The Australian government is betting on a natural gas-led recovery to fuel the country’s ascent out of the doldrums brought about by the COVID-19 pandemic, with Prime Minister Scott Morrison saying in September that it would make energy more affordable and support jobs.

How would it do this?

For starters, the government is looking to reset the East Coast gas market by setting new gas supply targets, enforcing “use-it or lose-it” requirements on gas licences, unlocking new gas acreage, reaching agreements with liquefied natural gas exporters to avoid supply shortfalls, and exploring options for a gas reservation scheme.

According to Morrison, this will “deliver more Australian gas where it is needed at an internationally competitive price” and ensure that households and businesses enjoy the benefits of abundant local gas while maintaining our position as a leading LNG exporter.

It all sounds good on paper, but this observer believes that not only is the initiative a case of too little, too late, it will also run up against the fast pace of innovation in several different areas.

Gas-led recovery a myth

For all the noise that the government is making about making east coast gas more competitive, long time observers will know that Australian Competition and Consumer Commission (ACCC) has written report after report saying that Australians are paying too much for gas, to little effect.

In contrast, gas prices in Western Australia have been significantly cheaper thanks to the state’s gas reservation policy.

While real effort is now being made to make east coast gas affordable, it doesn’t erase the fact that steps could have been taken earlier.

The lack of a solid commitment to gas reservation is also regrettable given the support it enjoys from gas consumers.

On the export front, the growing use of renewables and efficiency measures mean that big increases in gas demand could be a thing of the past.

Taken together, any belief that natural gas will lead Australia’s economic recovery is misguided.

Still a place for gas

That is not to say that there is no place for gas.

Many industries and households still rely on gas for the production of chemicals, fertiliser, power, heating and hot water.

While some of this is replaceable, there is little impetus for this to occur immediately.

Cheaper gas will help ensure this by further reducing the incentive to move away from gas, ensuring that domestic demand will remain consistent for some time yet.

Exports wise, there is still substantial demand for gas beyond our borders and will remain so for time yet as the shift towards renewable energy still has some way to go before it makes an appreciable dent on natural gas consumption.

So while natural gas is not likely to be leading the COVID-19 recovery, it will still contribute substantially to the Australian economy.

It also fills the power generation gap while the country moves to a larger share of renewables and develops the nascent hydrogen sector – the best hope for the next generation of Australian energy exports.

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