TiP

In mid-May Australia’s dreams and concerns about its gas future were well on display at the Australian Petroleum Production & Exploration Association annual conference in Adelaide.

Next week a fair few of those involved will be in Kuala Lumpur because the issues and opportunities that brought them to South Australia will be on display all over again in the Malaysian capital.

Australia gas future and present problems drew more than 3,000 people from 35 countries to Adelaide. The World Gas Conference in Kuala Lumpur has 5,000 registered from 46 countries.

For Australians, the big difference between the two events is that the home forum was as much about issues bedevilling development locally as sales prospects – while the KL exercise will highlight the global marketplace and, in particular and of special interest to developers locally, the prospects for gas sales in the Asia Pacific.

The central point is that we can navel gaze at home all we like – and this week’s “taking our jobs” shemozzle within the federal government is a vintage example of Australian small-mindedness – but the future of the next stage of the resources boom is going to be decided offshore by the needs and demands of customers, especially Asians.

The underlying theme of the APPEA conference was about whether we are capable of adding another $200 billion to $250 billion worth of LNG developments post-2017 to the $165 billion of projects currently commissioning (Woodside’s Pluto project) or under construction at various locations in northern Australia.

From the Saudi oil minister through a bevy of local and international petroleum executives, the message in Adelaide was that we have no reason to be cocksure about the next tranche of development.

Given local costs, the shortage of skilled workers and the myriad of barriers being thrown up by NIMBYs, radical environmentalists and politicians in desperate pursuit of votes, the chances are that pushing Australian LNG exports beyond 80 million tonnes a year – the level they will reach when the current crop of developments is completed around 2017 – may be beyond our grasp.

It was said with good humour, but the opening morning barb from Saudi Arabia’s Ali al-Naimi ricocheted around Adelaide’s convention centre for the three days of the APPEA conference: remember what tennis great Rod Laver said, al-Naimi warned, “your game is most vulnerable when you think you are ahead.”

A critical aspect of this issue is the great difficulty of getting Australians to understand how and to what extent the wealth of the resources boom is spread around the community, in terms of taxes paid, jobs provided directly and indirectly and products and services purchased by the developers.

The business community has yet to achieve any real success in this respect and most politicians are as much use as a fifth leg on a greyhound in communicating the benefits as well as the challenges.

“But look at their profits” is the catchcry of politicians, activists and unionists on the make, conveniently ignoring what has to be invested and the risks involved in order to generate the profits.

As I tried to explain in my own corner of north-west Sydney to someone at the weekend, if you have $100 and want to keep it safe you leave it in the bank and earn little more than six per cent. If you want a much bigger return, you take your chances investing in shares or property and, in this environment, you stand a fair chance of doing not so good – or you go to the casino and toss it on the roulette table.

The world gas market is one of the planet’s biggest roulette tables at the moment and the players have a lot more to worry about than the croupier’s wrist.

Today’s example comes from Fatih Birol, the International Energy Agency chief economist, who, speaking to the Australian Financial Review, has accused companies pursuing coal seam gas developments of not taking concerns about water contamination, land degradation and so on seriously enough.

The increase in costs faced by developers in dealing with regulation imposed by politicians reacting to noisy CSG opposition is “peanuts” compared to “the rather handsome revenues” they stand to gain, said Birol.

The extent to which companies in Australia can ameliorate policy and regulatory pressures was very much in focus at Adelaide earlier this month and will get another airing on a broader canvas in Kuala Lumpur.

Malaysia’s Abdul Rahim Hashim, the current president of the International Gas Union, whose party this is, says a key part of the answer is for companies engaged in unconventional gas business to be become more transparent and to make sure their operations are genuinely at a safe standard.

This is a critical factor affecting both the supply of onshore gas for Queensland and New South Wales in the decade ahead – with regular reminders in the media and from the NSW government that a shortage is looming – and the capacity of the big players to sustain their proposed LNG operations out of Gladstone.

KL is a goodly distance from Australia’s capital cities but the issues being discussed there next week are close to home for our gas supply companies, local gas customers and a range of political figures, some in government now, some hoping to be soon, who have to produce the policies to underpin the ongoing developments and ensure that Australians feel they are getting more of the pineapple than the rough end.

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