Appea warns of gas supply shortfall from 2019

PERTH (miningweekly.com) – Australia urgently needs more gas supply and more gas suppliers to head off a supply shortfall forecast for 2019, the Australian Petroleum Production and Exploration Association (Appea) has said.

CEO Dr Malcolm Roberts said on Tuesday that a new report by the Australian Industry Group (Ai Group) has shown that customers will pay a heavy price for government bans on developing new gas supply.

The latest Ai Group CEO survey warned that rising energy prices were exposing businesses and their employees to heightened risks and could see Australia losing jobs and business activities offshore.

"Businesses and households are going to see severe increases in their costs. Wholesale electricity prices are roughly doubling. Wholesale gas prices are at least doubling and may well rise much further. Spot prices are becoming more volatile,” said Ai Group CEO Innes Willox.

"The dollar impact of the current and forecast price increase is staggering. Once fully passed through, the electricity and gas price increases will cost energy users as a whole A$10-billion to A$12-billion a year. Households will pay up to an extra A$3.6-billion a year, and businesses up to A$8.7-billion [more] a year.”

Willox said politics-driven energy policies were making a bid situation worse, including decisions to put gas developments on hold in New South Wales, Victoria and the Northern Territory.

“Several factors are driving up wholesale electricity and gas prices including the closure of some baseload electricity generators, the unprecedented liquefied natural gas (LNG) developments placing strain on both the gas market and the cost and availability of gas-fired electricity generators, record electricity demand related to the pumping of LNG gas, the recovery of global coal prices, and the restriction on the development of additional onshore gas supplies.”

Roberts said on Monday that gas was no different to any other commodity and that if supply were restricted, prices would increase.

“We have the bizarre situation of state governments banning new gas projects and then complaining about higher gas prices. The Australian Competition and Consumer Commission, the Productivity Commission and a host of independent commentators all agree that stifling supply can only lead to higher prices,” he said.

Roberts said billions of dollars worth of investment was needed to unlock new gas supplies, adding that calls from the Australian Workers' Union for the Commonwealth to force Australian producers to tear up their contracts, would “kill investment overnight”.

“People concerned by the impact of higher gas prices on local customers should be arguing for the removal of unnecessary restrictions on developing new resources, not more heavy-handed regulation.

“The Ai Group report simply reinforces what Appea has been saying for years – that gas customers will pay higher-than-necessary prices if restrictions on developing new gas projects continue.

“Changes that increase the cost of exploration and production in Australia will place future investment at risk,” Roberts said.