Australia, Location, Projects

Premier need for leadership

CEO of energy advisory firm EnergyQuest, Bethune, a former senior manager with Santos, produces a number of analytical reports each year, including the closely-read “EnergyQuarterly,”? which is something of a bible for people needing serious information on the gas industry in particular.

This is subscriber-only material, as you would expect, but I am able occasionally to take advantage of Bethune’s good nature to get insights in to his take on developments that affect policymaking.

The latest issue of “EnergyQuarterly,”? for example, raises a major point: whether and how the global fall in oil and LNG prices will affect Australia’s east coast gas market, especially with respect to prices, a bugbear for the mass consumers and large users alike and one I expect to be front and centre at the end of the month when the Australian Domestic Gas Outlook conference is held in Sydney.

Bethune’s view is that “with the east coast now connected to the international gas market, it is inconceivable that lower global prices will have no impact domestically.”?

The prevailing theory not so long ago was that supplier companies could make more money from selling gas for high prices in Asia than by selling it domestically, he observes. “However, this is no longer the case.”?

As he says, global developments are taking some of the pressure off demand for Australia gas for trade in the LNG markets. Coming along the chain, this reduces LNG producers’ ability to pay for local gas while the fall in demand for gas by east coast power producers is also taking pressure off the domestic market.

Assuming domestic supplies are available, this, Bethune suggests, could lead to a situation where domestic gas prices, while still being higher than their historical levels, may be as much as $3 per gigajoule below the forecasts that have made users, and especially manufacturers, blench over the past 12-18 months.

The source of extra gas for the domestic market under this scenario and the cost of its production are manifest considerations as is the question of whether governments, especially in New South Wales and Victoria, can get their act together to resolve the drilling restrictions hassles.

Opening the On Power 2015 yearbook forum in Sydney yesterday – an event sponsored by PricewaterhouseCoopers and distinguished by a strong speech by Martin Ferguson that reporter Angela Macdonald-Smith has written about in all three Fairfax daily newspapers today (it’s on their websites) – I reminded attendees of the advice of Rafiki, the wise baboon in “The Lion King,”? that we should always look beyond what we see.

God forbid that it be thought I am comparing Dr Bethune to a baboon, wise or otherwise, but he is playing a Rafiki role here in getting us to think beyond what we suppose we can see.

Critical to the point is that we still have to have an adequate supply of gas and baulking explorers and producers from delivering this – under properly regulated conditions (and I refer you to my “Sense and nonsense”? post on “This is Power”? on 5 March in which I reported on the review undertaken by Allan Hawke) – is simply not in the community interest.

Among the things Bethune challenges in his latest “EnergyQuarterly”? report – a publication soon to mark a 10-year milestone – is the conventional wisdom that there is sufficient gas in Bass Strait to meet demand for 30 years, something the new Labor government in Victoria is embracing to help justify its attitude to holding up onshore exploration.

Bethune suggests that analysis of available information indicates a reserve life about half of that routinely quoted by politicians and some others.

The moral of all this is that you don’t wait until you are waist-deep in the mire with the water rising, as successive NSW governments have done, to think and act strategically.

This is the thrust of the trenchant advice coming from Ferguson and you will be able by the end of this week to see on the On Power website (, a filmed interview between he and I, recorded before the yearbook launch forum, that is a clarion call for a hugely improved approach to energy policymaking.

Interestingly, Ferguson says in this interview that he looks to the new Victorian Premier, Daniel Andrews, and a re-elected Mike Baird to shoulder the responsibility for making this happen, emulating the way Nick Greiner and Wayne Goss worked across party lines with Paul Keating a quarter century ago to bring about major electricity reforms.

Bethune’s observations highlight the fact that the ground can shift significantly in the energy arena, something it has done a number of times since the 1970s with respect to electricity, gas and more, and policy needs to be robust enough to cope.

Ferguson, not surprisingly, finds the current state of the energy debate “seriously worrying.”?

We don’t need any more inquiries, he tells me, “we need to exercise some leadership and make some decisions.”?

Ferguson is one of the keynote speakers at the Domestic Gas Outlook conference, too, and the 200-or so delegates booked to attend this event can expect to hear a further leadership challenge exposition from him.

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