Energy hysteria reaches ludicrous speed

Energy hysteria has reached a ludicrous pace in Australia. After years of political maneuvering, self-interest and misguided policies, the focus on energy planning has shifted to fear and hysteria rather than reasoned debate. The simple notion of securing domestic gas supplies to stabilize prices and ensure reliability has been lost in a sea of bureaucracy.

Santos, a major player in the energy sector, may abandon its $3.6bn Narrabri gas project in New South Wales due to concerns that Labor's domestic reservation plan could lead to a sharp drop in prices, making the project uneconomical and exacerbating the state's gas shortages. The Albanese government's draft energy plan proposes that LNG exporters supply 110% of Australia's domestic demand, a move that critics argue could drive prices below the level required to justify further investment in new supply.

While Santos's onshore Narrabri field could provide half the state's gas needs and support renewable energy generation, its chief executive, Kevin Gallagher, warns that it may become a victim of the reservation scheme depending on final policy decisions. Ryan Stokes, CEO of Seven Group Holdings, which controls domestic producer Beach Energy, concurs.

He warns of a real risk of an investment freeze due to government intervention. Beach Energy's latest breakeven estimate is around $12GJ, double what it was a decade ago. If stakeholders are relying on Narrabri to save them, they are already on the brink of failure. Queensland gas is the solution. Reserve it for domestic use. Its all-in breakeven cost is $5GJ, with a much lower cash cost of $1GJ or less.

Ryan Stokes has spent the past decade channeling cheap Beach Energy gas to China at exorbitant prices. He would likely prefer to retain this lucrative position. However, listening to him for national interest policymaking is absurd. Over 90% of Beach Energy's eastern gas comes from the Cooper and Otway Basins, with break-even costs of around $6.50GJ and $7.50GJ, respectively.

Beach claims to sell all its gas locally, but this claim is misleading, as the company supplies gas to both APLNG via Origin and GLNG via Santos, though the latter contribution is difficult to quantify. In essence, Ryan Stokes' role in exacerbating the gas crisis is overstated, and if Australian gas volumes were returned to local use, there would be no crisis.

However, Albo's reversal of his own gas reservation policy and its transformation back into the ADGSM means there is no gas security of supply on the East Coast for the foreseeable future. The brewing grassroots opposition to network expansions, fueled by years of misguided politics, has led to an unfolding energy-transition disaster.

Renewables are becoming stranded assets, with no gas backup or firming-power insurance, and any alternative is so distant that energy suicide has been committed. State governments must revive plans for major coal power plant renovations, or they risk turning their energy production network into the most unreliable and expensive in the world.