Amidst the headlines this week about forecast shortfalls in domestic gas supplies, there are some pointers from regulators and policymakers to the impacts that state-based moratoria on onshore gas exploration and development are having on supply availability.
With both the Australian Energy Market Operator and the Australian Competition and Consumer Commission delivering blunt appraisals of the likely supply scenarios for the East Coast from 2018, the Federal Government has given gas producers one last chance to divert gas earmarked for export to domestic markets, or face export control under the Australian Domestic Gas Security Mechanism (ADGSM).
In the press conference to announce the Government response, Prime Minister Malcolm Turnbull said:
“We strongly encourage the New South Wales government to approve the development of the Narrabri Gas Project, for example, which will add over 58 petajoules of gas per year.
“The sooner that is brought online, that is critical to the energy security of Australia, the energy security of this state New South Wales, which I might say imports 95% of the gas it uses, so it needs to produce more gas.
“Victoria is an even worse example where the Labor Government under Daniel Andrews has prohibited the export of gas onshore, regardless whether it is conventional or unconventional.”
And he wasn’t holding back on the need for more development, telling reporters that State-based policies were making the situation in southern states worse:
“But both Victoria and New South Wales are not doing enough. This has been a real failure on the part of these state governments.”
The strident response backs the ACCC’s stance. In the Interim Report of their 2017 – 2020 Gas Inquiry, the competition regulator says:
“To the extent that moratoria and other regulatory restrictions in the Southern States are preventing or hindering new gas reserves from being developed that could exert a downward pressure on gas prices, these measures are contributing to the southern supply shortfall and to the resulting higher gas prices being paid by C&I users and households.”
Instead, the ACCC again backs the need for
“As recommended in the previous inquiry (and endorsed in the recent Finkel Review), managing the risks of individual gas supply projects on a case-by-case basis rather than using blanket moratoria, and considering the effects that moratoria and other restrictions can have on gas users, would assist to increase incentives for gas exploration and may open up new sources of supply in response to high domestic prices.”
Of course, million dollar protest group Lock the Gate waded into the debate with another missive of half truths and confected outrage, calling for:
“Genuine and urgent gas market reform, price transparency and a coherent energy policy for Australia that prevents us from being held to ransom by the big gas exporters.”
If Lock the Gate is serious, then they need to back the removal of moratoria and the development of a safe, well-regulated onshore gas industry as the first stage in gas market reform. We won’t hold our breath.