Gas clampdown gives hope for lower prices, but doubts linger

The Australian Petroleum Production and Exploration Association (APPEA), which represents oil and gas companies, said the test for the new code would be whether it could support the investments that were urgently needed to bring on new supply, keep the lights on for Australian homes and businesses, and put downward pressure on prices.

APPEA chief executive Samantha McCulloch said the government’s announcement suggested it had taken on board some of the industry’s feedback. “However, we await the final text of the code to fully understand whether the industry’s concerns and recommendations have been addressed,” she said.

Two agencies that monitor gas supplies – the Australian Competition and Consumer Commission (ACCC) and the Australian Energy Market Operator (AEMO) – have expressed concerns about the outlook for south-eastern Australia later this decade as long-running gas fields in the Bass Strait enter rapid decline, without new projects to replace them.

In a joint statement, Treasurer Jim Chalmers, Energy Minister Chris Bowen, Resources Minister Madeleine King and Industry Minister Ed Husic said the code would “ensure Australian gas is available for Australian users at reasonable prices”.

They said gas producers had already made supply offers of at least 260 petajoules – equivalent of about 40 per cent of typical east-coast annual demand – out to 2027. “These indicative commitments will reduce the risk of shortfalls as assessed by the ACCC and AEMO,” they said.

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Saul Kavonic, an energy analyst at investment bank Credit Suisse, has been critical of the government’s interventions in the market, and said the code would not lock in lower prices for end users or “undo the damage the government has done to the investment landscape”.

“Some producers may start to reconsider stalled investments once the final code is made clear, but much may remain stalled and the industry remains rightly worried of government intentions,” he said.

“A reputation for investment stability takes decades to build, but only months to be lost, and the government has a long way to go before Australia’s reputation can be restored again.”