In his keynote speech at the Australian Energy Producers Conference, Kevin Gallagher, Santos chief executive officer and managing director, said that a successful energy transition is not about ideology, but energy realism – balancing ambition with pragmatism, emissions with economics, and domestic interests with regional responsibilities.
Gallagher kicked off his speech with a clear and direct proposition: Australia needs to develop more of its own gas supply.
“Affordable energy is quite simply the lynchpin of national success,” he said. “Without it, we pay more for everything.
“From the inputs like glass, brick and cement that go into building our homes. To the food we buy that requires gas for the fertiliser and to store and transport it, to the bills we pay for lighting and heating our homes, fuelling our cooktops and heating our hot water tanks.”
Gallagher said the data is stark, pointing to data showing an increase in east coast gas prices since 2020 as well as an increase in average wholesale electricity prices in the National Electricity Market between 2021–2024.
“That shouldn’t be the case as Australia has a lot of gas and yet, supply is being constrained,” he said.
“Only a fraction of Australia’s known prospective gas basins are currently under development. New projects are facing increasing delays due to complex regulatory approvals and uncertainty introduced by government interventions.”
Gallagher said without new supply, domestic shortfalls will widen, pushing prices even higher and threatening industrial demand and reliability in the power grid.
“That is bad for Australian jobs, bad for energy prices and bad for consumers.”
Gallagher said historically, long-term LNG export contracts have been the financial enabler of new gas developments in Australia, with the mode delivering more than $300 billion in LNG investment in the past two decades.
He said that the export contracts have underwritten massive capital outlays, de-risked exploration, and delivered the scale needed to make projects viable.
“Domestic supply has often been a by-product of these export-focused developments, benefiting from the economies of scale and infrastructure sharing.
“Australia’s LNG industry has been built off the back of this international investment but those investors are now seeing worrying trends,” he said.
Gallagher said policymakers have sought to decouple export markets from domestic supply through market interventions such as price caps, reservation schemes and ad hoc directives under the Australian Domestic Gas Security Mechanism (ADGSM).
“Let’s be candid: these interventions have backfired,” he said. “They’ve had the opposite impact that was intended.”
Gallagher said price caps introduced in late 2022, combined with new code compliance obligations, created investment uncertainty and several planned projects experienced delays or were shelved.
“Capital has become more risk-averse and this includes both Australian investors and international investors, who are now half as likely to invest in Australian exploration than they are in our competitor countries.”
Gallagher said wholesale prices have remained volatile, citing a 2023 ACCC report that stated that there is no clear evidence that the price cap materially reduced average wholesale prices in long-term contracts or spot markets.
“Meanwhile, storage and transportation bottlenecks have increased the cost of supply,” he said.
“This is not a theoretical concern. It is felt by Australian manufacturers in chemicals, glass, alumina, and food production, many of whom are now flagging closures or offshore relocations unless affordable gas can be secured.”
When it comes to decarbonisation, Gallagher said there is a fundamental disconnect between what people say they want and their purchasing behaviour.
“While we work to decarbonise, we must confront a sobering reality: the pace of the energy transition is not matching our ambitions. When we look at the bigger picture – primary energy consumption, which includes electricity, fuels, heating, and industrial use – renewables still make up less than 15 per cent of the global total,” he said.
“So while progress is real, the challenge ahead is even greater.”
Gallagher said electrification of industrial heat, freight and chemical processes remains a long-term goal, not a short-term fix.
“In the meantime, gas remains a critical fuel – especially for firming, heating, and industrial feedstock.
“We must therefore manage the energy transition pragmatically, not ideologically.”
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