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Jun 18, 2013

http://www.afr.com/p/australia2-0/calls_for_gas_reservation_policy_I7wUTcPPjnToopZrWfvYUI

Natural gas must play a critical role in meeting our future energy needs.

As energy demand grows in Australia and across Asia, we need to make sure we are supporting the development of the gas resources that are so critical to reliably powering our homes and businesses – as well as creating economic opportunity for the nation.

Our energy needs are rising fast. Global energy demand is expected to grow by one third by 2035, with an astonishing 60% of that growth to come from our Asian neighbours. As Australia’s population grows we expect energy demand to grow at a similar rate.

The good news is that at current projections, Australia has enough known gas resources to satisfy all our domestic demand and export needs for the next 50 years. And, with increasing exploration and new technology those resources will continue to increase.

The challenge that Australia faces is that those gas resources which have been relatively cheap to develop are mostly gone. However the low hanging fruit has been picked, and our remaining gas resources are more expensive to produce.

The key to ensuring driving down cost is to develop our resources at scale, and the reality is that in Australia this requires access to an export market – such as Asia is providing today through the ability to export gas as LNG.

All of this is important to remember amid rising calls for governments to intervene in the market and force producers to reserve portions of their gas for domestic use.

Let’s call a spade a spade. The call for a reservation policy is not about the availability of gas but for a request for the gas producers to subsidise others. This is neither sensible nor the best approach to ensure either industry prospers in the long term.

Reservation, as a proxy for price control, will not promote the development of new gas resources needed to supply Australia and Asia’s needs. It is likely to stop investment and reduce supply, causing the market to tighten and prices to rise.

Let me apply this to some immediate concerns. There is no doubt that tightness in the eastern Australian gas market is on the horizon. This is not about having enough gas in the ground, particularly in New South Wales where proven reserves of natural gas are the largest uncontracted resources onshore Australia.

This is about the ability to develop those resources and supply them to the market. In recent times this ability has been hampered amid policy uncertainty and increasing environmental activism.

Without the development of NSW’s resources, Australia’s most populous state and largest gas market faces the real prospect of significant gas shortages as early as 2016. Very soon, NSW must enable supply to match its demand.

Indeed, Santos has the potential to develop significant resources in north-west NSW that can supply 25% of NSW’s gas needs, and which we are committed to delivering to NSW customers.

It is time to allow the industry to deliver the gas the market needs.

Visibility: Everyone
Posted: Tuesday June 18, 2013, 9:03 pm
Tags: energy wrong gas a for are global policy asia reservation solutions calls [add/edit tags]

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