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Reviewing key proposals by the COVID-19 Advisory Board to subsidise the gas industry

August 01, 2020
Bruce Robertson
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Key Findings

Australia’s COVID recovery commission proposes gas industry subsidies with potential to cause long-term economic damage

The government is attempting to pick winners but has chosen a loser

In the NCC’s proposals, all returns are going to the gas industry

Overview

The National COVID-19 Coordination Commission (Advisory Board) (NCC) has proposed a number of ‘natural’ gas industry measures for a post-COVID economic recovery in Australia.

Instead of gearing the country towards a marked investment in industries that will shape our long term future, the NCC’s proposals are not only largely focussed on subsidizing and energizing the flailing gas industry, they are not market based and in fact will expose the government to significant long term liabilities. Depending on how energy markets continue to operate, the NCC’s gas subsidy proposals have the potential to cause significant long-term economic damage to Australia.

The NCC wishes to expand the role of government to be more like a socialist state than that of a market economy. The measures outlined in the NCC’s interim report1 has government wearing the burden of industry, while throwing all of the risk of markets, pricing, credit and demand onto the taxpayer at a time when budgets are stretched.

The oil and gas industry is in a long term slump, only exacerbated by the coronavirus. The industry is riddled with major write-downs and bankruptcies, across the board. For example, in Australia, the three lead companies in the consortium that own the three export coal seam gas (CSG) to liquefied natural gas (LNG) plants at Gladstone have written off over $24bn since 2014 on their failed investments.

The NCC’s gas subsidy proposals have the potential to cause significant long-term economic damage to Australia. IEEFA considers it is financially irresponsible for the government to pursue the NCC’s proposed gas subsidy measures to prop up a failing gas industry

Bruce Robertson

Energy Finance Analyst – Gas/LNG, Bruce Robertson has been an investment analyst, fund manager and professional investor for over 36 years. He has worked with Perpetual Trustees, UBS, Nippon Life Insurance and BT. He has appeared as an expert witness before a number of government enquiries into energy issues.

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