If only we could power the electricity grid with warnings. Back in mid-March, the Prime Minister warned gas exporters that the Commonwealth has “tremendous powers” including “the ability to control exports” which would be used if they didn’t provide sufficient gas for domestic consumption rather than exporting it. And then, dissatisfied with their response, in April, he announced a “Australian domestic gas security mechanism” a week after warning gar exporters he would intervene in the market. In June Malcolm Turnbull announced that he had “finalised tough new regulations in the gas sector.” Then, yesterday, there was considerable media speculation — indeed, there had been for several days — that he was was poised to “pull the trigger” and impose a gas reservation, having received a report from both the Australian Competition and Consumer Commission and the Australian Energy Market Operator that there would be a domestic gas shortfall in 2018 and 2019.
At just after 1pm yesterday, the Prime Minister, flanked by the Treasurer and Energy Minister Josh Frydenberg, strode into the media room in the government offices in Sydney and… issued yet another warning.
Turnbull could have just released the AEMO and ACCC reports, or Frydenberg and Morrison could have done it, but to deploy the authority of the office of the Prime Minister to issue yet another warning made little sense. Especially if you read the AEMO and ACCC reports. Both came to similar conclusions: the east coast faced a shortfall of at least 60-odd petajoules of gas next year, but in a worst case scenario over 100 PJ. Things only marginally improved in 2019, according to AEMO. These numbers, Turnbull noted, represented a significant worsening compared to preliminary advice he’d received.
But more to the point, the ACCC thought his repeated warnings hadn’t prompted enough action from gas companies. “While the LNG projects have taken some steps to supply more gas into the domestic market, it is unclear to the ACCC why we are not seeing more of it and why such significant volumes of LNG are forecast to be sold on the international LNG spot markets in 2018,” the report said. So, how many warnings do the companies need?
The point of the media conference, instead, appeared to be to bag Labor. In a relatively short media conference — just 5 questions including one about Barnaby Joyce’s absence and one about space — the opposition was mentioned 13 times and 3 times we heard about “Blackout Bill” — which is now being mocked in the media and may soon end up disappearing into the graveyard of failed catchphrases.
At least, unlike on electricity, the government actually has a policy while blaming Labor, even if it appears to consist of repeatedly warning that it really will use the Australian Domestic Gas Security Mechanism if the companies aren’t careful. That leads to some considerable irony. Last year, back before neoliberalism had died and there was no energy crisis, the Coalition had rather a different view of gas issues. Far from gas exports being a terrible threat that Labor had irresponsibly allowed, Frydenberg was lauding LNG exports. “We are now on the verge of becoming the world’s largest LNG exporter,” he boasted in June last year. “Importantly, our LNG export capacity will continue to ramp up,” he declared, in words Frydenberg might now regret. And the problem back then was that Labor was hampering exports.
I call on the Labor Party to reconsider its attack on the successful policies that have attracted over $400 billion in investment into Australia’s resources and energy industry, which has helped make Australia the largest exporter of LNG in the world by 2019-20.
What was Labor’s attack? Its proposal for a domestic gas reservation. “It will kill investment, destroy jobs and ultimately lead to less gas supply,” Frydenberg warned. Now, technically, Labor’s east coast gas policy was a national interest test, not a reservation. But for Frydenberg, that was a distinction without a difference. “No one should be fooled by Chris Bowen when he tries to differentiate between a national interest test and a gas reservation policy. The ACCC couldn’t have been clearer when it stated in its report that gas reservation policies include “export controls…such as a national interest test”.
As yes, the ACCC. In its April 2016 inquiry into the east coast gas market, it expressed opposition to any gas reservation policy. Lest there be any doubt about its view, it did so under the heading Gas reservation policies should not be introduced. What does the ACCC think of that now? “There is some risk that the LNG projects could respond to this scenario by reducing their gas production rather than selling gas to domestic users. There are multiple factors feeding into the issue of insufficient gas supply in the East Coast Gas Market, and while it may be possible for export restrictions to address or mitigate a supply shortfall in 2018, further steps are likely to be necessary in the medium to long term to address the underlying problem of lack of gas supply and diversity of suppliers.”
It’s not just politicians who have tailored their views to the times.