Interview with Kieran Gilbert, Sky News
16 November 2020
Subject: The Grattan Institute's gas report, Australia's hydrogen industry
KIERAN GILBERT: Let’s bring in live now, the Energy Minister Angus Taylor, who joins me live from Goulburn. Minister, thanks very much for your time. Do you accept the proposition, I guess, not just by Grattan but others, that essentially cheap gas is gone and that suppliers will have to go to more expensive and alternative gas basins for their supply?
ANGUS TAYLOR: Kieran, you could drive a truck through this report. I mean, gas prices are less than half of what they were about a year or 18 months ago. They’re the facts. If you look at international prices, if you look at the international price in the US, which is now the price discovery mechanism for gas all around the world, the 2030 price comes up a little from where we are today, but is still way below where it was a year or 18 months ago. So, this is deeply flawed analysis. It also misunderstands the importance of gas for manufacturing - 850,000 people in Australia working in manufacturing. They ignore critical industries that use gas like bricks and cement. They also ignore the role that gas plays in the electricity sector, which is enormously important because we know the gas price now largely drives the electricity price. We’ve seen wholesale gas prices dropping, as I’ve said, but we’ve seen wholesale electricity prices tracking down at pretty much the same pace. This is so important for industries like aluminium smelting that rely on that affordable reliable wholesale electricity price. So, deep flaws in that analysis. We’re very confident of where we’re going with this. We’re very confident that Australian manufacturing requires a good supply of affordable reliable gas and electricity, and that with that we’ll see real strength in that sector in the coming years. And strength in jobs for blue-collar workers, for small businesses that rely on energy for their business, and there’s many who do, including in sectors like agriculture. And we’re committed, absolutely committed to achieving that, as we have been. The runs are there on the board.
KIERAN GILBERT: What about the proposition though that the easy to access gas has already been, that’s already been part of the supply, and now they’ve got to go to more expensive options – is there a flaw in that analysis?
ANGUS TAYLOR: We’re seeing a range of different gas options coming forward now. The Surat Basin, the Bowen Basin offers enormous potential. The Beetaloo looks to be some of the lowest cost gas when you take into account the liquids that are expected to be produced from it. It’ll be some of the lowest cost gas in the world, there’s no question about that. It looks very much like the gas that has been growing rapidly in the United States, and driving growth in manufacturing in the United States. So, look, this is, as I say, these propositions are put forward by a group who clearly just want to see the end of the gas industry. Well, Australian manufacturing needs a strong gas industry. It needs a strong electricity industry. Gas and electricity are linked. Look, from my point of view, what affordable and reliable gas does in this increasing supply – which we’ve seen very strong growth in supply in Australia - what it does is it puts downward pressure on the gas prices, it puts downward pressure on electricity prices, and that’s enormously important, but it also put downward pressure on emissions. So, tick, tick, tick. All of the critical goals I’m trying to achieve as Energy and Emissions Reduction Minister. So, we’re going to keep encouraging it, despite calls from those who are clearly not on our side of politics claiming that they think we should be going in some other direction.
KIERAN GILBERT: More than 10 per cent of, well, multiples of the gas used in manufacturing here, more than 10 times, I should say, the gas used in manufacturing is exported. Are you seriously looking at the idea of a domestic reservation of gas like there is in WA? Because it seems that that has had a downward impact on prices there.
ANGUS TAYLOR: Well, we already have prices that are down less than half of where they were, Kieran. I mean, there was a chart in the Grattan review that looked at gas prices that stopped at 2018. Well, I tell you why, because the price has come down since 2018. So, we’ve already seen this reduction. Now, the key is to make sure that flows through over time to longer term contracts, as contracts roll over. Every company has contracts on different terms.
KIERAN GILBERT: Yep.
