Interview with Greg Jennett, ABC News 24
GREG JENNETT: Well, let’s get straight into that energy story straight off the top today. And Resources Minister Madeleine King seems to have brokered a deal to stave off a repeat of the gas and energy crisis that gripped south-eastern Australia earlier this year. She’s secured pledges from exporters of gas to offer large quantities of it to the local market next year – more than enough, in fact, on paper to meet projected demand. So this should mean there’s no need to use the so-called trigger mechanism which could have forced exporters to hold back gas for this country. Madeleine King joined us here a moment ago.
Well, Madeleine King, it looks like you got the result you wanted with gas exporters in a way that we might describe as the nice way. What is it, though, that gives you the confidence that Australia will actually be able to hold back the necessary supplies for 2023?
MADELEINE KING: Yeah, thanks, Greg. Well, what we saw happen in July was the ACCC identified that they believed there would be a shortfall of gas for next year of 56 petajoules, and since that time I’ve been speaking very actively with the three LNG exporters on Curtis Island in Queensland and sought to secure from them a plan about how they would meet that shortfall, knowing all the while that if I didn’t have confidence in their commitments or that they didn’t even come up with something there was the ability to use the Australian Domestic Gas Security Mechanism – the gas trigger, so to speak.
So what has happened since that shortfall was predicted is that we’ve worked together and they have identified through their planning, increases in production and other means 157 petajoules of gas to go into the domestic market.
GREG JENNETT: Did they sign through gritted teeth?
MADELEINE KING: No, no. We’ve been speaking very collaboratively and cooperatively. And there are – there’s a lot at stake. These are significant operations, they’re very complex. The liquid natural gas export industry is a complex industry. It’s based on tens of billions of dollars of international investment. So they have to rightly consider their international partners and their long-term foundation contracts. And I do respect that. Equally, I respect the needs of the Australian people to be able to have a gas supply.
GREG JENNETT: Sure. So the pledged offers of supply – and they’re only that, aren’t they, they’re offers – are just under three times greater than the shortfall that had been projected by the ACCC and others for the East Coast. Can that much possibly be needed or even delivered? Like how much buffer has been built into this?
MADELEINE KING: Well, clearly a significant buffer. And I would add also that they’ve already contracted 195 petajoules into that domestic market for next year on separate contracts for domestic users. So there is a lot of that gas, of coal seam gas, coming out of Queensland that will remain in the domestic market.
It’s a significant buffer. That means there is extra supply available to meet the demand but also to put downward pressure on prices. And that was the aim, and I’m grateful to the companies for, you know, committing to that. They did sign up. I didn’t see them do it personally; it was all done by counterparts. So I hope it’s not through gritted teeth.
GREG JENNETT: Sure. Is there any cost to them here, though, because I think the pricing is basically pegged off international spot markets. So they’re not doing Australia any price favours in whatever they do sell under this agreement.
MADELEINE KING: Well, they have agreed to abide by a very significant principle that they will not charge domestic gas users more than the international price for uncontracted gas. And for international companies to have any kind of price limit, that’s very challenging in an open trading market. So they have committed to that. And so they should quite frankly because it does make sense to every ordinary day – everyday Australians that you would not pay more for gas that’s going overseas.
GREG JENNETT: Yeah. Now, when you set about this task, I think last time we spoke to you on this program one of the things you bemoaned was that the regime was very ad hoc and you kind of had to go back periodically – I think basically annually – to renegotiate it. What about this heads of agreement improves that situation beyond just the calendar year of 2023?
MADELEINE KING: Yeah. Well, I have tried to regularise the reporting in it so that the exporters will come back to me every quarter and before those peak demands. So we meet again in March to make sure everything’s on track, there’ll be enough gas for the winter peak demand in the southern states. Then again in the midst of winter we meet again in June to see – make sure that that supply is there and that the pricing regime is appropriate. And then post that peak looking for the high demand into summer.
GREG JENNETT: So it becomes more of a rolling quarterly process rather than annual?
MADELEINE KING: Yeah. Or rather than a panic when there’s a crisis. And that’s what we want to move from these kind of crisis points to greater stability in this market of provision for domestic gas users.
GREG JENNETT: And what do you think the expectations are that flow from the rather significant AGL decision today? They're going to shut down about a decade earlier the big coal-fired plant Loy Yang A. Now that doesn’t on paper require extra gas in the system. But the grid is going to have to find its power from somewhere. Is gas domestically generated power likely to step up because of these and other decisions?
MADELEINE KING: I think there’ll be a range of energy resources that will step up into this, well, change in energy sources. AGL’s own investment in renewables will be part of that. There’s increasing investment in wind and solar that will take place over the 10 years as they plan the closure of that coal mine – coal generator, sorry. And there’s not a coal‑fired generator in the country that doesn’t have a closing date now. So it is – you know, it’s very important for AGL and the relevant state government to work on making sure that plan works so that the communities continue to have power.
GREG JENNETT: So nothing about today’s decision by that company surprises you or, more importantly, the gas operators in this country?
MADELEINE KING: I would say I think we’re seeing a pretty solid trend of (coal)-fired power stations deciding the time is coming for them to end. And it will be challenging and they do have a time line of planning to close. And in that time it’s up for the state government, the federal government, the power generators themselves to find the energy source that will backfill into that space. And I’m confident they can do that, whether it be a mix of gas but also, really importantly, new wind power, solar power and also hydro in some places.
GREG JENNETT: Well, if gas is part of that solution, at least short term, you’ve hopefully put down the base that enables that to happen.
MADELEINE KING: Yeah.
GREG JENNETT: Madeleine King, thanks so much for that update.
MADELEINE KING: Thanks very much.