Australian Industry Group Releases Gas Report

Boosting supply is essential to rein in a huge increase in gas prices – and that means arbitrary no-go zones and drilling bans should be abolished “as soon as possible”, says the Australian Industry Group.

These sorts of bans are “extremely blunt instruments and threaten to simply strangle production entirely”, says the Ai Group in a new report.

It argues that an effective way to minimise the regulatory burden on gas exploration and production would be for the states to allow the Federal Government a greater co-ordinating role.

The Commonwealth and states should “do what they can within the law to minimise unnecessary costs, including sharing information, harmonising processes, and potentially subsuming State decisions to Commonwealth ones rather than vice versa”, it says.

The report says supply constraints mean that new multi-year gas contracts starting after 2013 incorporate a rise of roughly $5 per gigajoule compared to historic averages.

That’s much larger than the increase of between $1.25 and $1.50 per gigajoule attributable to a $23 carbon price, a graph in the report shows.

One effect is that companies are reassessing cogeneration and trigeneration projects, the report says.

“Several respondents to the survey commented that their investment plans for cogeneration had been impacted by concerns about gas supply and pricing,” it says, citing one company that rejected a clean energy grant for a multi-million dollar co-gen plant and another that put its project on hold.

The Ai Group says gas production must be increased, “particularly from unconventional gas resources”, to mitigate the jump in prices.

Widespread concerns about unconventional gas “are sincere and must be treated seriously”, it acknowledges.

However, “some of those encouraging worry about coal seam gas and other unconventionals will never be persuaded by any efforts to manage real or purported risks”, it adds.

The report also calls for the introduction of a “national economic approvals process for additional LNG export capacity”.