Scott Morrison rules out price control on gas

Scott Morrison says achieving gas prices of $4 a gigajoule is a ‘great aspiration’ but rejects the need for price controls in the sector.

Scott Morrison with an ammunition shell during a visit to Rheinmetall NIOA Munition factory in Maryborough, Queensland. Picture: AAP

Scott Morrison says achieving gas prices of $4 a gigajoule is a “great aspiration” but rejects the need for price controls in the sector, as former Dow Chemical chief executive Andrew Liveris warns new deals signed between the federal government and gas companies will do little to create local jobs.

The warning follows a two-year deal being struck with the Morrison government and large east-coast LNG exporters this week to offer uncontracted gas first to Australian companies, in a bid to keep prices down and lower costs for manufacturers as part of the government’s COVID-19 ­recovery plan.

The new policy would also ­include domestic long-term contract pricing mechanisms, proposals for new pipelines across Australia and other policies that would make domestic gas pricing “more predictable”.

Mr Liveris, who was a special adviser to the Prime Minister’s National COVID-19 Commission, said it looked as if the agreement, revealed in The Australian on Thursday, was an extension of the policy on LNG export controls that was put in place by former prime minister Malcolm Turnbull.

“That was fine as it spoke to the domestic market for the first time and obligated producers to provide gas to the domestic market at international prices,” he said. “But, unfortunately, that means spot prices that could not be counted on a reliable basis and certainly wouldn’t encourage end users to invest for the long term.

‘‘If this policy is all we get, then we have gone nowhere to create domestic jobs. If this is where it stops, I would be extremely disappointed.”

A vocal supporter of the ­nation’s manufacturing industry, Mr Liveris said he believed a new domestic gas policy that was announced late last year and is ­expected to be released by Energy Minister Angus Taylor and ­Resources Minister Keith Pitt in the next few months would incorporate a domestic gas reservation policy.

Mr Liveris said he understood that Mr Taylor and Mr Pitt were working on a code of conduct on how the pricing structure for gas kept for the domestic market would work.

The Prime Minister said Australia was a “market economy” and there was no need for a price target within the agreement unveiled on Thursday for gas producers to offer more supply to the domestic market rather than ­exporting it internationally.

“We don’t want to put a floor on the price. We want that price to be able to go where it needs to go,” Mr Morrison said in the ­regional Queensland town of Gladstone.

“The whole point of this is I want manufacturers to get lower gas prices. And that’s what this is.

“Government don’t have to get involved in everything. We can’t have an economy that’s run by the government.”

Manufacturers and unions were pushing for price controls to help achieve a goal outlined by Mr Liveris for prices to drop to ­between $4 and $6 a gigajoule.

Big energy users complain they can’t find gas on a contracted basis for less than $8 to $10 a gigajoule, more than double historic levels.

Mr Morrison said gas prices needed to come down to make manufacturing more competitive but it was ultimately a matter for the market.

Opposition energy spokesman Mark Butler slammed the gas deal as “another announcement with no delivery”.

“Scott Morrison promised a gas reservation scheme last year and he has not delivered,” Mr Butler said. “Scott Morrison promised a price trigger for ­export controls last year and he has not delivered. The government is congratulating itself for an agreement with industry that just ensures that the LNG industry doesn’t ship all our gas off overseas.

Mr Morrison said gas was part of a transition to a low-emissions economy and declared batteries and storage were not ready to provide dispatchable power.