Key Concepts
- Domestic gas supply prioritization
- Gas as a "pivot point" in energy policy
- LNG exports and their impact on domestic gas prices
- Petroleum Resource Rent Tax (PRRT) and its effectiveness
- Northwest Shelf gas project extension and its implications
- Gas reservation policy
- Climate change and gas exploration
- Firming capacity for renewables
- Environmental assessment of projects
National Gas Plan and Domestic Gas Supply
The Australian government is prioritizing domestic gas supply to drive down power prices. This initiative, termed the "National Gas Plan," aims to ensure a well-supplied domestic gas market at a reasonable price, which is considered fundamental to the social license of the gas industry. Gas is viewed as a crucial component of the energy mix for at least the next decade.
Broken Politics and Policy
Gas policy in Australia is described as an example of "broken politics and broken policy." Despite an abundance of gas resources, the country faces a shortage, leading to government intervention, such as Industry Minister Maline King's warnings to the industry to provide cheaper gas.
LNG Exports and Their Impact
A significant contract to export LNG to China, increasing Australia's exports by over 10% (3 million tons annually), was hailed as a "gold medal performance" for the resource sector. However, concerns have emerged about whether Australia is benefiting adequately from these exports.
Historical Context: The Northwest Shelf Gas Contract
A 23-year-old contract between the Northwest Shelf Gas Partners and China, celebrated by then-Prime Minister John Howard, is now viewed critically. The long-term contracts secured by China resulted in significantly lower gas prices for them compared to what Australian industries and households pay today.
Petroleum Resource Rent Tax (PRRT)
The resource rent tax system has allowed LNG exporters to write down investments, resulting in minimal gains for Australia. According to the Treasury in 2023, no LNG project has paid any petroleum resource rent tax to date, and many are not expected to pay significant amounts until the 2030s. The Australian government earns more from HEX repayments than from the PRRT.
- Example: Impex, a Japanese gas company that exported around $54 billion worth of gas from the Northern Territory, has paid no royalties, PRRT, or company tax.
Northwest Shelf Gas Extension
The extension of a processing plant for the Northwest Shelf gas project until 2070, approved by Environment Minister Mari Watt, has sparked controversy due to its potential impact on indigenous rock art and Australia's emissions reduction targets.
- Geographic Disconnect: The western and northwestern Australian gas markets are separate from the eastern gas markets due to the lack of a pipeline connection. This makes linking the Northwest Shelf to the east coast's gas needs confusing.
Justification for the Extension
Prime Minister's justification for the Northwest Shelf gas extension is the need for "firming capacity" for renewables. He argued that renewables require gas-powered backup to ensure a stable energy supply.
- Example: Tomago, a major energy user in the Hunter Valley, is transitioning to renewables but requires firming capacity.
Gas Reservation Policy and East Coast Shortfall
While the Northwest Shelf partners are obligated to reserve 15% of their gas for the Western Australian market, there is no such obligation on the east coast. The demand for gas for export has driven up prices on the east coast. The shortfall in gas on the east coast is attributed to the Queensland coal seam methane gas resource not being as bountiful as expected. The addition of three large LNG export terminals on the east coast has exacerbated the issue.
Proposed Solutions: Gas Reservation and Export Controls
Economists like Bruce Mountain and Richard Dennis propose solutions such as a gas reservation policy. The government is urged to consider quarantining LNG exports to increase domestic supply.
Political Opportunity
The convergence of the Coalition's (domestic reservation) and the Greens' (tax on gas industry) positions presents a unique opportunity for the Labor government to change gas policy. By making the foreign-owned gas industry "sad," the government could provide cheaper gas to Australian households during a cost-of-living crisis.
Greens' Perspective: Senator Sarah Hansen Young
Senator Sarah Hansen Young, the Green spokesperson for the environment, criticizes the Northwest Shelf project extension, arguing that it intensifies pollution and worsens climate change. She highlights the contradiction of approving a "huge pollution bomb" while residents in New South Wales are struggling with floods and South Australian farmers are facing drought.
- Environmental Impact: The Browse Gas Fields project, linked to the Northwest Shelf extension, threatens pristine marine areas and endangered species like green sea turtles and blue pygmy whales.
Environmental Assessment Concerns
Senator Hansen Young points out that the environmental assessment for the project did not adequately consider the climate damage it would cause. She criticizes the current laws that allow environmental approval for polluting projects without fully assessing their climate impact.
Gas in WA's Energy Mix
While acknowledging the need for gas in Western Australia's energy mix during the transition, Senator Hansen Young emphasizes the need for a faster transition to renewables. She criticizes the government for providing "a free pass" and public subsidies to fossil fuel companies.
New Environmental Laws
Senator Hansen Young states that it is a red line for the Greens that the new environmental laws include power for the environmental minister to deny approval for projects on environmental grounds.
Conclusion
The debate surrounding gas policy in Australia is complex, involving issues of domestic supply, export commitments, environmental impact, and economic benefits. The government faces a challenge in balancing these competing interests while addressing the cost-of-living crisis and meeting emissions reduction targets. The decision on the Northwest Shelf and future gas exploration will be a significant battleground in parliament.
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