Page 11 - GLNG Week 34

GLNG COMMENTARY GLNG

Australia’s gas plans appear

to be on shaky ground

The government continues to reiterate its commitment to natural gas

within the power sector, but the facts do not seem to add up

POLICY THE Australian government does not appear Shadow resources minister Joel Fitzgibbon
to have noticed that its plans to bolster gas-fired has backed the plan, which calls for a number of
WHAT: power generation (GPG) over the long term have government measures to support upstream and
Australian Prime Minister begun to unravel rather rapidly. midstream development, only to be chastised by
Scott Morrison has Prime Minister Scott Morrison doubled Labor leader Anthony Albanese and climate and
doubled down on a gas- down on his administration’s commitment to a energy spokesman Mark Butler.
fired recovery. gas-fired recovery this week, calling for greater Morrison dismissed his opposition as “con-
domestic production and consumption of the fused” about gas, said his government was “all
WHY: hydrocarbon to “fuel the jobs that this country behind it” and claimed he would win over the
Cheaper gas will boost needs”. support of the Australian public. This is fighting
the manufacturing The prospect sounds appealing, especially talk, but it seems to have missed mounting ques-
sector, creating jobs and given the fact that more than 60% of the coun- tions about GPG’s role in the future economy.
boosting the economy. try’s coal-fired power generation is expected to
go offline by 2040. But there is a catch: Morri- Cheap gas?
WHAT NEXT: son’s vision has failed to catch the imagination of Morrison’s government threw its weight behind
Keeping a lid on gas those beyond his inner circle. gas as a bridging fuel after a draft NCC report
prices may be too big a The Australian Energy Market Operator’s recommending government support for domes-
job for the government. (AEMO) 2020 Integrated System Plan (ISP) tic projects as a means of capping gas prices was
has suggested that GPG’s role is not essential to leaked in May.
the country’s future energy grid, owing to rising East Coast wholesale gas prices averaged
feedstock costs. around at around AUD4 per GJ ($111.32 per
Western Australia’s state government, mean- 1,000 cubic metres) for many years until three
while, has barred the export of gas production world-class liquefied natural gas (LNG) export
from future onshore developments to the East terminals came online in Queensland in 2014.
Coast. This means that a potential source of Prices peaked at AUD20 per GJ ($556.62 per
cheap domestic gas has been sealed away from 1,000 cubic metres) in 2017, before sliding to
consumers in the east, which could exacerbate AUD4 this year in the wake of both global over- Western
East Coast gas prices further. supply and COVID-19’s demand destruction.
The NCC believes that the federal govern- Australia’s state
Doubling down ment should underwrite investment in new gas government,
Appearing in Parliament on August 25, Morri- pipelines, including one running from WA to the
son responded to criticism from Greens leader east, as a means of keeping a lid on fuel prices as meanwhile,
Adam Bandt by noting that gas would “firm a boost to the manufacturing segment, thereby
renewable technologies”. driving an economic resurgence. has barred the
“That is why we want to see more of it and However, the upstream industry has lashed
get more out of the ground … so we can fuel the back at this, saying AUD4 gas is unfeasible, as export of gas
jobs that this country needs to come out of the this is below the cost of production. AEMO, production from
[coronavirus] COVID-19 recession,” he said. meanwhile, has warned that increasing feed-
The Reserve Bank of Australia (RBA) has pro- stock costs will leave new GPG projects at a com- future onshore
jected that the country’s GDP will contract by 6% petitive disadvantage to battery storage within a
in 2020, before slowly recovering over the next few short years. developments to
couple of years. The ISP’s cost model anticipates not only that
Morrison then shifted gears to focus on divi- the cost of battery technology will fall, but that the East Coast.
sions within the Labor Party, which has been gas prices will rise on the back of supply con-
split over the National COVID-19 Commission straints and political intervention.
Advisory Board’s (NCC) recommendations that One such political intervention took place on
gas should be placed front and centre of any eco- August 17, when the WA government not only
nomic recovery strategy. nixed any hope of the NCC’s proposed WA-East

Week 34 28•August•2020 www. NEWSBASE .com P11