PM’s New Gas Deal Upsets Head of Australian Workers Union

Australian Prime Minister Scott Morrison speaks during a media conference at Parliament House in Canberra, Australia, on July 9, 2020. (David Gray/Getty Images)

As part of the federal governments CCP virus recovery plans, Prime Minister Scott Morrison has signed another two year deal with liquid natural gas (LNG) suppliers from the east coast of Australia to ensure that uncontracted gas is going first into the domestic market.

The agreement, announced by Morrison on Jan. 21, is part of the government’s CCP (Chinese Communist Party) virus economic recovery JobMaker package aimed at getting “the right balance between affordable gas for manufacturers and a price that encourages new gas resource development.”

Affordable LNG for Australians is to play a key role in the federal government’s “Modern Manufacturing Strategy” as it moves to incentivise the scaling-up of manufacturing in Australia for strengthening Australia’s “sovereign resilience” amid disruptions to global trade.

“As part of our JobMaker plan, we are delivering more Australian gas where it is needed at an internationally competitive price. This particularly includes manufacturing businesses who employ more than 850,000 Australians, many of which rely on gas to operate,” Morrison said.

But the deal is also designed to see high enough prices to encourage investment towards developing the nation’s untapped LNG resources.

“Gas is critical to our economic recovery, and this agreement ensures Australian businesses and families have the gas supply they need at the cheapest possible price,” he said.

Announced in October last year, the government will invest $52.9 million (US$40.83 million) to help unlock new gas supplies in Australia to get additional gas to the international market as efficiently as possible, while first empowering domestic gas consumers to get better deals.

“This is about making Australia’s gas work for all Australians, while also supporting economic growth and backing important regional jobs in our expanding LNG sector,” Morrison said.

However, the deal, known as the Heads of Agreement, has not provided enough assurance on domestic gas prices for some critics.

AWU National Secretary Daniel Walton in a media release on Jan. 22 said the prime minister had capitulated to the LNG exporters who would extract our gas and export it to Asia. He found it “acutely disappointing.”

“By rejecting price controls, or any other measures to ensure Australian gas reaches Australian employers at a reasonable price, Mr. Morrison’s deal is basically identical to the weak and pointless bargain negotiated by Malcolm Turnbull,” Walton said.

“Australia is lucky enough to have some of the most abundant gas reserves in the world,” he continued. “Morrison’s deal ensures that advantage will be squandered as our local manufactures cop gas prices higher than global competitors. This deal ensures Australians will continue to pay more for our own gas than foreigners.”

However, the government argues that after it moved to ensure affordable supply to the domestic market with the Australian Domestic Gas Security Mechanism and the first Heads of Agreement in 2017, the price of gas price has already dropped from between $10.50 to $12.50 a gigajoule to between $7 to $5 a gigajoule now.

CEO of the Australian Petroleum Production and Exploration Association Andrew McConville agreed with the government’s assessment.

In a statement on Jan. 21, he said that it had been confirmed by both the ACCC and the International Gas Union, that Australians pay lower prices than our Asian neighbours for Australian gas.

“Individual prices offered to domestic gas users will continue to be internationally competitive,” McConville said.

He also thanked the Morrison government for the common-sense approach it had taken to working with industry to finalise the agreement through to Jan. 1, 2023.

“The approach taken to recognise the realities of the gas market on the east coast will deliver competitive gas supply outcomes for customers and continue to encourage more investment in new supply by producers,” he said. “This is the best way to ensure the lowest possible prices for customers.”