Unlock gas reserves to lift domestic supply, exports

Resources Minister Matt Canavan’s concern to ensure Australia has sufficient gas supplies for domestic use is understandable, especially when productivity and growth are sluggish. In a nation with ample reserves, gas should be a vital part of our affordable energy mix and an important transition fuel in the slow, gradual shift from coal-fired power to renewables to cover baseload power. But Senator Canavan’s domestic gas reservation plan, announced on Friday, which the minister will develop this year in conjunction with the states and territories, is a second-best option.

Rather than focusing on the most critical issue — gas supply, which is the purview of the states — a reservation plan would seek to ensure adequate supplies by manipulating the market process. The issue again underlines the lack of an effective national energy policy that would capitalise on the nation’s comparative advantages by driving export growth and ensuring affordable power for large-scale industrial users.

On Monday, resources leaders pointed out the risks and shortcomings of a domestic gas reservation scheme. Richard Cottee, one of the founders of Queensland’s booming $70bn natural gas industry, said a domestic gas reservation scheme on the east coast could devalue the price of gas and lessen state royalties. Such outcomes, perversely, would ­reward NSW and Victoria, which had locked up reserves, Mr Cottee, chairman of State Gas and Elixir Energy, said. The policy, he said, could lessen the royalties received by Queensland and South Australia while enabling the Victorian and NSW governments to posture their “anti-gas” stands. A reservation scheme, he said, was a rationing exercise. The better option would be increasing supply and competition.

Victoria should ditch its ideologically driven moratorium on onshore gas exploration as soon as practical. NSW, which has locked up major gas supplies for too long for fear of political repercussions, also has much to answer for. The current policies of our two largest states have held their economies, and the nation, back. At least, in NSW, after years of drawn-out regulatory hurdles, energy producer Santos expects to receive a decision on its $3bn Narrabri coal seam gas project in the first half of this year. Santos has previously called for a clear timeline, arguing the development could help ease the tight east coast market by providing up to 50 per cent of the gas needs of our largest state.

Senator Canavan needs to take note of the views of the Queensland ­Resources Council — led by former Howard government resources minister Ian Macfarlane — and the Australian Industry Group. Both are sceptical that domestic gas reserves are necessary or have any benefits. Senator Canavan said we “can’t repeat the mistakes of the past in just letting our gas be shipped overseas with no thought to our domestic requirements’’. Large industrial users, such as Manufacturing Australia chief executive Ben Eade, agree. Mr Eade, who argues a reserve scheme is “in the national interest”, says gas reservation already happening in Queensland and Western Australia is serving both producers and customers well.

Australia has much to gain by stepping up gas exploration, supply and export. After years of dependence on Middle East oil, gas production and shale oil have been major factors in the US becoming energy self-sufficient.