21 Sep 2023

Opening Statement: Australian Energy Producers appearance at the Senate Inquiry into the Mandatory Code of Conduct

My name is Samantha McCulloch, Chief Executive of Australian Energy Producers, the peak body representing around 95% of Australia’s oil and gas exploration and development. I am joined today by my colleague Brendan Beck, Director Net Zero Technologies.

I would like to begin by acknowledging the traditional owners of the land on which we are meeting, the Ngunnawal and Ngambri People, and I pay my respect to their elders past, present and emerging.

I thank the Committee for the opportunity to provide a short opening statement on behalf of Australia’s gas producers.

The industry is committed to providing secure, reliable, and affordable energy to all Australians while also doing our part to reduce emissions and support our shared goal of reaching net zero emissions across the economy by 2050.

Over the past 12 months, we have seen unprecedented interventions in the gas market that have led to significant uncertainty in the gas market, resulting in a number of projects being stalled and chilling plans for investment in new gas supply.

New gas supply that is critical to keeping the lights on and reducing the risk of blackouts, to helping alleviate cost-of-living pressures, and supporting the transition to net zero.

The Australian Competition & Consumer Commission, the Australian Energy Market Operator, along with industry are all clear – without urgent investment in new gas production, the east coast gas market faces structural gas shortfalls as early as 2027.

The Mandatory Code mutes the market signals to bring on new supply and instead replaces it with a framework of exemptions that are bilaterally negotiated by government – effectively placing the government at the centre of the east coast gas market.

The government must therefore prioritise bringing on new gas supply as a matter of urgency.

This includes providing clear policy direction on the ongoing importance of gas as part of a net zero future for Australia; providing a long-term price signal to the market to encourage investment in new supply; and addressing regulatory barriers both directly at a federal level as well as working with states.

In the short-term, it also includes providing the market with desperately needed stability.

While Mandatory Code is far from perfect, in the short-term it does provide some level of regulatory certainty to the market.

We expect that the Code, pending government negotiations regarding conditional exemptions, will provide a framework to allow stalled projects to proceed.

The Code is also a notable improvement on the Emergency Price Order and the initial Code proposal, which included the “cost plus” pricing provisions and binding arbitration.

However, while providing much needed stability in the short-term, these market interventions must not be allowed to become a permanent fixture.

Attention must therefore turn to the 2025 review of the Code, and establishing a pathway to return to an open, competitive gas market that provides a long-term price signal to the market and delivers the necessary investor confidence.

It is critical that clear and objective terms for the review are established now.

Natural gas has never been more important to the Australian economy.

Our industry is committed to working with governments and gas and energy users to ensure Australians continue to have access to affordable and reliable energy.

We are happy to answer any questions.