12 December 2022
Interview with Tom Oriti on ABC News Radio Breakfast
Tom Oriti: Samantha McCulloch is the Chief Executive of the Australian Petroleum Production and Exploration Association. And Samantha joins us on the line now. Good morning, thank you for your time.
Samantha McCulloch: Good morning Tom, thanks for having me.
Oriti: In terms of your concerns here, Samantha, you're saying the government's intervention is more extensive than initially announced. What do you mean by that?
McCulloch: Indeed, it is far more extensive than we are anticipating. Not only has the government announced a price cap of $12/GJ for a minimum one-year period, there is ongoing regulation proposed in the gas market. This is price regulation that really dismantles the open and competitive operation of the Australian gas market. This is of particular concern to the industry and, frankly, it's sending the wrong signal to future investment.
Oriti: I wanted to ask you about that in a moment. But you say that the proposals undo 20 years of gas market and broader energy market reform. Critics of the industry, though, say you price gouge; some even go as far as saying you're taking advantage of world events like the war in Ukraine to make vast profits at the expense of households. There are a lot of people doing it tough at the moment. What would you say to that sort of criticism?
McCulloch: What we need to be very clear on is the domestic gas market… Firstly, the prices being realised in the domestic gas market are not the same as those being realised in the international spot market.
The average price that we're seeing the domestic market in terms of long-term agreements - this is in the wholesale market - is around $12/GJ currently. Now, this reflects tightening supply in some ways and this volatility that we see in terms of demand for gas.
So, the solution to actually bringing down the prices for the domestic market is investing in new supply and ensuring there is adequate supply there, particularly to service the power market as we are looking to phase out coal and as we're looking to increase the share of renewables. That's where gas is in demand…
Oriti: Are you saying then that those caps - sorry to interrupt - will harm the likelihood of those companies to investment in Australia? Because the Prime Minister doesn't think that it will.
McCulloch: Absolutely it will. These price caps send a signal that the government change the rules of the game at any moment. And what we are actually seeing is that after the industry has invested over $400 billion in the Australian economy in the last decade, the rules of the game are constantly changing.
Just in September, the east coast gas LNG producers struck a deal with the Australian Government to ensure that supply would be offered to the market at reasonable and competitive rates.
