King talks tough on gas from a very weak position

The Albanese government is sending welcome signals that it has had a Road to Damascus conversion when it comes to the importance of natural gas, but it must do more than berate industry to undo the damage it has already done. The Prime Minister told journalists on Tuesday “you can’t have renewables unless you have firming capacity. Simple as that. You don’t change a (energy) transition through, you know, warm thoughts”. “We need to make sure that there is security of energy supply at the same time as we support the transition which reduces our emissions,” Mr Albanese said. Hallelujah to that.

On Tuesday, Resources Minister Madeleine King told a conference of industry leaders it was “really important to acknowledge the contribution of the oil and gas industry to Australia’s economic development and to powering Australia’s cities, towns, industries and homes”. Ms King said every single Australian receives a dividend from our energy exports, and that very important dividend was regional stability. “It is simply not possible to over-estimate the critical importance of regional stability. It is very much in our national interest,” she said.

Unfortunately, federal Labor has come late to the party. The latest research shows that Australia is losing its competitive edge in attracting investment in natural gas exploration and production, threatening our energy security, economic growth and emissions- reduction targets. A report by consultancy Wood McKenzie on Australia’s natural gas investment competitiveness found that while global investment in gas exploration had grown by nearly 30 per cent in the past five years, investment in Australia had not kept pace.

Wood Mackenzie found: “Whilst Australia led the mid-2010s wave of LNG projects, a subsequent emerging wave is being led by the United States and Qatar, with Australia no longer featuring significantly.” Australia trails peer nations such as the United States, Canada, Qatar, Norway and countries in Southeast Asia and Africa in key investment areas, including exploration and LNG capacity.

As the government has dithered over approvals for major new gas projects in Western Australia, including an extension of the North West Shelf LNG project, our biggest resource companies have been busy investing elsewhere. Ninety-five per cent of industry leaders surveyed believed Australia was a less attractive place to invest today compared with five years ago. They blamed changing government policy and regulatory settings. One in five affected projects was either cancelled or relocated offshore. Australia was now attracting only a 15 per cent share of the investment portfolio of major international oil companies, down from 40 per cent just over a decade ago.

Ms King’s response was to tell industry leaders to “turn their consultancy spends to practical policy responses instead of CEO surveys”. She may be correct to say that a well-supplied domestic gas market at a reasonable price is fundamental to the social licence of the gas industry to operate. But she misses the point in thinking the solution is to demand that industry limit its attacks on government. The vital ingredient – as Queensland is now showing – is for industry to get the policy settings it needs to have the confidence to invest for the long term. Streamlining regulations and making timely decisions must be a priority.

The message from government to the gas industry is that they need each other because the Albanese government’s plan is to build productivity through a Future Made in Australia powered by gas. But it won’t do it without business. And the evidence is that industry is shutting its wallet on Australia, and that is something that must be turned around.