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Tuesday, 20 June 2017
Page: 4331

Energy


Senator O'SULLIVAN (Queensland) (14:33): My question is to the Minister for Resources and Northern Australia, Senator Canavan. What action has the government taken to ensure the security and reliability of Australia's domestic gas supply?


Senator CANAVAN (QueenslandMinister for Resources and Northern Australia) (14:33): I thank Senator O'Sullivan for his question. It goes to an issue that affects many of the regional businesses—manufacturing businesses in particular—in the senator's state. Today, we have taken significant action as a government to introduce gas export licences in Australia. This is significant action from the government, but it is action in response to a significant problem. I am sure many in this place have heard of the shortages of gas that are afflicting our manufacturing sector and also causing difficulties in energy markets and pushing up electricity prices. I myself have met many of them. Senator McKenzie took me to north-east Victoria recently where companies like Uncle Tobys, with 550 workers, are struggling. I went to Shepparton after that where Pactum Dairy also have pressures in terms of supplies of gas. AKD timber in Colac with 330 people are facing pressures for gas, and big businesses like Incitec Pivot and BlueScope Steel, with thousands of jobs at risk, also need adequate supplies of gas.

We as a government are focused on making sure that our manufacturing sector has the gas it needs to protect these jobs. We made mistakes. When the Labor government was in charge, no-one did an assessment on whether or not the expansion of LNG exports on the east coast of Australia was going to compromise our domestic energy security. We are living with the legacy of that, but we as a government are focused now on finding solutions and making sure we take the actions necessary to rectify those matters. We will do so by introducing this licensing system which will allow the Commonwealth government to ensure there is sufficient gas in Australia to serve our needs. It is unsustainable to have a situation where we are going to become the world's largest exporter of gas but have some of the highest prices in the world. That is not sustainable for our gas industry. It is certainly not sustainable for our manufacturing sector. That is why the government is acting to rectify the problem.

The PRESIDENT: Senator O'Sullivan, a supplementary question?



Senator O'SULLIVAN (Queensland) (14:35): Can the minister explain how the Australian domestic gas security mechanism will operate?


Senator CANAVAN (QueenslandMinister for Resources and Northern Australia) (14:36): From 1 July this year, once these regulations are in place, the Minister for Resources and Northern Australia will have the power to notify when a shortfall year should be considered to be called. Over a number of months, the minister for resources must take advice from the Australian Energy Market Operator and the ACCC and consult with the industry and other stakeholders to determine whether that shortfall should in fact be declared and to what extent it should be. If it is the case that a shortfall is declared, a licensing regime will be put in place for a full calendar year to align with the shipping profiles of the LNG industry. They can be reset on an annual basis or when any licence conditions are breached.

We are making sure this is a temporary measure. This is not something we see as a long-term solution to the issue. It is something we can significantly take action on now to relieve the pressure, but the regulation is due to sunset after five years and there will be a review after two years to provide certainty to the industry that we are focused on making sure we have long-term solutions to our gas supply problems.

The PRESIDENT: Senator O'Sullivan, a final supplementary question?



Senator O'SULLIVAN (Queensland) (14:37): This one is a doozy. What is standing in the way of more gas supply and lower prices?


Senator CANAVAN (QueenslandMinister for Resources and Northern Australia) (14:37): We have to have a clear understanding of what is happening to gas markets in this country. We are faced with a situation where traditional supplies of gas, domestic sources of gas, are declining. Over the next year, the Australian Energy Market Operator projects that Bass Strait will lose a sixth of our domestic consumption of gas due to declining reserves. So 100 petajoules will be lost to our domestic supply situation because of a declining market in Bass Strait.

It is only because of the investments in Queensland that have massively expanded our industry that we have the flexibility to respond in this case through this licensing regime. But that is a more costly gas to extract and, over the long term, we need to find a new supply of gas that is hopefully as prosperous as Bass Strait has been for us for many decades. That is why the government is open to ensuring we consider the Great Australian Bight as an option for oil and gas. It is very prospective in terms of the world stage. That is why we are doing a use-it-or-lose-it review in Bass Strait—to see what other resources we have there. It is why state and territory governments need to develop their own resources— (Time expired)