Uncertainty over carbon pricing stalls Australian power development

• 13 years ago (2011-03-10)
• Junior Isles

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Australian development of gas-fired generation is stagnating due to uncertainty over carbon pricing, according to EnergyQuest.

This is despite record natural gas production of 1999 petajoules last year, up 5.1 per cent.

In releasing its 2010 petroleum production report, EnergyQuest noted the marked difference in the amount of funds flowing into liquefied natural gas (LNG) projects, which produce gas for export, and the domestic gas-fired electricity generation market.

LNG production increased 6.2 per cent to 19.8 million tonnes, and another 40 million tonnes of production was on the drawing board.

"The LNG momentum looks set to continue in 2011," chief executive Graeme Bethune said.

"So far this year we have already seen another Gladstone LNG project, GLNG, in central Queensland, reaching sanction and the ConocoPhillips/Origin Energy APLNG project, also situated at Gladstone, reaching major milestones,” said Dr. Bethune.

Altogether there are seven Australasian LNG projects aiming for final investment decisions in 2011, with a combined capacity of around 40 million tonnes per annum.

In contrast, the momentum for new gas-fired power plants was weak.

Dr. Bethune said: "There are many plans and approved sites but not much action, partly due to low electricity prices and ongoing and heightened uncertainty about carbon pricing.

The Federal Government has now announced it is pressing ahead with a carbon pricing scheme from 2012, but with many qualifications and not many details.

"The issues here are whether there will be sufficient progress with climate policy this year to provide the certainty investors need to go ahead, and if not, what the consequences might be of continuing stalled development."

Dr Bethune's comments echo similar statements made by TruEnergy chief executive Richard McIndoe, who told a Committee for Economic Development of Australia forum that companies would not invest in baseload power generation until there was certainty on carbon pricing.

This was concerning, as Queensland, for example, needed new baseload power sources as early as 2013-14.

Policy certainty seems unattainable at the moment, however. Prime Minister Julia Gillard has committed to introducing a price on carbon from July next year, but opposition leader Tony Abbott has vowed to repeal the new tax.

The EnergyQuest report also showed Australian oil production bounced back last year, growing 16.2 per cent to 116 million barrels, after coming off a 40 year low the previous year.

Petroleum production overall increased 6.3 per cent to a record 520 million barrels of oil equivalent.