PERTH (miningweekly.com) – Australian energy producer Woodside Petroleum has called on Australia’s eastern state governments to revisit their policies in the face of the looming energy crisis.
Woodside CEO Peter Coleman said on Wednesday that for the security of gas producers and the customers that they supplied, each state needed a process to reassure the community that the reasonable domestic gas needs of Australians would be met. This might be achieved through reservation of acreage, or of volumes of domestic gas.
“The reality is there is no simple fix to the east coast gas crisis. But there are options for ameliorating it,” Coleman said.
He noted that a west-east supply pipeline was not a feasible answer as it would cost at least A$5-billion to develop, and the cost would be baked into household energy bills.
“It might seem like a simple solution, but would in reality serve neither east coast, nor west coast gas consumers well. For one thing, a pipeline would create a price floor in the east, not a price cap,” he said.
“A much more sensible approach is to establish a ‘virtual pipeline’, linking eastern gas markets to multiple sources of supply via one or more import terminals. This is better suited to the vast distances and small volumes of gas that are involved and can disrupt east coast gas markets and mitigate against opportunistic price gouging.”
Coleman called on policy makers to move away from mechanisms that tried to control prices after investments had been made, saying that repeated interventions risked teaching suppliers and consumers that the right strategy was to wait for a political crisis to emerge to bring down prices, and adding that it was an irresponsible way to manage the nation’s resources.
“Complex policy dilemmas require consultation and rational decision-making, rather than populist responses to rolling crises. Time and time again, decisions taken whilst in crisis end up needing to be unpicked.
“I’m talking here about short-term decisions that are ostensibly principles-based, but have ramifications that have not been thought through. Decisions like state governments imposing moratoria on gas exploration and development right at a time when new supply is needed. Decisions like the Australian Competition and Consumer Commission’s move to declare liquefied natural gas export parity prices as the default market price in the eastern states.
“This has encouraged domestic-only gas producers in New South Wales and Victoria to lift their prices, even though their exposure to export markets is minimal.”