2 June 2015
APPEA again rejects calls for domestic gas reservation
Australia’s peak oil and gas group has rejected calls by industry veteran and Oil Search managing director Peter Botten for a domestic gas reservation, saying it would be a throwback to the 1950s and would not reduce costs for industry or households.
As reported in The Weekend Australian , Mr Botten set himself at odds with almost every other oil and gas industry executive who has spoken publicly on the issue of a domestic gas reservation, telling the Australian Stockbrokers Association conference in Sydney there needed to be debate about how domestic prices could be managed.
The construction of $70 billion of liquefied natural gas export plants at Gladstone is expected to triple east coast gas demand, exposing domestic users to higher international prices and leading to forecasts of supply shortages.
The fears of price rises and shortages have led to some calls, including from the Australian Workers Union and explosives and fertiliser maker Incitec Pivot, for some form of gas reservation.
A spokesman for the Australian Petroleum Production and Exploration Association said Mr Botten’s comments represented a personal view not supported by Australian-based gas producers or representatives of major manufacturing groups. “A return to 1950s policy prescriptions that interfere with free markets won’t bring on more gas supply or reduce costs for manufacturers and households,” the APPEA spokesman said. “Reservation is a deeply flawed approach. That’s probably why we don’t do it for any other commodity such as iron ore, wool, wine, wheat or beef.”
Sydney-based Mr Botten said investigation of some form of domestic obligation for Australian companies would be appropriate. “The reality of life is that higher energy costs in Australia is going to drive out a number of, or make some, industries challenged in terms of cost and supply,” he told the conference on Friday.
“There are a range of new industries setting up in the US that are based on relatively cheap gas pricing. There needs to be a healthy debate about it ... there are means whereby prices in domestic markets can be appropriately managed.”
Mr Botten’s Oil Search is the second biggest stand-alone oil and gas company listed on the Australian Securities Exchange (after Woodside Petroleum). But all of its production comes from Papua New Guinea and it has no exploration interests in Australia.
Oil Search’s stake in the $US19 billion ($24.8bn) PNG LNG project and plans for more LNG makes the company a direct competitor to the Gladstone plants.
Oil Search’s partner in PNG LNG, Santos, is also an operator of one of the three Gladstone plants and has been one of the most outspoken critics of plans for a domestic gas reservation.
Santos declined to comment yesterday on Mr Botten’s statements.