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Gas Lies: as super profits ramp up so too does the fossil fuel propaganda war

by Michael West | Jul 4, 2022 | Energy & Environment, Latest Posts

As fossil fuel corporations reap fabulous profits at the expense of Australian gas and electricity customers, the gas lobby is running a propaganda campaign calling for Australia to power the world, help Ukraine, let “the market” do its thing. The reality is there is no properly functioning market and this is all a PR distraction to combat the obvious solution to the crisis, that the government needs to earmark gas supply for East Coast customers. Callum Foote fact-checks the finance press. 

The story could just as well be in The Australian, any of the mainstream finance press. It’s essentially the same message, concocted by the powerful cartel of multinational gas behemoths pillaging from ordinary Australians; and that is that governments should not intervene in “the market”. Problem is, there is no market, or if there is, it is broken, and that’s why we pay far higher prices for gas here – literally multiples of Qatar or the US – than elsewhere. It’s broken. 

Faced with calls to tax the cartel properly, to introduce a domestic gas reservation policy to earmark gas for local consumers as they do in WA where prices are lower, we are now subject to a campaign of blanket misinformation.

Faced with this logic, that the big gas producers not only pay a fair amount of tax and royalties on their super profits, we are now being told our gas is needed to power the world, to assist in the fight against Vladimir Putin.

To press the point on propaganda, Callum Foote dissects a story in the AFR.

AFRMr Bowen yesterday sidestepped the call from world leaders at the G7 in Germany for a new dash for global gas supplies, and may still in effect take more gas off the global market for local use.”

Fundamental to the gas lobby’s rhetoric is the idea that we have a supply shortage of gas in Australia. We are the biggest exporter in fact. The fossil fuel lobby is pushing for new gas projects to make more profit from exports.

Also misleading is the proposition that we are dragging the chain on opening up new supply. Australia is rolling out new fossil fuel projects at breakneck pace. The Labor government has thrown its support behind Woodside’s Pluto LNG/ Scarborough expansion which will add 1.4 billion tonnes of emissions with Climate Change and Energy Minister Chris Bowen supporting the Browse LNG project which is predicted to be of even higher carbon intensity. 

According to the Australian Energy Market Operator (AEMO), eastern Australia exports 80% of the gas it produces.

So large is the gas export industry that data released by the federal Department of Industry reveals more gas is burnt in the export process than is burnt in any other individual industry, including by gas-fired power generation plants.

By exporting the vast majority of gas, prices in eastern Australia have steadily increased. The high price of gas in eastern Australia over the past few years has led to a 23% drop in consumption of gas since 2014, according to AEMO.

Even before the recent price shock, Australian gas prices were far higher than other exporting nations sitting;

  • over five and a half times those of Qatar, the second-largest exporter of LNG; 
  • over three times the price of gas in the US; and 
  • nearly five times the price of gas in the Russian Federation. 

AFR: “Australia may have little spare LNG beyond contracted volumes to Asia. But Labor could say something about the egregious dispute that has halted LNG shipments from the $12 billion Prelude platform, where the largest floating object in the world has stopped loading ships as the Australian Workers Union and the militant Maritime Union of Australia seek more perks for workers on $250,000 for working 40 per cent of the year.”

Conveniently, there is no mention that it has been the unions which taken issue with Shell’s running of the Prelude platform. It’s about safety.

Prelude was shut down in February 2020 after an electrical problem was reported. This is after two other incidents in which gas was released unintentionally, which the regulator NOPSEMA (National Offshore Petroleum Safety and Environmental Management Authority) described as “dangerous”. Production was restarted in January 2021, only for the electrical supply to be disrupted by fire in December 2021, resulting in the evacuation of most of the crew. 

As a result of repeated environmental and safety failures, the regulator ordered that production at Prelude not be resumed until Shell could prove it had updated practices. According to NOPSEMA, Shell “did not have a sufficient understanding of the risks of the power system on the facility, including failure mechanisms, interdependencies, and recovery”, adding that “power loss directly impacted critical safety systems along with the ability to safely evacuate crew by boat or helicopter.”

In April 2022 the vessel resumed operations only to be interrupted in June due to industrial action.

The workers on the Prelude staged a strike at the start of the month to get their pay bumped up by 30%, amounting to $117,000 per year according to the AWU.

In response, Shell has issued a cancellation of shipments of gas from Prelude until at least “mid-July”.

