The political struggle swirling around Australia's changing oil and gas sector

STRONG views breed strange bedfellows, a point Slugcatcher noted last week as he watched the shale-gas debate take a funny twist in Victoria, and as normally pro-business politicians in WA turned against some of the country’s biggest oil and gas producers.
The political struggle swirling around Australia's changing oil and gas sector The political struggle swirling around Australia's changing oil and gas sector The political struggle swirling around Australia's changing oil and gas sector The political struggle swirling around Australia's changing oil and gas sector The political struggle swirling around Australia's changing oil and gas sector

ENB's infamous Slugcatcher

Tim Treadgold

Neither incident is serious, yet. However, both are examples of how Australia is struggling to cope with its emerging status as a regional “power-house” – in the sense that it is a key supplier of energy to the wider Asia-Pacific.

In Victoria, a state with a struggling manufacturing sector that is desperately searching for new and cheaper sources of energy, there was the utterly bizarre outbreak of “friendship” between a man the union movement once hated, and one of the country’s most powerful unionists.

Peter Reith, one-time national Labor Relations Minister in several terms of conservative government in Canberra, was praised by Paul Howes, national secretary of the Australian Workers Union, for his stand on the need to develop unconventional gas.

“We shouldn’t write off everything he [Reith] says simply because of his political past,” Howes told the Australian Financial Review newspaper.

Really. Has a long-running hatred of the man charged with “busting the union movement” actually been forgotten and forgiven in the name of finding a fresh source of gas for Victoria’s manufacturing sector, which is facing widespread closures as costs rise and competition eats into market share.

Full forgiveness is unlikely but to put the situation into context Howes was praising Reith for a report the former Labor Relations Minister wrote that recommended the development of unconventional gas just as Holden and Toyota joined Mitsubishi and Ford in threatening to kill the Australian car manufacturing industry unless it got more government aid.

Reith’s report was written for Victorian Premier Denis Napthine, and while it is being kept under wraps it is believed to be quite critical of the state governments in Victoria and New South Wales for not encouraging the unconventional gas industry – and fulsome in its praise of the Queensland Government for encouraging coal-seam gas development.

Napthine, and Victoria’s Labor Party opposition leader, Daniel Andrews, have refused to embrace the Reith report allegedly on environmental grounds, despite the prospect of an acute gas shortage that could deliver a double blow in the form of increased pollution levels as more coal is burned to power industry, and higher electricity prices which will add to the car manufacturing crisis.

Howes, who is deeply worried about the employment prospects of his members praised Reith for his report advocating the lifting of a ban on unconventional gas development.

“His report makes some very valid and important points concerning the future of manufacturing in Victoria,” Howes said of the Reith document.

“It’s a report that could apply equally to NSW, and the reality is we have a serious long-term structural problem with the economies of southeast Australia that will require a multifaceted approach to get more jobs and more industry moving.”

It would be rude of The Slug to equate those comments from Howes as an example of how truth can sometimes come from “the mouths of babes” but that is effectively what is happening as a hard-core, lifetime union organiser delivers a blunt warning about what will happen if industry is priced out of business.

“It amazes me,” Howes said, “that governments that are in a precarious position and oppositions that are within striking distance of winning elections don’t recognise the huge potential that coal seam gas presents for our economies.”

If Howes singing the praise of Reith, while also reading the riot act to his political mates in the Labor movement, was not sufficiently bizarre there was the attack launched by conservative (and Labor) members of the WA parliament on Woodside Petroleum, Royal Dutch Shell and BP, during an inquiry into floating LNG.

What annoyed the politicians was the switch in preference by the oil companies for FLNG over land-based gas processing, a move the companies say is purely a commercial decision made after they had invested $2 billion on the land-based option before choosing FLNG.

Unfortunately for the industry it gradually became clear that the $2 billion was a number that stretched credibility because it covered all exploration costs and not just onshore studies.

Over-kill, which is what the $2 billion number represents because the money had to be spent finding the gas no matter what final development option was chosen, did weaken the argument of the companies.

However, and this is the point that amuses The Slug, the criticism of the companies is coming from a very pro-business government that will (whether it likes it or not) eventually be forced to acknowledge that it is the companies investing their own money, and they must be allowed to do that in a way that maximises their profit.

The best way of looking at the WA situation is “storm in a teacup” with politicians saying anything that will get them a mention in the media.