PERTH (miningweekly.com) – The Australian Petroleum Production and Exploration Association (Appea) has warned the federal government that market intervention could adversely affect confidence in the oil and gas sector, and could discourage new entrants and supply diversity.

The warning comes after a South Australian minor party, Centre Alliance, revealed that it had agreed to support the Coalition government’s personal tax cut legislation in returns for reforms to the domestic gas market.

“The full package of reforms will be announced by government in the coming weeks but will include changes to the Australian Domestic Gas Security Mechanism (ADGSM) to deal with current pricing, market transparency measures, measures to deal with the monopoly nature of East Coast gas pipelines and longer-term measures to ensure future gas projects deliver surplus supply to the Australian market,” Centre Alliance said this week.

Centre Alliance senator Rex Patrick told The Australian that the gas reforms negotiated with the Coalition government would “cause lower electricity prices” but would not say if he had a signed commitment for the policies.

“What we’ve done with the government is negotiated a range of policy measures that they will announce over the next couple of months. And we have a very clear understanding of what those policies are. And we anticipate that they will have a positive effect for consumers on pricing.

“It’ll be good for consumers … it might be bad for gas companies,” he was quoted as saying.

Appea has urged that the oil and gas industry be involved in any proposed gas market reforms, with CEO Andrew McConville saying the industry recognises its important role in supplying energy to Australians and the role a secure and competitive natural gas supply plays for households and businesses.

“There have been numerous reforms to the gas market in recent years. Sensible reforms can improve the efficiency of the gas market and improve its operation,” McConville said.

“However, market interventions could adversely affect confidence in the oil and gas sector, as well as discourage new market entrants and supply diversity. Ongoing investment is crucial for economic growth and being able to fund the very tax cuts Federal Parliament is debating. Investment will only continue if businesses are confident they can manage the risk associated with the investment.”

McConville said that there was sufficient supply in the market, according to the Australian Energy Market Operator, meaning that there was no need for changes to the ADGSM at this time. 

Regardless, the ADGSM is up for a review in 2020.

McConville said rather than intervention measures by government, the best way to put downward pressure on gas prices was more gas from more suppliers.

“More gas supply into the Australian domestic market helps make a significant difference to the millions of homes and thousands of businesses that use gas. Increasing supply should be the focus of government, industry and all Australian businesses that rely on sustainable gas supply.”