Safeguard mechanism deal threatens power prices, says oil and gas industry

Oil and gas lobby groups have warned the Labor-Greens deal to pass the Albanese government’s safeguard mechanism could force up power prices and put domestic gas supply at risk.

Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch says ‘we can’t let politics and ideology get in the way of sensible, evidence-based climate and energy policy’. Picture: Tom Huntley

Oil and gas lobby groups have warned the Labor-Greens deal to pass the Albanese government’s safeguard mechanism could force up power prices and put domestic gas supply at risk, while business groups remain concerned about access to affordable and reliable energy supply.

But Anthony Albanese denied the mechanism would increase costs or create shortfalls in the ­national electricity market.

The Prime Minister gave the assurance after the government struck a deal with the Greens to impose a hard cap targeting coal and gas projects that the left-wing party claims will stop about 50 per cent of new fossil fuel projects in the development pipeline.

Mr Albanese said Labor had ­resisted demands from the Greens, including a blanket ban on new coal and gas, and argued the government had undertaken consultation with a variety of affected sectors.

“We have had discussions, to be clear, not just with people in this building, but people outside this building,” he said. “Whether it be the manufacturing sector or whether it be the gas industry. You will note, hopefully pretty obviously, that the demands that were placed on us of ruling out future projects, are ones that we said we wouldn’t agree with, and we haven’t.”

While the bill’s passage was welcomed by the Business Council of Australia and Australian Industry Group, Australia’s peak oil and gas lobby group warned the deal would “ultimately make climate change targets harder and more costly to meet” and put domestic gas supply at risk.

Australian Petroleum Production and Exploration Association chief executive Samantha McCulloch – representing gas ­giants including Santos, Shell and Woodside – said “we can’t let politics and ideology get in the way of sensible, evidence-based climate and energy policy”.

The pushback from the gas sector comes amid calls from the Australian Competition & Consumer Commission and Australian Energy Market Operator to unlock more gas fields to offset domestic supply shortages.

Ms McCulloch said “not only is new gas supply needed to support our climate change objectives, but it is also essential to avoid energy shortfalls and put downward pressure on prices”.

Australian Pipelines and Gas Association chief executive Steve Davies warned new restrictions could have flow-on effects on gas supply and subsequently trigger higher prices for consumers.

“While we welcome the certainty of the safeguard mechanism, there are questions over whether the flow-on effects of any additional restrictions on gas supply will be borne by Australian households and businesses who are already facing major increases to energy bills due to the transition,” he said.

Climate Change and Energy Minister Chris Bowen dismissed claims the new deal would create gas shortages, saying Labor had “resisted and rejected” calls to ban new gas.

Mr Bowen assured industries such as manufacturing, cement and aluminium that they would be supported under the changes.

Labor has committed $1bn funding for manufacturing and trade-exposed industries through the Powering the Regions Fund, including an extra $400m for ­industries that provide critical ­inputs for clean energy industries.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar called on Labor to ensure the safeguard mechanism would lock in certainty for businesses while also providing access to affordable and reliable power.

“Lowering energy costs and meeting our emissions targets ­necessitates collaboration between government and industry. While we welcome the certainty that an agreement will bring, business remains concerned about access to ­affordable and reliable energy supply,” Mr McKellar said.