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12/9/2018 — Oil and Gas
Politics creates Australian energy uncertainties

While New Zealand may have its future gas supplies muzzled by politics, Australia – now a major global supplier – has also through political changes seen its energy sector go into a sudden U-turn.

Principal of the research company Energy Quest, Graeme Bethune, recalled attending a side-event at the June 1 G20 energy ministers conference in Argentina, involving a diverse group of world economies.

This varied group managed to produce a consensus communique that said it was important to acknowledge fossil fuels still play a major role, but with a need to transform energy systems, by increasing investments in cleaner technologies, cooperation in energy efficiency and deployment of renewables and innovation.

Contrast that with the discussion in Australia over the National Energy Guarantee (NEG), which has collapsed following failure to achieve consensus within the Liberal Party room. This followed the defeat of Malcolm Turnbull as Prime Minister, partly due to Australia’s soaring domestic power bills, subsidising of renewables and Turnbull being coy on coal-fired power on the eastern seaboard.

“At the international level it is possible, with hard work, to achieve a consensus between the United States, Europe, China and Russia, but not among a small group of MPs in Canberra who all belong to the same political party,” Bethune said.

“So, what do business and investors do now? Probably nothing. The east coast needs substantial investment in electricity and gas supply, but without an emissions policy, what should anyone invest in?

“And what should energy buyers do, with uncertainty about future prices? The situation isn’t helped by widely varying forecasts of energy supply and demand, when AEMO says Victoria won’t be able to meet its own gas needs from 2022 and then three months later says everything will be fine until 2030.”

He said the Federal Government hasn’t produced any Australian energy projections since 2014, probably for political reasons.

Points made by EnergyQuest include:

• Australian petroleum production set a new record in the year to June 2018, increasing by 13.2% year-on-year to 870.4 MMboe. Australia is set to hit an annual run rate of 1 B barrels of oil equivalent at some point in 2019. LNG production is now nearly three-times domestic gas production.

• Queensland LNG projects continue to operate well below capacity, due to having insufficient gas. Capacity utilisation across Queensland’s three projects is “uncommercially low, falling to an average 77% in the second quarter.

• Increased Queensland supplies were unable to offset production declines in Victoria where offshore production in Q2 was 88.9 petajouls, down 23.9 Pj.

Bethune said with the political turmoil in Canberra east coast gas producers should prepare for heavy-handed political intervention over the next year, regardless of who wins the next federal election.

He said gross Australian LNG production in the year to June 2018 was a record 61.4 Mt - 19.4% higher year-on-year. LNG revenue for the year was $A31 billion ($NZ33.81 B). This takes LNG past international education to become Australia’s third most valuable export commodity.

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