Grasping at air for a clear gas solution

At Australia's blue ribbon energy event, political figures from both sides did little to appease companies desperate to develop Australia's gas potential.

There are not many Australian events, not even disasters, that attract 60 journalists, let alone for four days. The reasons the national upstream oil and gas conference did so are many and various, but they boil down to money, politics and high-wire corporate risk-taking.

The 53rd Australian Petroleum Production and Exploration Association conference filled Brisbane’s cavernous Convention Centre, crowding in 3470 paying delegates from 850 companies and 30 countries, plus 100 speakers.

The amounts of money these participants represent is extraordinary.

They include $200 billion worth of new LNG developments on the east coast and offshore western and northern coasts, as much as $150 billion more in further LNG projects dependent – as the industry said endlessly – on a race to the prize with multiple overseas rivals, and a river of gold for federal, state and Northern Territory governments (already at $7 billion annually today and possibly growing beyond $13 billion by the early 2020s).

In the struggle to communicate the meaning of the tax and royalty flow, the industry has hit on the idea of translating it into the nation’s budgets for primary schools and hospital beds.

The current $7 billion in payments translates into annual funding for 140 primary schools or, alternatively, 7000 hospital beds.

In a week in which the Queensland government has had to make the embarrassing concession that it simply can’t afford $300 million a year to fund subsidies for its household electricity consumers – whose bills will go up 21 per cent on July, a hike Premier Campbell Newman swore last month he would reduce to single digits – this level of contribution to community needs has more than a little potency.

Politics is always close to the surface of the APPEA conference cauldron. The presence among speakers of federal energy minister Gary Gray, minister-in-waiting Ian Macfarlane, Queensland deputy premier Jeff Seeney and the Queensland and New South Wales energy ministers was testimony to this.

Gray, whose task is essentially to hold the ring between the departure of Martin Ferguson, one of the most popular ministers ever to attend the APPEA conference, and the anticipated crushing defeat of the Gillard government in September, sprang one surprise when he launched a federal review of the east coast gas market which will be undertaken by the Bureau of Resources and Energy Economics and delivered by the year’s end.

Gray also took the opportunity to bite the Greens in the throat, vigorously dismissing Christine Milne’s call for a total ban on new coal seam gas exploration and development as “absurd".

The BREE review represents something of a landmine for the O’Farrell government, which is struggling to deal with the guerilla war being waged on coal seam gas activities in New South Wales by a loose coalition of farmers, rural communities and green activists.

The year-end report is likely to bring home to the state’s one million household gas users and thousands of business consumers, including 485 large companies, just how big a problem they may face later this decade.

The state finds itself in the bizarre situation that, firstly, interstate contracts today providing 95 per cent of its gas needs will roll off by 2018; secondly, there is enough coal seam gas within its borders to meet its annual needs twice over and; thirdly, thanks to policy mismanagement, some fairly ordinary handling of communities by the companies and contractors who began the dash for gas a decade ago and a campaign by radio shock jocks, most of the CSG seems likely to stay in the ground.

NSW energy minister Chris Hartcher spent his conference address lamenting the behavior of Labor regimes over a decade, the impact on public attitudes of the current corruption inquiries and the problems caused by corporate cowboys. What he didn’t do was outline even the faintest path out of this swamp, entreating his less-than-thrilled listeners to believe the state government is doing its best and urging the industry to do much more to bolster its “social licence”.

Hartcher’s visit was not made any easier by his Coalition colleague Macfarlane giving the O’Farrell government a spray for having failed to come up with a viable plan to address a situation for which the media clichĂ© “looming crisis” seems completely valid.

Macfarlane himself and the rest of Team Abbott are confronted with the fact that the $150 billion of extra LNG developments – the great white hope for keeping the Australian resources boom going over the next 10-12 years – are threatened by overseas developments, not least America starting to export its “shale revolution", and a local scene where high costs and a Gordian knot of green and red tape represent a huge barrier to progress.

The Royal Dutch Shell boss, Peter Voser, devoted a chunk of his conference address to this topic and then took himself off to Canberra to repeat the message to both Tony Abbott and Julia Gillard.

The Shell message, which is also the message from APPEA and its members collectively, is that if the national government wants the river of tax and royalty gold to continue rising, if it wants the thousands of extra jobs the local gas boom offers and if it wants the full economic benefits of LNG exports, it had better extract a digit.

Voser’s diplomatic way of expressing this, in an interview he gave while in Canberra, is that he would have expected a “somewhat faster reaction” here to the LNG global market challenges.

Macfarlane, who spent the afternoon after his conference address prowling the massive exhibition (testament to the billions of dollars in annual income garnered by petroleum support businesses and the thousands of indirect jobs APPEA members provide), has pledged to attack the time it takes for regulatory approvals in tandem and to have a red-hot go at abolishing the carbon price.

APPEA and its members know they don’t have to spend any time educating Macfarlane about their industry, but they are not yet convinced that, domestically in NSW and in the broader LNG game, the Coalition will be able to deliver an improved playing field to avoid crueling their hopes for continuing the local dash for gas.

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