IEEFA Australia: Federal government needs to stop the magical gas merry-go-round

Hearing Australia’s New South Wales government rush through two import gas terminal approvals is like revisiting the fantasy world of Mary Poppins.

Just last week, a brand spanking new terminal was approved for Newcastle, while one for Wollongong was approved four months ago. At about $250-$590 million each to build, the terminals will provide local communities a veneer of strong economic development in the State.

The reality however is a lot different.

IMPORTING HIGH-COST LIQUEFIED GAS WHEN AUSTRALIA IS THE WORLD’S LEADING EXPORTER is paying for a merry-go-round we don’t need.

Historically, New South Wales got its gas through a pipe, direct from well-oiled gas fields in the Bass Strait and South Australia.

In recent years, the cost of our piped gas increased with governments allowing a small band of private suppliers to take over the reins in the name of the market. They soon painted a merry picture of high production costs and low supplies, then passed on their cost burden to the consumer.

Meanwhile, they sold Australia’s ample gas supplies overseas, while increasing local costs to consumers.

RECENTLY, THEY’VE GONE ONE LEAP FURTHER – AND SOMEHOW, FANTASTICALLY, TROTTED OUT A STORY to Australian state governments of the need for import gas terminals where currently there are none. The convincing of governments must have involved a fair bit of magical play, because Australia already has enough gas to supply our population three times over every day.

But convince them they did, and oh boy, the companies involved, an oligopoly of some five companies behaving as a cartel, must believe there is magic in their world.

IT REALLY MUST SEEM SUPERCALIFRAGILISTICEXPIALIDOCIOUS. For what they have done is, indeed, mesmerizing. They are selling our cheap locally produced gas overseas, and we’re buying it back off them at higher prices.

The east coast of Australia produces three times the gas consumed domestically.

WE DON’T NEED THE EXPENSE OF LNG IMPORT TERMINALS. And particularly not the cost of liquefaction. Each time our gas leaves the country, it is liquefied. As we will be stupendously buying our own gas back, it will need to be shipped across oceans to us, and then taken through the re-gasification again. The cost of liquefaction, shipping and re-gasification will be worn by the customer, not the gas suppliers.

THE CARTEL HAS SUCCESSFULLY PULLED THE WOOL OVER OUR GOVERNMENT’S EYES, if their recent moves to fast-track four of the five import terminal applications around the country are any indication. But consumers – retail, manufacturing and industrial alike – are increasingly ‘woke’.

Australia’s chemical industry came out this week and called it, saying the gas market is dysfunctional.

In effect we’re supporting an oligopoly, a cartel of producers who are limiting supply and charging way above international parity prices for gas.

AUSTRALIAN ENERGY CONSUMERS KNOW GAS SETS THE HIGH PRICES FOR ELECTRICITY in the national electricity markets. They know the import terminals will only further increase the cost of energy, which will make our economy more uncompetitive.

Energy consumers know the import terminals should not go ahead. The federal government must urgently install a full domestic gas reservation policy on the east coast of Australia, with price controls at $5 per gigajoule.

We must take back control of our gas, our supplies, and the price we pay for it.

Australia doesn’t need any import terminals to supply gas. 

This article first appeared in Renew Economy

Bruce Robertson is a gas analyst with the Institute for Energy Economics and Financial Analysis (IEEFA).

Related items:

IEEFA update: The staggering cost of gas in Australia

IEEFA report: Gas reservation policy would reduce electricity prices in Australia

IEEFA Australia: In need of a domestic gas reservation policy to bring electricity bills down