The Australian Petroleum Production and Exploration Association Wednesday labelled a push for price subsidies to support domestic gas consumers as "little more than protectionism dressed up as industry policy."
Responding to a report commissioned by the Australian Industry Group and the Plastics and Chemicals Industries Association, which represent large gas buyers, it said: "Rather than supporting the subsidies requested, governments that desire expanded gas supplies should support the development of new gas projects to increase availability of natural gas and diversity of supply.
"Establishing more effective regulation, including less duplicative planning processes and more timely approvals processes is the answer to securing future supplies of gas, not the heroic assumptions contained in the report about the possible use of gas by industrial customers in Australia and their demands for one industry to subsidize another," it said.
APPEA also dismissed the idea of reserving gas supplies in eastern Australia for domestic consumers, which it said would impair local supply and affordability by deterring investment.
Exports of gas from Australia's east coast are set to soar in coming years, with three coalseam gas-to-LNG projects already under construction and scheduled to come on stream after 2014. According to the gas users' report, prepared by the National Institute of Economic and Industry Research, exports could rise from 2 million mt in 2015 to as much as 24 million mt in 2023.
The report found that long-term gas supply contracts have evaporated for local industry due to export commitments. As a result, gas prices on the east coast would rise to as much as triple the current $3-4/gigajoule level, NIEIR said.
"Domestic gas users are increasingly being offered 'surplus' gas volumes and prices that do not reflect domestic supply, demand or extraction costs, but are instead linked to East Asia's LNG market -- the highest-priced gas in the world," according to the report. "This is a radical reshaping of the domestic gas market, constraining supply [in the near term at least] and driving prices to high [and for many industries uneconomic] levels."
"NIEIR's report raises doubts that the supply of natural gas will be sufficient in coming years to meet both export commitments and domestic needs," PACIA Chief Executive Margaret Donnan said in a statement Wednesday. "NIEIR questions whether production and proven reserves will expand fast enough to provide confidence in secure long-term supply to all users."
Donnan said, however, that industry was not looking for a hasty solution. "We are not arguing for domestic gas reservations or other measures that would harm investors," she added. "Indeed, it is important for all governments to remove unnecessary barriers to the increased production of gas."
APPEA pointed out that Australia has ample gas resources, totaling 819 Tcf, according to Geoscience Australia figures cited by the industry body. A city of 1 million people can be powered for 20 years by just 1 Tcf of gas, APPEA added.
Figures from local industry consultancy EnergyQuest show that in the year to March 2012, Australia's consumption of gas totaled around 1 Tcf, while its exports of LNG were just under 900 Bcf, or around 17 million mt, from its projects in western and northern Australia.
Western Australia-based gas consumer lobby group DomGas Alliance, meanwhile, reiterated its calls for Australia to implement a national reservation policy to set aside a proportion of gas production for the local economy. Australia is the only major gas producing country in the world experiencing serious gas shortages and sharply rising prices, said Domgas Alliance Executive Director Gavin Goh. Domestic gas prices are around $10/Gj in eastern Australia and $8-12/Gj in Western Australia, he said, compared with around $2.60/Gj in the US and $2.10/Gj in Canada.
"It makes little economic sense for Australia to link its energy prices to the world's highest prices in Japan," Goh added.