ANGUS TAYLOR: So we want to see that passing through as those contracts roll over. We want to see that containment of prices, and we want to see investment in the low cost gas that we have in this country that can deliver more supply. Look, we have grown the biggest gas export sector in the world alongside a very significant domestic gas use for households – of course for cooking and heating and so on – for small businesses and for industry. We can achieve all. Everything is heading in exactly the right direction. There are some who don’t like that because they’d prefer to see other solutions, but it’s the right answer for affordable, reliable energy, and bringing down emissions. Because gas, critically, firms renewables. As the Chief Scientist has said, it’s the perfect complement to solar and wind. It’s critical for industry as a feedstock as well as a source of energy, and it’s critical in the electricity sector which was pretty much completely ignored by the Grattan review, which is extraordinary. And if you go back to 2013, Grattan wrote a report saying that gas offered enormous potential for the Australian economy, and now they’re saying something diametrically imposed. Look, we know where we’re going with this. We know it’s heading in the right direction. We know because we hear from big energy using customers, and the unions, the AWU for instance, that this is crucial to our manufacturing sector in our country, so we’re going to keep persevering down this track, and we know we have enormous support from people in regional Australia, in the outer suburbs where manufacturing is important, and we’ll continue to support those hardworking Australians with affordable reliable energy.
KIERAN GILBERT: It doesn’t sound like you’re convinced on the idea of the reservation approach, given, as I’ve said, well, you said it yourself, we export massive amounts of LNG. Why not just have a reservation of, say, 10, 15 per cent, like they’ve got in WA for domestic use?
ANGUS TAYLOR: See, what ultimately matters is the price. That’s what manufacturers care about. If you’re an aluminium smelter where the price of electricity’s driven by the price of gas, what matters is the price. If you’re a manufacturer of fertiliser and you’re competing against fertiliser factories producing ammonia in Texas or Louisiana in the United States, what matters is that you’ve got an internationally competitive price. Now, the good news is we’ve seen a change in our market – we’ve seen a change in the global market, which again, Grattan has almost completely ignored, where we are seeing lower international prices, and we’ve seen Australian prices come into line with that. Now, we do need to see Australian prices that are internationally competitive. Reservation is one way you can try to achieve that. Making sure that we’ve got a market that has the right set-up, the right transparency, the right level of liquidity, the right market transactions happening in that market. That is the other way of achieving it. Whatever is the preferred mechanism, and we’re working through this with industry including prospective reservation on new developments, whatever is the right mechanism to make sure we have internationally competitive prices, we’ll focus on making sure we have internationally competitive prices. But that’s the outcome we’re after here. Reservation is not a goal in itself, the goal is internationally competitive prices. We’re getting that, and we want to see it stay.
KIERAN GILBERT: What do you say to the argument or, you know, the analysis that a minority of companies use the majority of gas? As you alluded to aluminium, a big gas user, uses about a third of the manufacturing gas use, but only employs about three per cent of the manufacturing workforce. So, it basically is a minority of companies using majority of the gas.
ANGUS TAYLOR: Well, see the Grattan report completely ignores electricity. And gas, the gas price – and we've seen this change in the last few years – drives the price of electricity. So, in fact, the Grattan report completely ignores aluminium smelting. And yet, having an affordable, reliable supply of gas is critical to having the low-cost base we need for a competitive smelting sector. So, the numbers they’re using ignore some really critical parts of the manufacturing sector. Look, the fact of the matter is there’s 850,000 people working in manufacturing, Kieran. And manufacturing, almost by definition, uses energy. It’s a big energy user. Over a long period of time, that's what manufacturing has been built on and why affordable, reliable energy is so important. And gas is important in providing that energy and feedstock, not just directly, but also because of the impact it has on electricity prices. So, this sort of analysis that you're quoting there from Grattan, it ignores all of these issues. Clearly, they had an objective in what they wanted to conclude from the report. But we know what we want - we want to make sure that Australian workers and small businesses and households that rely on affordable, reliable energy get a fair deal on that. And that's why everything we're doing in energy is focused on as we bring down our emissions, and gas is critical to achieving that.
KIERAN GILBERT: It's a different approach to our European partners, though, isn't it? Because the draft EU green finance guidelines released over the weekend basically say that gas is not a legitimate transition fuel. That's the view from the your European-
ANGUS TAYLOR: Well, hang on, hang on here. If you look at the UK – and I know they’re on their way out of Europe – they've managed to achieve dramatic emission reductions from North Sea gas. If you look at Germany and other Western European countries in the European, on the continent, they have relied for many years and will continue to on Russian gas. They know how important that is to complementing the renewables. I mean, we've seen in the UK those big offshore wind farms you see, or in Denmark and other countries, those big offshore wind farms rely on having a fuel source that can complement them, that can turn on when the wind stops blowing, and that's been a very, very effective combination for Europe. So I don't see Europe turning off the gas any time soon.
KIERAN GILBERT: Yep.
