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During a press conference in Perth last June, newly re-elected Prime Minister Anthony Albanese was asked about Western Australia’s domestic gas reserve scheme and whether the east coast should follow the example. Pointing to the Australian Domestic Gas Security Mechanism, set up by the Turnbull government in 2017, he insisted “there is a mechanism in place right now” to ensure supply.
That mechanism gives the government the power to force liquefied natural gas producers to divert exports to the local market in the event of a shortfall, but it has never been triggered.
“It’s a very different position from the one that the Coalition advanced during the election campaign, which seemed to have been plucked out of a Coco Pops packet one morning,” Albanese declared.
The plans announced this week for an east coast gas reservation – a policy that will prevent companies from exporting all the gas they extract from beneath this country and its waters – are different again from those Peter Dutton proposed, in one of his few concrete policy offerings of that campaign. But once the Coalition opened the cereal box, it was always possible that political pressure would compel Labor to see what was inside.
The Age welcomes the government’s plan to reserve 20 per cent of overall production through the spot mark and uncontracted gas, at the same time as honouring our existing international contracts. In an increasingly volatile global environment, the “just in time” approach of assessing energy needs a few months in advance, then relying on voluntary commitments to fill shortfalls, was not sufficient to ensure stability and confidence.
The argument often made by producers – and by the Rudd-Gillard Labor governments at the time when exports of liquefied natural gas took off – that a reservation system would stymie investment is not borne out by the evidence from Western Australia. A reservation was legislated there in 2006 (in June’s Perth press conference, Albanese said that legislation “showed good vision”) and many billions of dollars in investment have followed.
At the same time, it is a little perplexing that the Albanese government has resisted renewed external and internal pressure for significant changes to the Petroleum Resource Rent Tax (PRRT), or even its replacement, and pushed back on talk of a windfall profits tax, arguing that our gas gives us leverage in securing oil and diesel supplies from other nations and that the US-Israeli war on Iran hasn’t generated a surge in prices.
The Age’s view is that our nation still does not get its fair share of profits from our natural resources under the current tax regime, and that the PRRT still does not reflect the growth of our role as a gas exporter or best practice in other countries.
While recent campaigns by independent senators David Pocock and Zali Steggall, the Australia Institute and the influencer Konrad Benjamin, aka Punter’s Politics, may have raised the immediate political temperature around gas profits and taxation, producers and the government have been on notice regarding supply for many years. The problem of meeting east coast demand as the Bass Strait fields near the end of their life, combined with the priority given to exports, was brought into sharp focus by the 2022 energy crisis that followed Russia’s invasion of Ukraine, which prompted dramatic electricity price hikes on our shores.
The reservation is a worthwhile short-term measure to ensure the resilience of our overall energy supply, though how the firms at the heart of gas exploration in this country will meet the new requirements and what storage will look like are not yet clear. Our current fixation with the Strait of Hormuz, like the 2022 shock, is a reminder of our continued vulnerability to interruptions of the global trade in fossil fuels.
In this context, true national resilience – and even energy independence – lies in accelerating our progress towards renewable sources of energy, which are far less prone to disruption.
The government has made it clear that gas has a major role to play in the transition. “You can’t have renewables unless you have firming capacity – simple as that,” was how the re-elected Albanese put it a year ago. But we are entitled to ask whether the transition is proceeding quickly enough, particularly in the fields of transport, heavy industry and agriculture.
We can take heart at the news from our electricity grid, where the last two quarters in a row have seen renewables and batteries supplying roughly half the nation’s needs and successfully pushing down prices. As our political and international editor Peter Hartcher wrote recently: “That doesn’t make gas obsolete. Heavy industry depends on gas, and 5 million homes use it too. But it does make it a little less central; we have a glimpse of the future.”
It’s a future we must develop a clearer and more defined picture of. The government’s east coast gas reservation policy may help create calmer waters in the meantime, but we shouldn’t confuse such stops for fuel, however necessary now, with our ultimate destination.
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