Oil and gas rivals to pounce amid climate war, says Santos CEO Kevin Gallagher
Australia’s energy sector faces fresh competitive threats as the OPEC oil cartel flexes its muscle while LNG rivals like Qatar are expected to hike production.
Santos has declared Australia’s oil and gas industry faces new competitive threats and risks to prices from government-owned national oil companies hiking cheap supplies, as climate pressures force some investors and lenders to axe exposure to the sector.
The Middle East-dominated OPEC oil cartel will flex its muscle while big LNG rivals such as Qatar are expected to dramatically lift production as countries like Australia wrestle with a landmark International Energy Agency report that concluded there should be no new oil or gas fields if the world was to reach net-zero emissions by 2050.
“In the IEA’s recent Net Zero by 2050 scenario, the share of OPEC oil supply rises to over 50 per cent, the highest in history. This will increasingly put oil supply security and prices for countries like Australia in the hands of the cartel,” Santos chief executive Kevin Gallagher will say in a speech to the annual oil and gas industry (APPEA) conference in Perth on Tuesday.
“Russia, Qatar and the OPEC producers know that the developed world will find it increasingly difficult to develop new oil and gas reserves. And they know that demand for oil and gas is not going to decline as fast as the world might want.”
Mr Gallagher, also chairman of APPEA, said the industry faces immense pressure to adapt to environmental, social and governance pressures, even as demand for fossil fuels remains strong.
“Equity investors have turned off the taps. US equity issuance in exploration and production fell off a cliff in 2017 and it will not recover. Increasing environment, social and governance pressure has restricted access to capital with banks increasingly under pressure to not fund projects in our sector. As a result, we are seeing national oil companies stepping up with more investment because demand for oil and gas is not disappearing.”
Australia has the potential to build a big carbon capture and storage industry as one practical response to reduce emissions, according to the Santos chief.
Carbon capture and storage “could not only reduce Australia’s emissions. It can protect existing domestic and export industries by creating offset opportunities for industries from airlines to manufacturing, preventing the loss of tens of thousands of well-paid jobs across the country”, Mr Gallagher will say.
Separately, just under half of Australian adults support the nation’s gas sector while opposition to the industry has edged up from September 2020, new polling commissioned by peak energy group APPEA shows.
Forty seven per cent of those polled were either strongly or somewhat favourable to the Australian gas industry, unchanged from its last survey conducted nine months ago.
Those who find the industry somewhat or strongly unfavourable rose to 19 per cent in April from 15 per cent in the prior September period, according to a poll of 1500 adults undertaken by JWS Research for APPEA.
While some 71 per cent of respondents agreed there was a role for gas in the nation’s energy mix, just 29 per cent envisage it to remain over the long term with 43 per cent in the short to medium term.
Eleven per cent see no role for gas while 18 per cent did not know either way.
APPEA, which will release its first social licence report on Tuesday, said the findings indicate broad support for the gas industry.
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