Australian Domestic Gas Outlook (ADGO) 2022 conference
ANGUS TAYLOR MP: Thank you for the opportunity to speak today.
The last few years have been a testing time for global energy markets.
The world has moved from one extreme to the other – from extraordinary demand destruction at the height the pandemic, causing an oversupply of oil, to potential shortages today, culminating in a coordinated release of oil stocks.
Russia’s unwarranted and unjustifiable invasion of Ukraine has raised the stakes even further.
It has again called into question Europe’s energy security – coming only months after severe gas shortages over winter ground their economies to a halt.
Gas prices in the United Kingdom and Europe have increased by more than 300 per cent over the past 12 months.
In early March, they beat previous highs hitting the equivalent of more than $85 Australian dollars per gigajoule.
Bills have skyrocketed, energy retailers have closed, factories have been mothballed, and families have been forced to choose between eating or heating.
With Russian gas accounting for around 32 per cent of total European and UK gas consumption in 2021, the full impact of the current crisis remains to be seen.
Europe’s experience has not been repeated in Australia.
As a result of industry and government working together, we have avoided the price increases seen abroad.
Our local gas supplies have helped to keep prices internationally competitive, protecting Australian gas users.
While Asian spot gas prices are significantly elevated, domestic Australian East coast spot gas prices have not followed.
In the middle of March this year, domestic spot prices were up to 77 per cent lower than in Asia and Europe respectively.
The gap between the East Coast spot price and the ACCC netback price remains one of the largest divergences since the netback was first published in 2016, with the April netback currently around 79 per cent higher.
These low gas prices have remained even while we have been exporting record levels of gas to assist liquidity overseas.
Latest ABS statistics shows that LNG export earnings totalled almost $53 billion for the 12 months to January, up 52 per cent on the previous year.
Australian exporters will continue to supply LNG overseas through their long-standing contracts. The world counts on Australia and our gas companies to export energy security. Rain, hail or shine - that’s what we do.
It is critical that this is done while ensuring Australian gas continues to work for consumers here at home.
And those of you in the audience today know just how important gas is to Australia.
Gas makes up 42 per cent of the total energy use in our manufacturing sector.
Gas consumption has been increasing significantly in the mining sector and now constitutes close to 49 per cent of the sector’s final energy consumption nationally. In absolute terms, the sector’s total natural gas consumption is up 71 per cent in five years.
As more renewable generation enters the grid at world-leading rates, the importance of reliable, dispatchable gas-powered generation continues to grow.
Our nation has plentiful reserves of natural gas, but local production must increase or consumers will face higher prices and disruptions in supply.
The ACCC is forecasting southern supply gas shortfalls from 2024 to 2030, and an east-coast wide shortfall from 2027.
A Coalition Government will work to make sure we do not face the economic devastation that a gas supply shortage would inevitably cause.
Our landmark National Gas Infrastructure Plan shows we need at least one new basin online before 2030 to avoid future shortfalls.
These basins include the Narrabri project in NSW, the world-class Beetaloo Sub-basin in the Northern Territory and the Galilee and North Bowen basin in Queensland.
The expansion of existing gas storage and pipeline capacity and the construction of new pipelines are needed to encourage more flows of gas to southern states.
That’s why we committed more than $38 million in last year’s Budget to back critical projects, including the recently announced $32 million loan to the Golden Beach production and storage project in offshore Gippsland, Victoria.
This project is expected to produce local gas for the domestic market for around two years before converting to an underground gas storage facility. The 12.5 PJ of storage will help meet demand for gas during times of peak demand and keep a cap on prices.
The IEA has reiterated the importance of gas storage to provide insurance against unexpected events.
As noted in their latest Gas Market Report, a tight market with low storage levels can drive up gas prices.
Increased demand and tighter supply have resulted in a drawdown of gas storage in Europe, which usually acts as a supply buffer when the market is tight.
On 6 March 2022, total storage stocks in the EU and UK combined stood at 28 per cent of capacity – the lowest stock levels since 2018.
Our NGIP also highlighted the critical need for more gas storage to provide greater supply flexibility during winter peaks. This will help keep the lights on and homes heated in southern Australia.
I am pleased to announce today that in the upcoming Budget the Morrison Government will be investing over $48 million more in additional support to accelerate priority gas infrastructure projects.
This includes targeted grants for early works to accelerate six critical projects, which include:
- APA Group’s:
o Southwest pipeline expansion project in Victoria;
o Project Range project in Queensland;
o Surat Hub project in Queensland; and
o Stage Two of East Coast Gas Grid Expansion.
- Lochard Energy’s Heytesbury Underground Gas Storage project in Victoria; and
- Transition Energy’s Gas Infrastructure Hub project in the Bowen Basin; and
- A feasibility study into the most efficient infrastructure to deliver natural gas from the Beetaloo to the east coast market.
This investment will advance the priority actions identified in the NGIP, including strengthening storage capacity close to southern demand centres and increasing capacity to bring additional northern supplies of gas south.
The Budget will also commit additional funding for feasibility studies and options for CO2-carrying pipelines from major gas and industrial hubs to prospective sites for carbon capture and storage.
This includes CO2 pipelines from:
- Upper Spencer Gulf region to the Cooper Basin;
- Gladstone to the Surat Basin and to the Cooper Basin;
- Options for CO2 pipes in the Beetaloo.
The energy crisis in Europe should act as a warning of what could happen in Australia if there is not enough investment in the gas sector here.
We are acting on this now.
The IEA has noted that the significant price increases in Europe have been driven in part by a lack of investment in supply and infrastructure. This has increased European reliance on imports.
Globally, upstream gas spending is less than half of what is required each year under the IEA’s Stated Policies Scenario.
In Australia, Labor and the Greens have adopted the anti-gas policies of activists at a cost to consumers.
The ACT Government’s plan to phase out gas connections, for example, will place upward pressure on gas prices.
The Australian Energy Regulator has noted that the policy would see an increase in residential and small business consumer gas bills of 3.2 and 3.5 per cent over five years.
The ACCC has strongly encouraged state governments to not adopt blanket moratoria or bans on development.
While the Coalition Government has and will continue to back the gas sector, the same can’t be said of the Opposition.
Over the next few months, Australians will be making an important decision.
There will have a choice between supporting a government that stands resolutely with the gas sector, or an Anthony Albanese-led Opposition that has obstructed and undermined it at every opportunity.
When it comes to gas, Labor play postcode politics – telling inner-city voters one thing and regional Australia another.
Labor MPs like Joel Fitzgibbon have been replaced by the Labor Environment Action Network, which has called for the end to the oil and gas sector.
Our gas-fired recovery has not only delivered results, it is the envy of the world.
We cannot allow activism or policy uncertainty to stop or slow gas projects and increase gas prices.
Without unlocking more gas, we will feel the price pressures being experienced overseas.
This would result in household bills going up and our essential industrial and manufacturing business closing.
Under Labor, this is a very real and very frightening scenario,
The Coalition Government will continue to support efforts to bring on new supply and develop the critical infrastructure needed to get gas to Australian consumers.
The Australian Domestic Gas Supply Mechanism and the Heads of Agreement will also continue to be important tools in Australia’s energy security arsenal.
However, the best tool we have is a strong gas industry that continues to have the confidence to invest, speaks up on the importance of gas, speaks out against activism, and is focused on working with domestic customers.
I look forward to continuing to work with the gas sector on these critical energy security and national sovereignty matters well into the future.