The future of Australia’s energy security is at risk if gas caps are implemented according to a report from EnergyQuest.
The report, A Review of Gas Cap Pricing, from the advisory firm found that the long-term economic implications of the decision would negatively impact exploration and development of gas resources, Victorian gas storage economics and the viability of LNG imports to the east coast.
Australian Petroleum Production & Exploration Association (APPEA) chief executive, Samantha McCulloch, said that the government should allow existing industry mechanisms – heads of agreement and the gas industry code of conduct – to work without interference.
“Gas can play a part in that solution by bringing on new supply to put downward pressure on prices. But this can only be done when positive investment policy settings and regulatory certainty encourage new investment. Intervention does the opposite,” she said.
The report suggested that a gas cap risks capital flight, with operators investing in other countries that can offer faster and higher return on investment.
“The long-term net effect of a price cap is to increase demand with lower prices, and decrease supply with lower economic returns – the opposite of what is required,” the report said.
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