Labor’s “national interest test” fails gas consumers, APPEA says

The national interest test on gas exports announced on Wednesday by the Labor Party will rather “discourage than stimulate” investment in developing Australia’s gas reserves, according to the Australian Petroleum Production & Exploration Association (APPEA).

There is an urgent need to bring more gas to market to ensure reliable, long-term supply in eastern Australia,” said APPEA CEO Malcolm Roberts. “We need policies that encourage more investment in developing new reserves,” Roberts said.

According to Roberts, adding new “regulatory risks” does not help, especially at a time of depressed prices.

In its Inquiry into the East Coast Gas Market report released last month, for example, the ACCC warned that reservation policies, such as a national interest test, would “weaken incentives for further gas exploration and appraisal.”

The opposition Labor Party proposed on Wednesday new policy under which new liquefied natural gas projects in Australia may need to set aside supplies for domestic use.

“In addition, new gas projects which are scaled into the domestic market may be forced out of the market due to poor economic returns. Over time, reservation policies would reduce the likelihood of new sources of gas being developed, to the detriment of the level of diversity of supply for domestic gas users,” Roberts said.

In a market that is facing supply issues arising from LNG, moratoria, and a low oil price, further impediments to gas supply development would be detrimental and so should not be introduced,” he said.

Roberts said it was “disappointing Labor had bowed to union demands” to introduce a policy that could penalise one of the nation’s “most successful export industries“.

An export gas industry does not threaten domestic gas supply. Our major gas exporters are also major suppliers to the domestic market,” Roberts said.

The opportunity of LNG exports has made possible the massive reinvestment in gas production and infrastructure of recent years,” he said, adding that Australia “cannot afford to increase sovereign risk and project costs if it wishes to convert its gas reserves into jobs, royalties and exports.”

 

 

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