It’s been another extraordinary week at the office for BPH Energy, just one more in a long list of the extraordinary which began around the same time former Prime Minister Scott Morrison secretly assumed control of his government’s Resources Portfolio.

It’s already old news that Mr Morrison leveraged his extraordinary ministerial powers to overrule then resources minister, Keith Pitt, on the Pep-11 gas project off Newcastle, stepping right on in without telling his colleagues, his constituents or BPH Energy (ASX:BPH) that he’d appointed himself responsible to at least three additional portfolios.

That was in April 2021 and the extraordinary was just starting for BPH.

Not 10 days ago, government sources recently emptied that particular bag of cats telling journalists at News Corp Mr Morrison took control of the resources portfolio specifically to reject the offshore gas exploration permit in the lead-up to the election.

As the only Aussie-listed holding company specialising in investments across the Australian biotech and resources sectors, BPH is extraordinary in its own way.

With some cracking board-level expertise across both sectors, BPH executive director David Breeze told Stockhead the room immediately knew something was wrong in the state of deal-making as Australia moved headlong into the grim reality of a major gas crisis.

After calling on the government to urgently rethink its apparently contrary decision-making In June this year, gas explorer Asset Energy – a wholly-owned subsidiary of Advent Energy and investee of BPH Energy – kicked off federal court proceedings

The allegation was shocking: according to the company, a biased Mr Morrison clearly “failed to afford procedural fairness” by reversing the desperately-needed gas extension and re-evaluation under PEP-11, just as the east coast gas crisis began to make headlines.

Now BPH Energy says it’s conducting a full review of its options relating to the PEP-11 gas exploration licence as the revelations keep dropping of the former Prime Minister’s unprecedented use of power in blocking the project.

Speaking to Stockhead, Breeze said the review includes investigating the potential for legal recourse as part of BPH’s strategy to ensure the country’s access to energy in a gas market in full crisis and to ensure BPH investors are protected.

“Even back in June, we quite clearly believed that there’d been a miscarriage of justice in this process, and we believe our position is strong and we’ve naturally moved to protect our shareholder’s interests,” Breeze said.

“The commentary you’ve seen in the press in every element of the media I think expresses the view of the community in the manner that it (the secret control of ministerial portfolios) was done – all those lead editorials and commentary I think speaks volumes for the attitude of most Australians.”

“Extraordinary,” he added.

“And while I can’t say much as proceedings are going forward, other than there are clear precedents for our case in this area of administrative law.”

And BPH aren’t the only ones seeking clarity – Prime Minister Anthony Albanese, following the glut of revelations that Morrison took secret control of a number of portfolios including Resources, has sought legal advice as to whether Morrison’s appointments and decisions (which includes the PEP-11 decision) were “beyond power.”

 

Australia’s Energy crisis – we’re picking up the tab

Breeze told Stockhead the country is in the midst of an energy supply crisis years in the making.

“Experts in the sector – we’ve all been saying for years now – this crisis which is forcing manufacturers to close or reduce operations after prices jumped four-fold (gas prices have increased from circa $6-8 /GJ to $40/GJ) – would have been averted if government at any stage had worked with the sector.

“Now the market operator (AEMO) has been forced to institute a temporary cap of $40/GJ because gas prices spiked to $400/GJ on the spot market. It’s crazy.

“NSW has to import 95% of its gas supplies and the overwhelming nature of the current energy crisis has demonstrated to Australia just how important gas is as a reliable, firm power source.”

 

A gas supply solution at hand

“Consider this – Australia is a leading world energy supplier – but during June and July  its government ministers had to come out and ask consumers to turn off their lights and heaters to avoid blackouts.

“The same ministers then had to introduce price controls and seize control of the electricity and gas markets to manage the crisis.”

Certainly Aussie households and businesses face higher power bills to compensate energy regulators which in turn are paying millions of dollars to generators to boost supply and avoid potential blackouts up and down Queensland and NSW.

Just last week Resources Minister Madeline King urged the eastern states to ‘free up’ gas reserves for exploration and production to ensure households and manufacturers can access reliable energy for years to come.

“Experts have been warning of just this bottleneck in supply and demand for years.”

 

Which brings us back to the PEP-11 project

BPH investee Advent Energy’s PEP-11 Gas and its climate focused carbon storage project proposal at Baleen (Seablue1 well), offshore Newcastle NSW is a project of national significance.

“The PEP-11 project is the closest potential carbon storage area to the major Australian carbon sources which are in the order of 30% of the entire Australian CO2 output,” Breeze said.

Location it turns out is a key factor here in carbon disposal with synergies greatest where industrial point sources are both near each other and a viable storage site.

“At a time of incredible national duress, this is a project which addresses both current gas shortages. And at the same time it addresses the critical objective of Net Zero Emissions.”

Breeze says everyone at Advent is obviously committed to ensuring all the gas produced from the project is available for Australian domestic supply.

“BPH backs companies like Advent which are strong supporters of plans for Net Zero by 2050.  We see the company playing a direct role in achieving that target, especially for New South Wales,” he added.

The NSW Business Chamber in its report ‘Running On Empty’ found:

NSW imports 98% [of] its gas requirements from other states, a constrained national gas market will see further price rises for every household and business in NSW and inaction on gas and energy security are now holding the future of businesses in NSW to ransom, threatening employment losses and reduced investment.

Breeze says unfortunately this prescient prediction is now a reality.

 

The global gas crisis on our doorstep

As AEMO pointed out back in 2021- Victorian gas fields are rapidly depleting.  By 2025, AEMO now expects Victoria’s production to almost halve.

The consumer watchdog (ACCC) made the same observations in its own 2021 gas report.

In NSW alone some 300,000 jobs rely on a steady gas supply. The state manufacturing sector, which is approximately 84% of the state’s industrial gas load, adds $33 billion in annual industry value.

“So, we’re shaking our heads in frustration here – the PEP-11 gas project, if successful, could play a key role in meeting that supply shortfall,” Breeze said.

And elsewhere world economies are now facing a perfect storm of an energy supply crisis.

War in Ukraine, the move to a low carbon future, rapidly rising energy costs and supply shortages are impacting households and economies across the globe.

European gas prices were recently quoted at ~$100/GJ, and the Russians are taking this week to shut down Nord Stream again for “maintenance”.

“And what’s happening is clear – international energy prices are increasingly setting east coast domestic prices, and that is wreaking a new kind of havoc on the volatility in domestic gas prices,” Breeze said.

“And it’s forced key local manufacturers exposed to spot prices to the brink.

 

If only we’d seen it all coming…

These potentialities were even considered when the NSW and Australian Governments signed the 2020 joint MOU to fund a $2 billion increase in energy supply and to reduce emissions in NSW.

This included a specific target to bring an additional 70PJ a year of gas into the NSW market by 2022.

“It’s not the end. There is a way out,” Breeze told Stockhead. “And it’s bringing further gas supply onto the market and the government of Anthony Albanese has made it clear that it is both aware of the problem and moving on the solution.

“As I said (Minister for Resources) Madeline King has just released new areas for exploration and in doing so said that future supply was essential to our energy security.”

In the meantime, preventing power blackouts is becoming more difficult as weather dependent renewables replace coal powered generation.

But still AEMO has been forced to intervene more often (250 times in 2019-20 compared to 20 three years earlier) and ordering other sources, typically gas power, to come online.

Which makes Morrison’s extraordinary actions all the more extraordinary. Until, perhaps, the Federal Court finally gets to ask the questions.

 

This article was developed in collaboration with BPH Energy, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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