A new report by energy thinktank the Institute for Energy Economics and Financial Analysis (IEEFA) suggests proposals for providing long-term subsidies to the flailing gas industry could cause significant long-term economic damage to Australia.
Led by Western Australian gas industry executive Nev Power, the National COVID-19 Commission (Advisory Board) (NCC) is proposing taxpayer funds steered into new gas infrastructure and production for the 30-to-40-year life of the projects.
Report author Bruce Robertson says most Australian industries are struggling to rebuild post COVID without any hand-outs from the federal government. Yet the NCC’s hand-picked advisory group are suggesting billions of dollars in multi-decade hand-outs should go to the gas industry.
“The NCC wants gas to be Australia’s economic saviour, with taxpayers subsidising the gas industry up and out of COVID-19 for the next 30-40 years,” Robertson says. “Our country simply cannot afford this gift giving for years to come when the gas industry gives us so little in return.”
Robertson says the NCC’s proposals overlook the present market conditions.
“There is already a massive global over-supply of gas, which is likely to last this decade,” he says. “Gas industry bankruptcies, poor profitability and spectacular write downs are the norm, while gas prices have bottomed out globally, if not in Australia.”
Robertson says due to an absence of government regulation, gas companies have been allowed to set the price for gas on the east coast of Australia. Since 2014, domestic gas prices have increased exponentially while gas companies have exported ever-increasing quantities of Australian gas, at costs cheaper to consumers overseas.
“The gas companies have lined their pockets by exporting east coast gas supply overseas, causing what they describe as a supply shortfall locally,” says Robertson.
“In the first half of this year, the gas companies exported 18 cargoes of liquified natural gas at prices below domestic prices according to the ACCC. We supply gas to Asia cheaper than we can buy Australian gas in Australia.
“We don’t need new gas projects as proposed by the NCC. We need the supply we already have to be made available to Australian consumers at reasonable prices and regulated by government via a domestic reservation policy, which reserves gas for local consumers, like what they have on the west coast of Australia.”
Robertson says the gas industry sets the high price of gas, fails to pay tax, and offers few royalties to state governments.
“This is a losing industry, not a winner to take the country out of COVID,” he says. “The government is attempting to pick winners but has backed a loser.”