Big Gas exporter but facing local shortages, page-6

Just in case you weren't p!$$ed off enough that the dingbat Qld Govt won't allow UCG - now we have a gas shortage which will cause prices to skyrocket!

Our Qld govt is a very special kind of stupid


Gas crisis fears drive reform on CSG projects


Energy Minister Josh Frydenberg will chair a meeting today with his state and territory counterparts. Picture: Kym Smith

• The Australian
• 
  
  
• KYLAR LOUSSIKIAN
  
  Journalist
  Sydney
  @kloussikian
  

Bans on coal-seam gas projects would be relaxed and a “use it or lose it’’ threat would force pipeline operators to keep gas flowing, under a national plan to prevent a predicted east-coast gas shortage that would cause prices to skyrocket.
State and federal energy ministers will tomorrow debate the biggest reforms to the national energy system in more than a decade, which would create an open and transparent market with two new gas trading hubs to eliminate the current practice of secret deals between suppliers and users.
The plan will be contentious, with NSW indicating it will ease restrictions on new coal-seam gas development, moving to case-by-case assessment of projects, while Victoria will remain the only state with a statewide moratorium.
Tomorrow’s meeting in Canberra, to be chaired by Energy Minister Josh Frydenberg, comes amid fears that predicted gas price rises by the end of the decade could cost thousands of jobs.
The ministers will debate solutions to the gamut of problems facing the energy sector, including the integration of renewables with the existing power grid, which has caused disruption in South Australia, where prices for electricity have spiked to as much as $14,000 per kilowatt hour when the state’s interconnector was not working.
The meeting will also be briefed on how to obtain emission reductions in the power-generation sector, which is the nation’s biggest source of carbon pollution.
Gas pricing figures for the largest industrial users prepared for the federal government show increases of up to 113 per cent in some parts of Queensland between 2002 and last year. The food and grocery lobby has warned that the forecast tripling of gas prices between 2014 and 2021 would cost its members $9.7 billion and result in 3000 job losses, “significantly larger than the output impacts of the carbon tax”.
Australia is on the brink of becoming the world’s largest exporter of liquefied natural gas, with an investment of $200bn into the sector during the past decade.
The shift toward exports, however, has fundamentally changed the domestic market and forced industry to compete increasingly against exporters for supply, pushing prices higher and shortening the length of contracts.
The case-by-case assessment of CSG projects for approval was a key recommendation of an Australian Competition and Consumer Commission’s review of the gas industry. Adoption of the measure by all states except Victoria is expected to ignite a furious row with environmentalists.
Governments will argue that gas is a key transition fuel for the nation as it moves to cut greenhouse emissions and that its supply must be guaranteed.
The energy ministers’ plan will also threaten a showdown with pipeline operators, who could fight the new competition rules and the ultimate threat of a “use it or lose it’’ clause to force them to move gas through their pipes.
Under the plan, pipeline capacity would be subject to a daily auction to ensure capacity was not tied up in a bid to hamper competition. If this measure proves ineffective, ministers have reserved the right to force operators to make capacity available for others.
Ministers are expected to discuss changes to the so-called coverage criteria that regulate pricing for monopoly operators, a mechanism that has been criticised as ineffective in its aim of enforcing competitive pricing for users. The meeting will also support the establishment of two primary trading markets in eastern Australia: a northern hub based at Wallumbilla, in southwestern Queensland, and a southern hub in Victoria.
Ministers have already flagged support for that proposal, which was put forward to support a transition to a exchange-based trading market, improving pricing transparency and reducing barriers to participation.
The Grattan Institute’s energy program director, Tony Wood, told The Australian the gas market was “very tight” and would remain so without significant reform.
“There is no physical shortage of gas, but what we need are commercial agreements that will deliver gas where it’s needed, and we do need government seriously looking again at the supply of unconventional gas,” he said.
“A shift to a project-by-project assessment would potentially improve the supply of gas on the east coast of Australia, in particular it may open up new coal-seam gas developments currently stopped by a moratorium on such development.”
NSW had in place a moratorium on CSG mining, but now allows exploration in about 8 per cent of the state, compared with about two-thirds under the former Labor government. The change would allow mining outside that area as long as it met stringent environmental, social and economic standards.
The Baird government is preparing a new strategy for gas mining in the state, likely to be completed this year.
Victoria has a moratorium on unconventional gas exploration as it decides whether to implement a permanent ban, with a decision to be announced this month.
The most significant proposal is for the introduction of day-ahead auctions for pipeline capacity and the requirement for operators to publish financial information.
“Shippers and customers have complained among others to the ACCC that getting access to pipeline capacity is difficult if not impossible at times, and that those who hold that capacity do so inappropriately, that’s the problem,” Mr Wood said.