Don’t intervene in east coast energy market: LNG exporters
Canberra must resist the urge to intervene in the east coast gas sector, say energy producers.
The re-elected Coalition government must resist any move to intervene in the east coast gas sector and should trust in the market to resolve a supply squeeze and high prices, a group representing major energy producers says.
LNG players recommitted last year to the Australian Domestic Gas Security Mechanism which gives the government power to limit gas exports if it anticipates a domestic shortfall the following year.
While the scheme has helped divert gas to the local market rather than be shipped as LNG to customers in Asia, there have been concerns it is failing to deliver enough supplies for the domestic market with prices still remaining inflated.
Big industrial users today ordered a meeting with Resources Minister Matt Canavan and Energy Minister Angus Taylor to call for more interventionist measures to provide relief for domestic manufacturers.
The government should avoid intervening in the market, the Australian Petroleum Production and Exploration Association says.
“Governments historically are never good at intervening in markets and you always end up with the pendulum swinging too far the other way and markets get distorted,” APPEA chief executive Andrew McConville told The Australian. “I can understand the desire for the government to want markets to work, but I would resist the temptation to see continuous intervention in markets to make that happen.”
The gas mechanism was first introduced by the Turnbull government as a temporary measure to reduce retail gas prices in Australia giving Mr Canavan the power to trigger export controls if forecasts show a lack of domestic gas over a calendar year.
The three Queensland LNG export projects led by Santos, Origin Energy and Shell have agreed to co-operate and the mechanism has partly helped in lowering prices from levels topping $20 a gigajoule two years ago.
Still, current prices between $10 to $12 a gigajoule still remain challenging for many consumers.
The start-up of Queensland LNG exports back in 2015 — which effectively tied the east coast to the international market — has kept prices at a high range but the APPEA chief is hopeful more supply can help bring relief for users.
“Given the nature of us being in a global market, we are in a higher price environment than we have been but I do think there is a path through it,” Mr McConville said. “I would prefer to let the market work and if the demand is there domestically then producers will come with the supply.”