Executives say Australia gas moves may hit long-term energy investment
(Reuters) - The Australian government's repeated intervention in domestic gas prices could have long-term repercussions on investments in its wider energy sector, industry executives warned this week.
Australia, which accounts for 21% of global liquefied natural gas (LNG) exports, has successfully attracted billions of dollars in investments over decades because of its abundant resources and stable investment environment.
However, domestic supply shortages in the east coast and record gas prices last year prompted government measures including caps on local natural gas and coal prices.
Early this year, it proposed expanding its powers to curb LNG exports from Australia's three east coast projects to meet shortfalls for the region which is home to most of its population and gas-dependent manufacturers.
"Every single policy change they've made has hurt the sector, has hindered its ability to invest," Saul Kavonic, head of energy and resources at Credit Suisse, told the Australian Petroleum Production and Exploration Association conference.
"Large investors are now seeing investment in gas as unwelcome in Australia and its going to have repercussions well beyond just around energy security here," Kavonic said.
"For example, a Japanese company wants to build a hydrogen project, they're going to remember the experience they've seen in gas and know that when they build that larger project in 15 years, the government might come, increase the taxes, change the regulations, force their domestic regulation policy etc".
"And that ... will see people do more hydrogen in the U.S. than in Australia instead."
Stable policies have always set Australia apart despite higher costs and hard-to-access resources, but a "pancake stack of policy changes" has made investment more difficult, said Bill Townsend, senior vice president corporate at Inpex Corp.
"When we do go to advanced projects, we'll have to add an additional risk or additional uncertainty into the mix."
"When you start to add up those pancakes into a stack, all the issues, it paints a picture of a deteriorating investment climate in the country, which is of concern," Townsend added.
Shell's Australia head Tony Nunan said while the company is complying, intervention is "not a desired place".
"It's incumbent on us as an industry, on government, on the regulators and our customers to make the market work, such that we can move away from this view that we can intervene in price."
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