It’s sickening to think Australian governments would put the gas cartel and foreign citizens ahead of lower electricity for Australians. But as Rex Patrick reveals from the latest FOI documents, sadly, that’s what they have done.

In October 2022, nine months after Russia invaded Ukraine, then West Australian Premier Mark McGowan gave some unsolicited advice to the federal government on how to deal with surging gas and electricity prices. They should look to his state to find a solution, he told the ABC’s 730 Report. 

McGowan was primarily referring to the gas reservation policy that’s been in place in WA since 2006, whereby gas producers are forced to reserve 15% of the gas they produce for use in WA.

“I think there’s a pretty good model here in Western Australia,” Mr McGowan said.

“Industry didn’t like it at the time but now, it’s seen as a wonderful initiative and, across the board, it’s accepted by industry — both the oil and gas industry itself, but also other industries that are downstream users of it, particularly down here in Perth”.

High gas prices and the ADGSM

Gas sets the electricity price. So, a high gas price doesn’t just hurt industry, it affects every Australian household.

On the East Coast, it is supply availability that sets the price. This can be seen in the picture below, which paints a thousand words. In the early part of last decade, the East Coast gas prices (purple) were on par with the west (blue) and the US (yellow) – below $5/GJ. 

In 2015, as the gas cartel turned on the export gas trains in Gladstone, Queensland, the price started to rise. The prices on East Coast started to rise, peaking as export production rose to full capacity, in 2017 at $10/GJ (long term contract prices were up around $18/GJ).

That’s about the time that I, as an advisor to Senator Nick Xenophon, negotiated the Australian Domestic Gas Security Mechanism (ADGSM) with the Finance Minister, Senator Matthias Cormann. 

At the time the cartel were refusing to offer gas to some Australian businesses, no matter the prices they were willing to pay. The gas companies were determined to get gas offshore to their long-term foreign customers, and Australian consumers weren’t a priority.

The ADGSM allows the Resources Minister to stop gas exports if there is a projected shortfall in the East Coast market – in effect, it’s an emergency gas reservation policy.

After the introduction of the ADGSM, supply availability improved, but the cartel kept prices high by keeping a tight rein on supply.

Through all of this period the WA price remained below $5/GJ.

Asian gas absurdity

In early 2019, the price of East Coast gas rose above that of Australian gas in Asia. That was an incredible situation, given that gas exported to Asia needs to be liquified and shipped.

In May 2019, the Morrison Government was re-elected, and I found myself, as an independent senator for South Australia, in a strong ‘balance of power situation’ in the Senate.

I used that position to jump on a plane to WA to have a serious discussion with Cormann about the gas situation. We were joined by Resource Minister Senator Matt Canavan.

We talked through ways to deal with the problem. Cormann and Canavan agreed to conduct an early review into the operation of the ADGSM, with a view to factoring price (rather than just supply) into the mechanism. Cormann also agreed to explore an East Coast gas reservation policy.

Cormann close, but no cigar

On 6 August 2019, the Morrison Government announced it would look into a gas reservation policy for the East Coast.

By October 2020, the Department of Industry, Science and Resources had prepared an issues paper and was calling for submissions from stakeholders. Over 40 submissions were received.

In October 2021, the Department completed its analysis, finalised an options paper, and advised then Resources Minister Kieth Pitt to recommend to the Prime Minister that a gas reservation scheme not be supported.

The Department’s options and analysis were secret and they have spent the last two years, and a great deal of taxpayers’ dollars shelled out to lawyers, to make sure the options paper did not see the light of day.

They were only partially successful in that objective.

 

The documents the Administrative Appeal Tribunal eventually ordered the Department to hand over reveal a trail of bureaucratic deceit and betrayal.

First, it is revealed that the Department acknowledged in the options paper that a domestic gas reservation policy was “a way to push to producers towards offering longer term, lower cost supply contracts. 

 

READ MORE:

https://michaelwest.com.au/fois-gas-cartel-conned-government-fixed-high-energy-prices/

 

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