AsianOil: Australia’s “gas-led recovery” faces industry pushback
The Australian upstream industry is once more pushing back at aspects of the federal government’s plans for a “gas-led recovery”.
The Australian Petroleum Production and Exploration Association (APPEA) warned this week that efforts to turn the Wallumbilla gas hub in Queensland into a US-style Henry Hub would “backfire”.
The industry body revealed on April 6 that it had warned the government against such a move in its submission to the Gas Fired Recovery consultation, explaining that efforts to model Wallumbilla on Henry Hub would fall drastically short owing to the two markets’ very different dynamics.
Canberra has unveiled a number of measures over the past year that are geared towards bolstering domestic gas supplies in order to lower local prices and kick-start a manufacturing renaissance. While some initiatives have been welcomed – such as funding for exploration drilling in the Beetaloo Sub-basin – others that have called for greater direction from the state have fallen flat.
APPEA CEO Andrew McConville argued: “The fundamentals of the US gas market, particularly on the supply side, are vastly different given that the gas is largely a by-product of significant liquids development compared to very dry onshore gas developments in Queensland.”
He noted that the US hub also enjoyed such access to an infrastructure network that connects it multiple intra- and interstate pipelines, storage caverns and also to the Canadian and Mexican markets.
McConville said: “The US domestic market also has the benefit of enormous scale, being around 50 times the size of Australia’s East Coast domestic gas market.”
The executive would rather see Australia develop its own system driven by local market needs. He said that while Wallumbilla has a role to play in any gas-fired recovery, any reporting requirements put in place must be fair.
He said: “We need to ensure the Hub structure should minimise the need for government intervention in the operation of the market. Development should be market-driven, and large-scale changes driven by the requirements of existing and future participants.”
McConville added that all market participants, and not just gas producers, needed to submit activity reports in order to ensure the efficient operation of markets. He said: “Currently, there is no emphasis placed on improved transparency around the activities of domestic consumers of natural gas and that needs to change for this concept to be successful.”