Mister Micawber famously said that the difference between happiness and misery was just one shilling. Australia’s gas industry finds itself in a Micawberian state.
Queensland’s coal seam gas industry produces around 1400 petajoules each year. This is more than double the demand for gas on Australia’s east coast. Happiness should be the result.
However, the gas industry has long term contracts to supply Asian customers over 1300 petajoules through large LNG plants at Gladstone. Suddenly, happiness has a smaller margin.
Then, the LNG industry last year bought 187 petajoules of gas from non coal seam gas sources. And it only sold back 160 petajoules of this to domestic users. Result misery.
In all the reporting of our energy crisis few have mentioned that the coal seam gas industry, which should be our saviour, is taking more gas from Australia than it is putting in right now.
The principle cause of the energy crisis is not the gas industry. We have an energy crisis because state and federal governments have become hypnotised by the siren song of green energy. We have installed renewable energy at a faster pace than anywhere in the world.
We know that these renewables are intermittent so we have latched on to fairy tales that other sources of energy, that have not been successfully tried at scale anywhere in the world, will save the day. I am talking about hydrogen, batteries, pumped hydro and small scale nuclear.
Unlike fairy tales, in the real world, failing to face reality ends in a nightmare.
So we have not invested in our ageing coal fired power fleet. We have put up moratoriums and red tape on gas production and now we are reaping what we have sowed. Energy prices have skyrocketed by more than 5 times since the Liddell coal fired power station shut its first unit in April.
The only way back now is to drop the childish things and take a hard headed look at what we need to bring down prices and save what is left of our manufacturing industry.
The gas industry can help because Australian gas should be provided to Australians first. When I established the so-called “gas trigger” in 2017, gas price offers had surged to $20 per gigajoule. And the LNG industry was a net draw on our domestic reserves.
In mid 2017 I wrote to the whole gas industry explaining that I would restrict gas exports for Australians unless they could prove there was no shortage of gas in Australia.
Many in the gas industry were not happy with me but surprise, surprise within months gas price offers had halved and over the next few years the LNG industry became a net contributor to our gas needs. Their net contribution was around 100 petajoules a year, or a fifth of east coast demand.
The new Labor Government is still finding their feet but it does not seem to understand that you do not need to use a big stick for it to be of use. They are instead finding every excuse to not even try to force the Australian gas industry to supply Australians first. This is a mistake.
The Labor Government should do what I did five years ago and write to the gas industry about the potential for a gas shortage. We designed the Australian Domestic Gas Security Mechanism so that governments could not restrict exports overnight. There is a clear need to consult with an affected industry before doing something as radical as that.
As the experience showed five years ago, starting this consultation alone will increase the domestic focus of the LNG industry because they will not want the trigger pulled. The clear principle should be that the Australian LNG industry must make a net contribution to our Australian gas needs. They are not doing that right now and I cannot see how the industry could argue against this point.
Directing more gas to our domestic supply will not solve this crisis alone but it may just avoid the misery of a Dickens novel.
