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    Policy Reversal Upsets OZ N Territory E&P (Correction)


The unexpected decision has left E&P companies asking for an explanation.

by: William Powell

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Policy Reversal Upsets OZ N Territory E&P (Correction)

(Corrects status of Territory Alliance to minor party)

Upstream industry group Australian Petroleum Production & Exploration Association reacted with disappointment June 23 to Territory Alliance's proposal to halt hydraulic fracturing in order to make gas production viable, having earlier approved it. It has asked the party leader for an explanation. Territory Alliance is a new political party founded in 2019 as one of the challengers to the ruling Labor Party. Elections are in September.

In a document published that day, the Territory Alliance said existing exploration licences will not be renewed, and no more production permits will be issued. Existing production may only continue where sufficient community and environmental safeguards are implemented. 

Apart from the alleged environmental risk posed by hydraulic fracturing, the Territory Alliance justified its proposal on a number of grounds that might be for the investor to take, rather than the government.

These include the gas oversupply in world markets. It said: "The glut is not expected to clear until after 2030. This is not simply a short-term blip caused by a Covid related down turn but was a well-established trend even before the pandemic forced widespread industrial closures. It has been well known since 2017 that production was far outstripping demand, with both investors and production companies taken to task for their addiction to growth and to ‘stop counting barrels and start making money’.

Another factor was sovereign risk, scaring off investors upstream with Canberra's plan to limit exports: "The Commonwealth Australian Domestic Gas Security Mechanism has also spooked the market with many established companies exiting Australian projects citing the inability to secure long term supply contracts," it said.

Another factor is the shrinking pool of money to finance these projects: natural gas is also becoming too risky for major investors and risk-averse major investment banks are divesting shares. And another reason it gave is the European Union's plan to impose a carbon tax on imports, which would apply to LNG as well.

Appea said: “The backflip is staggering given [party leader] Mr Mills said in January: ‘If onshore gas is a viable industry in every way, then we should welcome it as a part of our economy. To do otherwise would send a message of uncertainty and governmental incompetence to all businesses right at the time when the NT is most in need of additional business investment."

It said the policy put at risk "the creation of thousands of jobs in the Territory, hundreds of millions of dollars in work for local companies, and a multi-decade revenue stream to the NT government. The Territory Alliance policy also disrespects the consent and rights of Native Title holders who support onshore gas development and puts at risk their existing and future benefits and opportunities. We are keen to understand how and why Mr Mills’ view has changed."

The moratorium was lifted in 2018, since when approvals have been granted for hydraulic fracking in the shale gas-rich Beetaloo basin.