – many of whom are unable to switch to renewables.

Increases in utility bills would threaten to stoke inflation and add pressure on households – a record number of which are already unable to pay their energy bills.

Despite the warnings, Australian gas projects such as Santos’s Narrabri project continue to be held up by regulatory delays.

Gas industry executives have insisted the warning should be treated as a looming emergency. The federal Labor government insists it appreciates the role of gas but says it cannot cut corners on environmental approvals.

Mr Trump has vowed to usher in an ethos of “drill, baby, drill”, which has stoked alarm among supporters of a transition to ­renewables.

The Moomba gas plant owned by Santos. Picture: Brenton Edwards

US Energy Secretary Chris Wright said not only would the Trump administration produce more fossil fuels but it would enable human progress.

“The Trump administration will treat climate change for what it is: a global physical phenomenon that is a side-effect of building the modern world,” Mr Wright said.

The Energy Secretary had ­already drawn the ire of critics when he praised coal. “Coal transformed our world and made it better, extended life expectancy and grew opportunities,” he said.

Mr Wright denied he was a climate sceptic, insisting that he was instead a “climate pragmatic”.

While the US has embraced fossil fuel production, Australia’s east coast is increasingly likely to have to rely on imported LNG to stave-off a shortfall. Imported LNG is expected to be more expensive than domestic supplies.

APA Group, which owns and operates Australia’s largest gas pipelines, has said it could resolve the bottleneck via a near-$2bn infrastructure investment.

But Woodside chief executive Meg O’Neill earlier this year warned it might be too late to avoid a crunch in Victoria, leaving LNG imports as perhaps the only viable option.

In an indication of the concern, the Victorian Labor government – historically a harsh critic of gas – has proposed federal government support for an LNG import facility.

The Victoria-led push for the commonwealth to underwrite LNG imports will be presented to federal and state energy ministers on Friday.

Under the blueprint, the Australian Energy Market Operator would act as an anchor buyer of LNG likely from the two most ­advanced projects: Andrew Forrest’s Squadron Energy plant in Port Kembla, NSW, and Viva ­Energy’s Geelong facility.

Originally published as Gas crisis a consequence of coupling energy and climate policies: Santos boss