“At this point the union has confirmed management has ordered the plant, which usually runs at 94% of maximum design capacity, to be reduced to 35% design capacity,” The Offshore Alliance (a partnership between the AWU and the MUA) says in a statement.

AWU national secretary Daniel Walton called Shell’s action baffling. “I honestly don’t know if we are witnessing the work of unhinged industrial extremists or cover-up artists. Either way, it is damaging, it is irresponsible and it should stop today,” he said.

“Shell is, in effect, helping Vladimir Putin advance his goal of choking off the global gas supply purely so it can play hardball with a few hundred Australian workers who want nothing more than standard industry conditions.”

AFR: “But, to protect domestic manufacturing on the east coast, Australia is sharpening up the Australian Domestic Gas Security Mechanism, which could take gas from global customers whose huge contract commitments underwrote Queensland’s LNG-based gas developments in the first place.”

Queensland’s LNG-based gas developments have been for the almost exclusive use of “global customers” with very little benefit for Australians stemming from Australian resources being drilled and sold.

A new Australian Energy Regulator (AER) report shows that in the midst of the energy crisis (May 8-14) more gas was flowing north for export than south to supply the domestic market. LNG exporters are plundering domestic gas to feed exports with domestic prices exceeding netback price after May 10.

“More gas required to flow south to meet demand,’’ says the regulator “From 10 May, prices have been above $30/GJ in the downstream markets, exceeding the export parity price for June ($27.96/GJ). For the fourth quarter to date and despite record-high domestic spot prices, the majority of gas continues to flow north to Queensland, supplementing production at Gladstone for LNG exports. During the week of 8–14 May only a limited volume of gas flowed to Southern markets from Queensland.”

AFR: “Mr Bowen said yesterday that domestic supply is part of the gas industry’s “social licence”, for which he does not apologise. But the grubbier reason to go that far is because state politicians have capitulated to unscientific populism about onshore gas extraction and won’t develop onshore reserves sitting next to the industries they are so anxious to protect.”

Even grubbier is that the finance press does not recognise the scientific fact that fracking, or smashing underground water deposits which have lain idle for millions of years releases toxic water to the surface, is carbon intensive and damages rivers and farmland, Australia does not need more gas supply. We are the biggest exporter in the world.

Apparently, “unscientific populism” must mean a failure to believe the gas industry’s claims that more gas produced means more domestic market supply.

Amid the price pressures, Shell shipped three LNG tankers from Australia to Chile to replace the supply it typically relies on from the Americas. 

Reuters reported that this is due to the higher prices Shell can fetch for gas in Chile given the Freeport LNG in Houston is now offline until September following a blast.

The new Resources Minister, Madeleine King, said that Australia’s energy issues were “primarily about rising prices rather than a lack of supply, linked to high international gas prices”.

Who benefits then if more gas is produced?

The major oil and gas companies operating in Australia are 95% foreign-owned and contribute very little to Australian government revenue in terms of royalties and taxes paid. 

The Petroleum Resource Rent Tax, the primary mechanism to capture offshore gas profits for taxation, is so broken that many offshore oil and gas projects predict they will never pay any tax. For example, the Ichthys project run by Inpex will pay no PRRT in its lifetime according to a report produced by consultants ACIL Allen and reported by The West Australian.

In 2019-20 Ichthys LNG paid no income tax on $6.4 billion in revenue according to the latest ATO Corporate Tax Transparency report, nor did it pay any PRRT.

The fossil fuel sector is in a fight for its life. Large political donations and relentless lobbying have dragged governments onside and persuaded major media houses that the world’s biggest exporter of gas actually suffers a supply problem. But the propaganda can’t last because of the sheer carbon intensity of gas and the sheer economic falsity that we need to produce more gas.

Last week, the Victorian government ruled that new homes in the state did not have to be built with gas. This despite the irony of the government opening up new drilling provinces.

In Western Australia, the EPA has advised the state to give Woodside an extension to run the North West Shelf gas development for another 50 years despite the spectre of adding more than 4bn tonnes of carbon dioxide to the atmosphere.

The industry is furiously locking in as much supply, as much drilling, as it possibly can before the party is over. With prices at record highs and super profits to be made, the battles and the propaganda wars will continue. So it is that we can expect to hear, weekly, the call for new drilling, for no intervention in “the market”, for Australian gas to “power the world”.

Ransom Notes: pay us to keep our old power plants running or else, say fossil fuel majors


Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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