26 Apr 2023

Media Release: Code of Conduct recognises need for new gas supply investment but fails to adequately address investor uncertainty

The Australian Petroleum Production and Exploration Association (APPEA) has acknowledged today’s release of the proposed mandatory code of conduct. The Code recognises the critical need for investment in new gas supply to avoid future shortfalls in the east coast domestic market and to put downward pressure on gas prices for consumers.

“Supply shortfalls will only drive up energy prices for all Australians,” APPEA Chief Executive Samantha McCulloch said.

“While automatic exemptions from price controls are proposed for small domestic-only producers, in most cases meaningful supply investments will require further conditional exemptions. This will be at the joint discretion of the Climate Change and Energy Minister and Resources Minister and will need to be approved by five separate government departments and agencies.

“Exemptions will start at 12 months in length, meaning projects may need to reapply many times over the course of project operations, with no guarantee that the basis for an exemption today will be sufficient for an exemption in the future.

“Conditional exemptions may also be varied or revoked at any time. Long-term capital investments for new gas supply cannot be made on the basis of one year of certainty.

“The draft Code moves away from a ‘cost plus’ model and binding arbitration, but the revised approach still adds significant complexity and Ministerial discretion to the operation of the gas market and is unlikely to address the concerns from investors.”

“The extension of the 12-month temporary price cap for at least another two years is at odds with the recommendations from the International Energy Agency, which only days ago made clear that the temporary price cap should not become permanent because investment may be put at risk.

“The test for the Code will ultimately be whether it can support investment in critically-needed new gas supply. Our members will be seeking urgent clarity on the implications for their proposed supply investments during the course of the consultation period.”

Ms McCulloch said the sector understood the challenges faced by businesses and consumers due to global energy system pressures and was committed to delivering competitively-priced gas.

“While we are still working through the full implications of this latest intervention, initial reviews suggest further clarity and refinement will be needed across a number of areas to ensure the domestic gas market is able to function effectively,” she said.

“APPEA and its members will continue to engage constructively with the government to find a workable way forward to finalise the Code and ensure investments in new gas supply can be made.

Click here for a PDF of this release.

Media Contact: Brad Thompson on 0401 839 227