ANGUS TAYLOR: And indeed, they've been building LNG terminals at a rapid, rapid pace to get gas coming out from the United States, up from North Africa. So, what really matters is the actions being taken, and the actions being taken on this are very, very clear.
KIERAN GILBERT: You gave a speech today to the Hydrogen Council. Clearly, you believe there's a massive future for hydrogen as an export as well. Is your inclination to really drive for the zero emissions option when it comes to hydrogen as a focus? Is that your focus, given what seems like a huge growth potential for that particular energy source?
ANGUS TAYLOR: Well, there is enormous potential for hydrogen, and we're seeing the Japanese, for instance, with great challenges with their nuclear generators falling from Fukushima, are looking for alternative fuel sources. They've been a big buyer of gas, of LNG from Australia alongside our coal, but they are looking for alternative fuel sources. And we're working very closely with them now on building a hydrogen supply chain that can meet their needs. I think Korea will follow quickly on the footsteps of Japan as will other countries throughout Asia. So it is an enormous opportunity. We’ve built industry after industry in this country on the back of Japanese demand. I mean, if you look at, go back to the iron ore industry in the ‘60s, we saw the coal industry a little more recently, the LNG industry more recently, and hydrogen is the next cab off the rank. So it's a big opportunity for us. You can make hydrogen from gas, or you can make it from renewables. You can do it either way. Both will be important. The gas can be sequestered through carbon capture and storage, and that can reduce the emissions. So there's a range of ways to do this. We can transport it as hydrogen. We can transport it as ammonia. And these are all options. We shouldn't be taking any option off the table right now, Kieran, because we need to explore which is going to be the most competitive supply chain. What's going to be the best way to meet our customers’ needs. What's the best way to build an industry that can create jobs and investment. And we have projects going across the country now, and there’ll be many more in the near future, that are focusing on building that supply chain alongside our very successful supply chains up into Asia in LNG, in coal, in iron ore, of course in agriculture. We’ll continue to build those relationships and build those supply chains in the coming years, and hydrogen is one with great opportunity.
KIERAN GILBERT: That big trade deal signed yesterday, it includes South Korea, Japan and China, all of which have committed to a pathway to net zero emissions. In terms of our exports of our coal and gas exports, is that a concern to you about the trajectory of those exports, given the commitments of those major trading partners?
ANGUS TAYLOR: I'm very confident our exports in all of those commodities will continue for many years to come. The mix will change. It always has, always will. That's natural. But the good news is that we are seen as a trusted supplier of energy products, energy alongside being a trusted supplier of agricultural products and increasingly services - education, health, financial services. And so these trade agreements are about building a diverse range of customers, making sure that we can do that across a range of different products and services, and that's important for our country. But we also need to make sure, in commodities like gas, that we have Australian gas working for Australians alongside our exports, and much of our policy work in recent months has been about making sure we get that balance right, and we will, and we are now seeing that balance coming into line.
KIERAN GILBERT: Minister, before I let you go, a couple of quick questions on issues of the day. The borders question, it’s arose again off the back of this cluster in South Australia. It's a critical 24, 48 hours ahead for the South Australian authorities.
ANGUS TAYLOR: Yeah, it is. Look, it is important. And of course, we all want to see borders opening up as we approach Christmas, people getting back together with families. We're making enormous progress. We’ve seen in New South Wales phenomenal outcomes, and South Australia has done pretty well in recent times as well. We've seen obviously huge improvement in Victoria. We've got to stay on it. The outbreaks are getting caught very quickly now with a much strengthened tracing capability across the states, but we're going to have to remain vigilant as we move towards Christmas and getting families back together across borders over the Christmas period.
KIERAN GILBERT: Yeah, we hope that that can happen. Finally, we've just seen the breaking news, the Robodebt class action. There has been a settlement. What sort of lessons should be learnt from that episode, do you think, for the Government?
ANGUS TAYLOR: Look, I haven't seen that news, Kieran. I'll leave any comments on that to the Minister for Human Services, Stu Robert, who I know has been dealing with this in a very professional way. It's a difficult issue, and it's been a challenging issue for many, many years since before we got into government of course. But I'll leave it to Stu, to the Minister, to make comments on that. As I say, I haven’t seen any of those details.
KIERAN GILBERT: Angus Taylor, live from Goulburn, thank you. Appreciate it. We’ll talk to you soon.
ANGUS TAYLOR: Thanks, Kieran.
Minister Taylor's office: 02 6277 7120