ABC NEWS



 

The Japanese government has become the latest player to add its voice to the debate about the Commonwealth's plan to cap coal and gas prices amid anxiety about energy security in the north-Asian giant.
  Key points:

• The Japanese embassy says it is following Australia's energy market intervention plans "with great interest"
• The federal government is set to introduce legislation into a special sitting of parliament tomorrow
• Complaints from oil and gas players are growing over plans to control prices indefinitely

In a statement to the ABC, a spokesman for the Japanese embassy said Tokyo was following events in Canberra closely given about half the country's coal and gas imports came from Australia.

Japan has long been the cornerstone of Australia's liquefied natural gas industry, which has grown to become the equal biggest in the world largely thanks to Japanese demand for the fuel.

A slew of Japanese firms including its titans of industry such as Mitsui, Kansai and JERA – a joint venture between the Tokyo Electric Power Company and Chubu which is the world's biggest LNG buyer – are also investors in Australian gas projects.

The spokesman for the embassy acknowledged it was up to Australia to decide what measures were taken to deal with runaway energy prices.
But he stressed the desire to maintain "our mutually beneficial trade and investment relationship in the energy and resources sector".

"We are following the current process within Australia with great interest," the spokesman said.

"Close to 40 per cent of gas and 60 per cent of coal imported by Japan comes from Australia, which underscores the overwhelming impact on the Japanese economy and the wellbeing of the Japanese people.

"Japan and Australia have continuously been communicating on these issues for quite some time and will continue to do so.

"Reassurances have been repeatedly given from the Australian government to the Japanese government, including at the prime minister's level and the cabinet minister's level, that Australia will remain a reliable and trusted supplier of energy and resources to Japan, as well as a safe place to invest."
 

Industry anger at plan grows

Concerns over energy security have been growing in Japan, which is almost totally reliant on imports for fuels such as oil, coal and gas from countries including Australia.

Such are the worries, Tokyo governor Yuriko Koike last month called on residents of the world's biggest metropolis to wear turtlenecks this winter to save energy and stay warm. 

Despite the fears, the comments from the embassy are more conciliatory than the broader response from the oil and gas industry, which has cried foul over what it says is an ambush by the federal government.

As part of the package announced by Prime Minister Anthony Albanese on Friday — and agreed to by state and territory leaders — prices for uncontracted gas and coal will be capped at $12 a gigajoule and $125 a tonne, respectively.

While the caps are set to be temporary, lasting 12 months, details in the legislation set to go before parliament on Thursday suggest other measures could be wider reaching.

Most contested is a plan to give the government the power to determine a "reasonable price" for gas indefinitely.

Saul Kavonic, an energy analyst at investment bank Credit Suisse, also took aim at provisions that he claimed gave the government even more extreme powers.

"Go read section 53V of the legislation," Mr Kavonic said.

"It gives the government the power to break contracts, take anyone's gas, direct it anywhere to be sold at any price, no recourse, no review.

"You can't make that kind of stuff up.

"Let's just put aside whether regulating the price is good or bad policy.

"It's just a fundamental change in the whole way the market is going to work."
 

Woodside says move will raise prices in long term

According to Mr Kavonic, the rushed nature of the government's proposed legislation and the lack of consultation on its implications was also a radical departure from accepted norms.

Woodside Energy, Australia's biggest homegrown oil and gas firm, also weighed in on the proposal, saying it would push up gas prices in the long run by choking off investment in supply.

"The policy will not address falling domestic gas supply and the increasingly critical role of gas in providing dispatchable power," chief executive Meg O'Neill said.

"No-one wants to see energy shortages and gas rationing.
"We must develop a comprehensive, longer-term solution that addresses gas supply and reliability, the overall energy mix and infrastructure, without undermining the market-based economy."

Despite the complaints from industry, the government has stood firm on its position, arguing the gas giants knew a mandatory code of conduct was coming.

Treasurer Jim Chalmers said the industry had been consulted ahead of the announcement and would have further opportunity to speak to ensure operators were able to generate a profit under the measures.

He also pushed back against industry claims the code would kill investment, pointing out that new projects were going ahead when prices were lower than $12 a gigajoule.

"We flagged our intentions for some time that we're looking for a regulatory outcome here, which is meaningful and responsible, which takes into account not just that these companies are making a lot of money on international markets, but also that they need to make a reasonable rate of return here in Australia as well," Mr Chalmers said.

"Any investment that was a good idea before the war in Ukraine will be a good idea after the war in Ukraine.

"We're really just talking about taking the price back to something resembling what it was before the war in Ukraine intensified."

 

Government unfazed by reaction

Mr Albanese said the reforms were aimed at giving teeth to the so-called gas trigger, which gives the government power to ensure there are sufficient gas supplies to meet local demand and is overseen by the Australian Competition and Consumer Commission (ACCC).

"Like the ACCC looks at competition policy and reasonable pricing across the board," Mr Albanese said.

"This is jumping at shadows. Are we going to have a circumstance whereby a business wants to be able to charge an unreasonable price?

"We've consulted about these measures for a long period of time.

"We didn't rush into this. We've negotiated with states and territories to achieve an outcome in the interests of the nation … in the interest, particularly, of consumers who are doing it tough."