Monday, 19 June 2017
Matters of Public Importance
We need to understand why the Japanese pay less for our gas than we do. The Japanese consumer pays less for our gas than the Australian consumer. We need to understand why if we are to do something about it.
In May 2017 the price for gas per unit was, in Tokyo, $7:11; in Sydney, $10.05; in Adelaide; $9.34; in Brisbane, $9.82; and, in Melbourne, $9.50. The fact that the Japanese consumer pays less for our gas than we do is even more shocking when you consider their price of $7.11 also includes things we do not pay for like turning the gas into a liquid so it can be shipped, the shipping cost and, finally, the payment of an import duty to the Japanese government.
Another shocking fact is that the Japanese government estimates it will over the next four years make $2.9 billion from the import duty on Australian gas while we make nothing with the exception of a royalty on the North West Shelf Project. Not only does the Japanese consumer pay less than we do for gas; but their government makes more than our government does on Australian gas. What has gone wrong? Can we do anything about it?
I asked myself how it is possible that Australia, as one of the largest exporters of gas in the world, has a gas shortage and the world's highest gas prices. The answer is simple. Firstly, we lack a disclosure regime which would require companies to provide information on average production costs, average sales costs and reserves based on a standard oil price. This means petroleum companies have all the information and the government has only part of the story, making it impossible to develop sound policies. The government and Treasury are overly reliant on what business tells them.
Secondly, we have given away our natural gas resources for peppercorns, with the results that the owners of our gas are foreign-owned multinationals and some Australian companies keep the domestic market just short enough of gas to maximise prices.
Thirdly, we accept a situation where foreign-owned petroleum multinationals pay more in political donations to the major parties than they pay in corporate income tax. In 2015-16 Chevron paid no corporate income tax, but they did manage to pay $53,365 to the Liberal Party and $44,950 to the Labor Party.
Finally, the government is reluctant to address failed policies of the past, because of worries Australia's reputation will be damaged by changing the rules after investment decisions have been made, even though foreign-owned multinationals have breached their social contract with Australia through decades of non-payment of corporate income tax.
The problem is we already have a sovereign risk because our gas and electricity prices are the highest in the developed world, causing loss of competitiveness and jobs. Once we lose manufacturing jobs, we will not get them back. The government needs to decide whether it will choose Australians over foreign-owned multinationals.
We are at a tipping point where high gas prices and uncertainty about gas supply are causing Australian manufacturers like brickworks to import bricks, and they are evaluating whether to move our production offshore—possibly to Malaysia.
The tragedy of high gas prices and shortages is that they could have been prevented. All we needed was good government policy, and I am here to say that it may not be too late, although we will never really see low gas prices again. I want to see a 10 per cent royalty regime put in place on all gas projects where none now exists. In this way, we will see some payment for our gas. I want to see an Australian domestic gas reservation policy introduced, which will mean that 15 per cent of all gas in Commonwealth waters that is not already covered by the Western Australian domestic gas reservation policy be provided to the government at cost price. This will increase the supply of gas in the long term and will lower prices.
We need to build import gas terminals so that we can bring cheap gas from areas of Western Australia to the east coast. I commend the AGL energy company for their feasibility study, which will see the first gas import terminal in Australia. Unfortunately, the gas they plan to import from other countries is cheaper than ours and will not be available until 2021. I ask the government to abandon plans to spend $60 million on unconventional and costly gas in the eastern states and to divert that money to encourage the building of another gas import terminal. In September 2016 the largest floating liquid gas plant and storage facility, Prelude FLNG, moored in Commonwealth waters. It is not too late to require this project to be subject to a domestic gas reserve policy, because they need government approval to anchor in Commonwealth waters. The policy of not ring-fencing Petroleum Resource Rent Tax, PRRT, credits to the exploration project where the expenses were incurred is costing us billions of dollars in revenue. Let's be clear that the mountain of PRRT credits owned by multinationals will mean that no corporate income tax will ever be paid for our offshore gas projects.
It is common knowledge that electricity and gas prices are increasing at a rate beyond the capacity of individuals and businesses to pay. If the government does not intervene in a meaningful way in the next few weeks then the Turnbull government will allow Australia to sleepwalk into recession.
Pensioners cannot continue to pay 11 per cent of their non-discretionary income on gas and electricity. Australians in work cannot manage electricity and gas bills that double from one quarter to the next. I am not interested in clean energy targets. I want gas and electricity prices brought down right now so that Australian businesses can stay in business and so that Australians will have jobs. Small businesses like a fish and chip shop cannot pay $7,000 a quarter for electricity and survive. Small hotels in rural towns cannot pay $17,500-plus a quarter for electricity and keep the doors open. We have a national emergency and drastic measures are required. Nothing is working, including the partnership between industry and government known as AEMO, the Australian Energy Market Operator. It is 60 per cent owned by government and 40 per cent by industry. AEMO has failed Australians and the government stands by and lets it continue. AEMO failed to change the electricity rule when China Light and Power, which owns 30 per cent of Australia's electricity generation, blocked the change from 30 minutes to 5 minutes, which means that Australians pay too much electricity. Once again, the sale of our precious assets to foreigners is costing us dearly. These critical assets should never have been sold and we must stop any future sales.
We face a national emergency. Will the government wait for an energy-policy-induced recession to occur in Australia or will it back now? I will be seeking the support of like-minded crossbench senators to take the necessary action to pull back from disaster. I will be discussing with them a jointly sponsored private senator's bill to enact a domestic gas reserve policy.
We hear it daily from people talking on our radios, people across the country, and just from talking to people in general on the streets: they cannot continue the way they are going. Businesses are shutting. The rising costs of electricity and gas are devastating to a lot of families, pensioners—everyone right across our country. I have sat down with and spoken to Minister Canavan with regard to this. He was enlightened on quite a few issues, because he knew nothing about them.
I think it is important, if we are going to be able to provide gas for all Australians and for industries and manufacturing—because manufacturing consumes about 30 per cent of all gas—that we provide it at a cheap, reliable, affordable price. We need to build more terminals and we need to be able to say, 'You want our gas from WA? You have to give us at least 15 per cent before you can actually ship it out of this country and make more out of it from other countries.'