Australians know how to cause problems for themselves

OPINION: Australians sure know how to shoot themselves in the foot when it comes to gas project development, and this week provided a reminder of the latest potential blunder.

Just before Christmas, the government introduced a cap on the price of domestic gas received by producers, the cap was set at A$12 (US$8.50) per gigajoule which is rather farcical given the price of gas internationally.

The price control applies to producers in the eastern Australian states, which have large populations and strong industrial and residential gas demand.

The gas industry was blindsided by the intervention. Major gas producers including Woodside Energy, Beach Energy and Cooper Energy were shocked, and said the price cap would damage the investment environment just when new domestic gas supply was urgently needed in the east.

Senex Energy, a subsidiary of South Korea's Posco, immediately suspended a large investment called Atlas/Roma North in Queensland.

This week, several producers reminded their shareholders that new investment in gas is up in the air while the uncertainty exists around pricing.

Woodside, Beach and Cooper want to develop offshore gas fields in the Gippsland and Otway basins, but there is not much chance of that happening while everyone is confused and seeking solutions.

This messy intervention comes hot on the heels of another recent howler — the suspension of Santos’ Barossa offshore gas project following a successful legal action by an Australian indigenous group.

That decision shone the spotlight on the regulations that operators must adhere to, and has put the frighteners up the offshore gas sector.