Australia Risks Status as a Natural Gas Superpower

SEATTLE (Oil Monster): As a $200bn wave of new global investment gets under way, the energy industry is warning that chaotic policymaking and overseas competition are threatening to cut short Australia’s tenure as the world’s biggest exporter of liquefied natural gas.

The energy companies say the government has failed to deliver coherent climate and energy policies, appears willing to intervene for the benefit of local industry over LNG exporters and has been unable to approve more gas exploration.

“Australia’s policies are somewhat uncertain with calls for government intervention — that raises concerns,” Ryan Lance, ConocoPhillips’ chief executive, said at Australia’s largest oil and gas conference last week. “We are seeking clarity and stability to provide confidence around the viability of Australian investments.” 

Australia overtook Qatar to become the world’s top exporter of LNG in November, but faces intense competition from the likes of the US, Russia and Mozambique for investment from companies who prioritise stable energy policies and clarity over the outlook for costs. Companies are chasing an expected boom in LNG demand as governments look to shift their electricity systems from heavily polluting coal generation to gas.

Worries over Australia have emerged as the energy industry prepares to sanction a record 100m tonnes a year of global capacity in 2019 and 2020 to meet an expected surge in demand for LNG by the middle of the next decade. Australia has a $50bn pipeline of LNG projects seeking final investment decisions over the next three years, underlining how high the stakes are.

The LNG industry’s frosty relationship with Canberra was underlined by a rebuke last week from Matt Canavan, Australia’s resources minister, over producers’ call for a carbon pricing mechanism to provide certainty over emissions policy. Shortly before servings of conference canapés and sparkling wine, he told executives bluntly that they should drop their fixation with carbon pricing, as the ruling Conservatives surprise election victory last month showed it was the “will of the people” to tackle climate change by other means.

The worry for the industry is that the lack of a national emissions framework encourages the country’s state governments to introduce their own policies. Western Australia recently floated a proposal that all future projects should be carbon neutral — a benchmark that would threaten the commercial viability of many LNG projects. 

Canberra has put slashing energy costs for businesses and consumers at the top of its agenda, and is threatening to trigger a gas export security mechanism that would restrict LNG exports if there were shortfalls in the domestic market. The mechanism was introduced in 2017 to address a spike in prices that hurt manufacturers and other big users of gas and has never formally been deployed.

Courtesy: www.ft.com