Gas policies should foster investment and returns

Expectations released from the Office of the Chief Economist showing that resources and energy export earnings face a $68bn hit in 2023-24 are a reminder that the nation, and the Albanese government, cannot take the resources revenue bonanza for granted. The current record LNG and thermal coal prices are on track to deliver a record $459bn in 2022-23 earnings. Upgraded forecasts, released on Monday, reflect a $9bn improvement in earnings since September. But they warn that earnings will fall to $391bn in 2023-24, due to a slowdown in global demand and easing of supply chain disruptions. Such a fall would have a negative impact on the budget bottom line. But much will depend on the extent to which China further eases Covid-19 restrictions and seeks to accelerate economic development. Competition between Japan and European nations for high-quality Australian thermal coal, higher oil prices and the end of the La Nina weather pattern early next year could also help boost exports over the next 18 months.

The annual Resources and Energy Major Projects Report showed 423 projects in the investment pipeline in the 12 months to October 31, 2022. These represent more than 30 commodities and a 53 per cent increase in committed projects over the previous year. While oil and gas, iron ore and coal remain the nation’s largest export earners, the report showed expansion in hydrogen projects, which doubled to an estimated $230bn to $303bn in value this year. The critical minerals major project pipeline also expanded from 71 to 81 projects.

As Resources and Northern Australia Minister Madeleine King said, demand for minerals crucial to new low-emissions technology, such as lithium, copper and nickel, remains strong and is supporting prices. “These materials, along with other critical minerals and rare earths, will be crucial to low-emissions technologies such as batteries, solar panels and electric vehicles, and will help Australia and the world to meet net-zero commitments by 2050,’’ she said. “Demand for Australia’s lithium remains strong. The Resources and Energy Quarterly forecasts lithium export earnings to increase more than ten-fold in two years, from $1.1bn in 2020-21 to $16bn in 2022-23 and $17bn in 2023-24, making lithium Australia’s sixth-largest resources and energy export commodity.”

The forecasts come after a critical week in which parliament passed the Albanese government’s 12 months of caps on gas prices in order to slow the rise in domestic electricity prices. Coal prices will also be capped. The government will make taxpayers subsidise the power bills of some businesses and households in receipt of commonwealth benefits. Anthony Albanese has flagged a possible domestic gas reservation and caved in to irrational demands by the Greens for taxpayers to subsidise poorer householders in replacing gas appliances with electric appliances.

The government has promised key trading partners including Japan, South Korea and India that exports will not be impacted by the energy market intervention. That would be more reassuring, however, if Australians could be certain that market interventions do not deter investors in future Australian gas projects. Industry leaders warned of that potential consequence last week. On Friday, Samantha McCulloch, chief executive of the Australian Petroleum Production and Exploration Association, said the regulations proposed will dismantle “the open and competitive operation of the Australian gas market’’. This was of particular concern to the industry and was “sending the wrong signal to future investment’’. Interfering in a market that has served the economy, including government revenue, well can have unintended results.