In its detailed submission to the Federal Government’s Gas Market Consultation, Senex says the intervention as it stands will drive away investment in gas supply and risks electricity shortages, fewer jobs, weaker regional communities and Australia’s energy security.
Senex Chief Executive Officer Ian Davies said the company believed the Government’s rushed intervention from December 2022 fails to deliver the key criteria it was designed to meet.
“Eastern Australia’s energy markets are incredibly complex and finely balanced, and the Federal Government’s proposed gas industry actions risk irreparably eroding investment confidence, undermining critical gas supply, increasing prices and risking Australia’s energy security,” Mr Davies said.
“The only sustainable response to high prices in a demand-inelastic domestic gas commodity market is additional domestic gas supply.
“The Federal Governments current proposals instead threaten to suffocate industry investment confidence, likely requiring further interventions in the future – including the breaking of LNG export contracts to divert supplies to the domestic market and damaging relationships with our important trading partners.
“The result will mean investors like Senex’s majority shareholder POSCO International, a subsidiary of POSCO Group and one of Australia’s largest natural resource customers, will see the country as a much riskier proposition.
“With the ACCC already flagging gas shortages without continued domestic gas supply, jeopardising the investment required to achieve exactly this could have dire consequences for eastern Australia,” he said.
“Natural gas is a critical firming fuel in electricity generation and an essential input for manufacturing where there are currently no viable alternatives.
“It should be the Federal Government’s highest priority to secure continued investment to safeguard energy supply for Australian households and businesses, particularly while driving the nation’s ambitious renewables build-out. Reduced investment in new supply will result in the diminution of the critical safety net gas provides should this build-out not go to plan,” Mr Davies said
Senex investment plans
In mid-2022, Senex announced a more than $1 billion investment to boost reliable and affordable domestic gas supply for Australian homes and businesses, including an estimated $200 million injection into regional communities and the creation of hundreds of jobs.
Following the passing of the gas market intervention legislation in December 2022, this investment is now on hold pending finalisation of this consultation.
Further, the intervention derailed Senex’s Expression of Interest (EOI) process for the sale of 229 petajoules of additional gas to the domestic market from late 2024, which was conducted in good faith and in accordance with the existing agreed Voluntary Code of Conduct.
The EOI was heavily oversubscribed, with offers for over 700 petajoules of gas on contract durations of up to 15 years, demonstrating the willingness of seller and buyer to agree satisfactory terms for gas supply.
Senex’s EOI process demonstrates there is no market failure for gas supply from 2025 and therefore no case for heavy-handed and enduring market intervention.
“With nearly 1 in 5 jobs in Queensland’s Western Downs reliant on the resources sector, regional communities in Queensland will sadly feel the impact of this reckless intervention,” Mr Davies said.
“Australia needs clear, targeted and effective energy policy that enables the confidence to invest in new supply to ensure secure, reliable and affordable energy for manufacturing, businesses and homes, to keep people in jobs in regional Queensland, and to support Australia’s energy system transformation.
“Senex and its shareholders stand ready to invest billions of dollars in new energy supply for Australia, and have the balance sheet strength, capability and capacity to do so. But for this to happen Senex must be confident that the necessary regulatory settings are stable and sufficiently balanced to incentivise the necessary risk-taking of material investment in new gas supply.
“In its submission, Senex has set out a series of recommendations to the Federal Government that will give us the necessary confidence to invest in new gas supply and welcomes genuine collaboration aimed at meeting key objectives and criteria of this consultation for the benefit of all Australians,” Mr Davies said.
A copy of Senex’s submission in response to the consultation paper entitled “Options to ensure the domestic wholesale gas market delivers for Australians” released on 9 December 2022 can be found here.