South Korean Business Lobby Warns Australian Gas Could be Dumped If Intervention Doesn’t Stop

An aerial shot of Woodside's North-West Shelf gas plant in Karratha, Australia, on April 17, 2008. (AAP Image/Rebecca Le May)

South Korea’s business lobby group has warned that the Australian government’s intervention in the gas market will lead to a price hike, the same problem that the government was hoping to solve.

The comment comes after the Labor government revealed on April 26 it was considering extending its controversial price cap on wholesale gas prices until mid-2025.

The policy, which came into effect in December 2022, put a $12 a gigajoule (US$8.15) cap on wholesale gas prices and $125 a tonne (US$84.85) on coal.

While the move would cut into the profit margins of energy producers, the government claimed it would “ensure sufficient supply of Australian gas for Australian users at reasonable prices.”

However, Korea International Trade Association executive vice chairman Jeong Marn-ki said gas companies could “diminish the production because the price is lower than the normal price.”

He told Australian reporters in Seoul on April 26 that instead of preserving low prices, the price could be “increased heavily in the long run because in the market the gas shortage could be breaking out,” as reported by the Australian Financial Review.

Jeong also warned that the move would put a heavy burden on the Korean market. Due to Korea’s dependence on imported energy and resources, as well as its lack of conditions for renewable energy, it might have to turn to other producers, such as the Middle East, if the prices are too high.

“I think the government intervention could be influencing the costs in Australia and Korea,” he added.

South Korea is Australia’s third-biggest export market and Australia’s fourth-largest two-way trading partner. The level of investment between the two countries has grown exponentially over the past ten years, from just A$600 million (US$296 million) in 2003 to $49 billion (US$32 billion) in 2018. In 2021, Australia exported A$29.4 billion to South Korea, including A$8.1 billion of natural gas.

Similar Concerns Flowing From Japan

The comment comes after Japan’s Ambassador to Australia, Shingo Yamagami, said the recent development in the Labor government’s gas policies is “a matter of concern” for Japanese investors, energy companies and trading companies.

“Among Japan’s imports 70 percent of coal, 60 percent of iron ore, 40 percent of gas come from this beautiful country of Australia,” Yamagami told Sky News Australia on April 24.

“I’ve been trying my best to convey those concerns to friends in Australia, but hopefully, I think [with] these mutual efforts [we] can get over these difficult times.”

The Japanese ambassador said the two countries not only share common values, democracy, the rule of law, human rights, and the market economy, but they also increasingly share strategic interests.

“Interestingly, we are now exchanging our strategic assessments, so rather than divergent, we are reaching points of convergence, and that means a lot to us.”

Gas Intervention Has Geopolitical Consequences: Inpex

The same concerns have also been voiced by Inpex chief executive Takayuki Ueda, who said Canberra’s attempt to control the gas industry would “choke investment, strangle expansion of LNG projects and allow Russia, China and Iran to fill the void.”

Inpex, Japan’s largest oil and gas exploration and production company, has operated in Australia since 1986 and energised Australia’s resources sector with a US$34 billion LNG investment.

“Australia may be a lucky country but needs to recognise it is in a global competition. The race has started, and Australia already lags far behind. Certainty in policy direction and a stable regulatory framework will continue to encourage strong investment in Australia,” Ueda told MPs at the federal parliamentary event on March 28.

“Unfortunately, the investment climate in Australia appears to be deteriorating. In Japan, we say, ‘don’t cheat at rock, paper, scissors’. This translates to ‘don’t move the goalposts after the game has started’.”

On the geopolitical front, “Australia’s ‘quiet quitting’ of the LNG business has potentially very sinister consequences,” Ueda warned.

He noted the question of who would replace Australian supply in the market was front and centre.

“Alarmingly, the ‘inconvenient truth’ is most likely that Russia, China and Iran fill the void,” he said.

“I hope this point is obvious to all of you and that you appreciate that this outcome would represent a direct threat to the rules-based international order essential to the peace, stability and prosperity of the region, if not the world.”

While Japan is the world’s third-biggest economy, the country is dependent on imports for 94 percent of its primary energy supply.

Despite concerns from foreign investors, the left-wing Australian Greens have pushed to ban the gas and coal industry and are hopeful that the new safeguard mechanism deal it struck with Labor would stop many new coal and gas projects in the development pipeline.

“Coal and gas have taken a huge hit. The Greens have stopped many of the 116 new coal and gas projects in the pipeline from going ahead.” Greens Leader Adam Bandt said in a statement.

“Pollution will actually go down, and we’ve derailed the Beetaloo and Barossa gas fields.”