Beach Energy chair Ryan Stokes says Federal Government’s gas reservation scheme will undercut suppliers

Beach Energy chair Ryan Stokes has blasted the Federal Government’s proposed domestic gas reservation scheme, saying it threatens the development of new supply critical for its manufacturing agenda.

As the Senate Economics Legislation Committee on Wednesday approved without amendment a Bill that provides for 20 per cent of gas produced by LNG exporters to be reserved for the domestic market, Mr Stokes told shareholders the company would not commit their capital to “new supply where the balance of risk and reward is not right”.

“Capital is mobile. It will not sit where returns can be legislated away,” he told Beach’s annual general meeting in Adelaide.

“Beach is a proud Australian company but our obligation is to you, our shareholders.

“Forcing exporters to oversupply the domestic market undercuts the companies that have always supplied it. That punishes the domestic gas sector, the very sector Future Made in Australia depends on.”

Mr Stokes, also chair of Seven Media Group, which owns The Nightly, emphasised Beach supported the Federal Government’s objective that gas should be affordable.

But he said the country had a supply problem, not a resource one.

He said the Bill gave the Government discretion to require LNG exporters to supply up to 20 per cent of their product to the domestic market, and was not a lasting solution.

“Reservation moves gas. It does not make it. And discretion creates uncertainty that can stop new supply being developed,” Mr Stokes said.

“The only way to get more gas to market is to encourage investment, not mandate sales.

“If there is to be a reservation, it should be rules based, prospective and sized to fill the gap in wholesale demand, not to oversupply the whole market.”

The Senate committee refused calls to exclude WA, which already has its own gas reservation scheme, from the national plan.

The committee, which approved the Bill on party grounds, noted the Federal Government had made concessions, and while some submissions sought further amendments, “many submitters also encouraged the Parliament to pass the bills without delay and without weakening its provisions”.

Having passed the Lower House, the gas reservation plan will go before the Senate for final approval.

“On balance, the committee considers that the domestic gas reservation scheme is appropriate and necessary to ensure Australia has access to a reliable and affordable supply of domestic gas,” said the committee chair, Victorian Labor senator Lisa Darmanin.

However, her committee deputy, South Australian Liberal senator Kerrynne Liddle, said the Coalition refused to support the scheme without major amendments, saying the existing plan posed “too great” a threat to further investment.

“It inexplicably includes WA, it risks investment in new supply, there is limited clarity around ministerial discretion, and it risks operating to solely redistribute gas rather than growing supply,” Senator Liddle said.

“This puts both energy security and affordability at risk.”

Frustrated industrial buyers on the east coast, which is the focus of the Government’s scheme, hope it will alleviate tight gas supplies and rising prices and better enable them to secure long-term contracts.

“Australia has abundant gas resources and, over the last 20 years, there has been a major increase in LNG exports,” Senator Darmanin said.

“This has been beneficial for Australia’s economy and profitable for gas producers . . . but Australians have faced high domestic gas prices as a result, particularly in the east coast market.”