POSCO, Hancock-controlled Senex stalls $1bn gas expansion over Albanese price cap laws

About 370 jobs and new contracts including supply deals for Queensland’s $1bn Atlas expansion project are now on ice while Senex determines the fallout of new gas laws.

Recruitment for more than 370 jobs, new investment and future contracts related to Queensland’s $1bn Atlas expansion project – aimed at boosting east coast supplies – will be put on ice until the outcome of the Albanese government’s consultation on its new gas price cap rules.

Senex Energy, which jointly owned by South Korean giant POSCO International and Gina Rinehart’s Hancock group, announced the decision on its website, in response to the passing of the energy price relief bill earlier this month.

New laws passed by the Albanese Government “that could arbitrarily dictate investment returns” for gas producers puts its investment at risk and will result in less gas, electricity shortages, fewer jobs and weaker regional communities that rely on the resources sector, Senex warned.

Energy Minister Chris Bowen and PM Anthony Albanese have rejected industry criticisms. Picture: Bianca De Marchi

“This legislation has the potential to choke gas supply into the east coast market and put at risk the essential role that natural gas will play in the energy transition to enable reliable electricity supply for homes and businesses,” said Senex chief executive Ian Davies.

“Until we know the scope of future Government actions under the yet-to-be-developed Code of Conduct, and the potential for retrospective application of measures, including the breaking of agreed contracts, it is prudent to review all investment,” he said.

“Price controls drive up demand however do nothing to increase supply – a situation that can only lead to unintended consequences requiring more intervention, potentially including energy rationing and breaking LNG export contracts.

His comments echo sentiments expressed by Santos chief executive Kevin Gallagher, who accused the government of imposing a “Soviet-style policy” creating investment settings in line with Venezuela and Nigeria.

But PM Anthony Albanese and Energy Minister Chris Bowen have rejected concerns that a one-year $12-a-­gigajoule cap on gas and $125-a-tonne cap on coal would trigger an investment drain and supply gaps.

New gas laws are also an investment setback for Gina Rinehart.

In August, Senex announced plans to expand its Atlas and Roma North natural gas developments in Queensland’s Surat Basin, which would boost its annual production to an estimated 60 petajoules (PJ) per year, representing more than 10 per cent of annual east coast gas demand.

Senex’s expressions of interest process in September for the sale of gas from 2024 until 2029 triggered offers “oversubscribing the available supply by more than five times in the early years of supply, and with solid interest extending out to 2039”.

But the new laws have made it “impossible to contract with confidence”, Senex said.

The developments are an investment setback for POSCO and Hancock, which bought the former ASX-listed entity after lobbing a $900m offer before Christmas last year.

“We invested in Senex because we saw value in the Australian market and understood the country to be one of the lowest risk places to invest in energy, Senex chairman and POSCO executive vice president Jhoon Soo Jho said on Thursday.

“Because these changes have been brought on so rapidly, we now believe our investments are under question until we see the outcome of consultations and the final form of the mandatory Code of Conduct and new laws.”

Hancock Energy, which is also in pursuit of WA gas player Warrego Energy, said the legislation could “cause catastrophic consequences for Australia’s energy supply”.

“Our friends and allies in Korea and Japan have also relied on Australian energy for decades and are very concerned that we in Australia are turning our backs on them and affecting their industries and their people,” said Stuart Johnston, chief executive of Hancock Energy – 49.9 per cent owner of Senex Energy.

The “heavy-handed reforms introduced without proper consultation” had, in less than a week since passing Parliament, dealt a blow to new east coast domestic gas supply and future energy security, the Australian Petroleum Production & Exploration Association said.

“No new gas supply means no downward pressure on prices and an increased risk of future gas shortages,” APPEA chief executive Samantha McCulloch said.

Originally published as POSCO, Hancock-controlled Senex stalls $1bn gas expansion over Albanese price cap laws