Future LNG investment not guaranteed thanks to Labor action, say global giants
The federal government’s gas policy has made Australia unappealing to future LNG investment, say US giant Chevron and Japan’s Inpex.
Labor’s gas policy instability has dented the appeal of Australia and recent investments are no guarantee that they will continue pouring more funds into the resource sector, two of the country’s largest foreign investors say.
The resources sector is simmering with frustration with the federal government after a series of policy interventions that they say undercuts a recent pledge to place gas at the heart of transition policies.
Issuing a plea for stability, senior executives at US giant Chevron and Inpex – one of Japan’s largest investors into Australia – said government interventions undermines their confidence in the country and future investments needed to maintain supplies are not guaranteed.
Chevron president of international exploration and production Clay Neff said the company’s $80bn investment into building LNG facilities in Western Australia was predicated on strong fundamentals, namely large resources, strong local and regional demand and a consistent regulatory and fiscal landscape.
But a spate of changes means it must now consider whether to continue to pour more money into developments needed to maintain supplies.
“The government has the right to do what it wants to do but over the last couple of years there have been successive changes … those changes can happen over the course but when you have those things line up in a year or two-year time period, you have to take a pause,“ Mr Neff told The Australian.
“We don’t have to backfill and if we don’t there are trade-offs for that but we will just factor that into our investment decisions.”
The comments come as industry figures have unleashed a series of pointed criticisms at Labor after the government last week withdrew legislation that would have closed a legal avenue exploited by environmentalists to curtail new LNG developments, after striking a deal with the Greens for support of its wider legislative agenda.
The government had assured the industry earlier this year it would move to define who offshore gas developers needed to consult, a seemingly minor yet consequential change that the industry had earmarked as an indication of Labor’s commitment to the sector worth more than $90bn in exports and employing tens of thousands of people.
The LNG industry has interpreted the decision as what they consider to be Labor’s indifference towards gas, and prominent companies worry they could be targeted as long as the legal avenue remains open.
Labor has insisted that it has not abandoned the pledge, and will continue to consult players and refine the measure, so it can pass through parliament. Resources Minister Madeleine King offered few assurances in a speech at a major gas conference in Perth on Tuesday.
The government insists it has been forced to intervene in Australia’s gas market after soaring prices left households struggling to pay utility bills and manufacturers were pushed to the brink of bankruptcy.
The government has publicly endorsed the role of gas in Australia’s energy transition, the centrepiece of Labor’s plan to meet emission reduction targets.
Takayuki Ueda, CEO of Inpex Corp – Japan’s largest oil and gas exploration and production company – said the policy was reassuring but Australia would now have to demonstrate its commitment to the strategy.
“The offshore approvals processes for environmental approvals and carbon capture and storage requires immediate action,” Mr Ueda said.
“I really hope the government understands what we are saying. It is not just Inpex saying this, but many foreign investors are thinking about the stability of policy setting by the Australian government. If those policy settings continue, we are happy to continue our investment in Australia.”
While offshore investors have heightened pressure on the government, Labor is struggling to manage a growing schism over the role of gas. Gas remains divisive despite impartial industry figures such as the Australian Energy Market Operator stressing the importance of gas, it remains deeply unpopular with some pockets of the community.
Environmentalists have managed to persuade a growing number of voters, particularly millennials – Australia’s largest voter bloc and many of whom are climate focused – that the country can easily switch to renewables.
As a result, domestic gas developments have struggled to secure social and regulatory licences to build new sources of supply, while Labor last year weakened fiscal support for carbon capture and storage (CCS) projects.
CCS sees gas developers remove carbon dioxide from supplies before it is often buried deep underground. The technology is used overseas but technical issues at Chevron’s Gorgon facility have been used by critics to undermine confidence in the technology.
Critics insist using CCS will prolong the use of fossil fuels, but industry executives stress gas is needed to support renewable energy generation during periods when the sun is not shining or the wind is not blowing.
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