Samantha McCulloch is the chief executive of the Australian Petroleum Production & Exploration Association, which represents gas producers.
Samantha McCulloch, welcome to the program.
Thanks for having me David.
So the industry minister says the problem with gas prices right now is "a glut of greed" by the gas companies. Is he right?
Oh, what a direct question! But first, talking points:
David what we're seeing is high energy prices across the globe. This is the result of a global energy crisis, triggered by Russia's invasion of Ukraine.
It's affecting all energy sources, and it's affecting all countries.
But can you explain to me, why that should push up the price of Australian gas, in Australia?
We're seeing
specifically ogling, and salivating at
very strong demand for gas domestically. […] It's increasing demand for gas that's driving up these prices, as well as of course international pressures. And the key to driving down these prices […] is increasing supply.
That's what the industry is seeking to do,
within the constraints of maximising profit,
but we need a clear runway, for more investment, to boost supply, and put downward pressure on prices.
Well, OK but you did say a few days ago yourself, "The domestic market is well supplied." And the agreement that was struck only just over a month ago […] was about boosting supply […]. Supply doesn't appear to be the problem does it?
The gas industry is committed, to supplying
at exorbitant prices
the domestic market, and the domestic market has been well supplied. The heads of agreement that were struck […] committed to ensuring adequate supply for the domestic market.
So what's the problem with supply? Is price the problem, in reality?
Oh look, some states:
The problem that we're seeing, is the increasing demand for gas is predominantly in the southern states […]. Yet, we're not seeing the investment in supply, in those states.
But you just said, we're well supplied.
The cheapest gas is the gas that's close to the use
which is why we love sending it overseas.
So we
and this one is an inclusive we, which includes you the taxpayer
need to be building more supply, where it's needed. […]
[…]
[…]
[…] Alright. Well if more supply is the answer here, one proposal being considered by the government, is to let the three big LNG exporters keep their international contracts in place, no breaching of contracts, but excess gas that's currently sold on the international spot market would instead be made available in Australia first, at a price of no more than $10 a gigajoule.
More than they were getting last year, so they still get a profit. What's wrong with that idea?
David, that uncontracted gas is already being offered to the domestic market first. That was the basis of the heads of agreement […].
But at very high prices. But not at $10 a gigajoule, it's being offered for more than that.
Well let's just be clear on what these gas price caps would do.
I know it sounds like a[n] easy and quick solution…
Yep.
And that yep isn't even one of these inserted thought bubbles!
… but it's not that simple.
Why not?
Gas prices, gas price caps, would have… a chilling effect on
profit, and to a lesser extent
new investment. It will undermine investment confidence in new supply, it'll actually increase demand, while creating structural shortages in supply, which just creates further difficulties and problems long-term.
Well, you talk about a chilling effect, manufacturers are facing more than a chilling effect […]. That's spooking a lot of investors, having to, you know, face double the gas price they were a year ago.
Let's… when we're talking about gas prices, let's just be clear, this is a complex market, and gas pricing is complex
meaning profitable.
There's the retail market, and then there's the wholesale market. Now, I'm going to, I'm focused on the wholesale market […]. And the realised average price, for gas sold in the wholesale market, 90% of which is sold under long-term contracts, is priced between [$]6 and $12 a gigajoule.
Well that was probably on contracts written before this price spike though right?
That's the average price being realised, in third quarter this year.
[…] That's between July and September and presumably contracts that pre-date what's happened with the gas price. What's being offered now?
So David, this is where we need far more transparency in the market.
Whoops. Did I just say that instead of "we need to be far more transparent?"
Can't you tell us?
Because we're seeing… well we're seeing, uh claims of… of very high prices being offered in the market…
Well don't you know?
… but there's no details around that.
Why don't you know?
No, this is reported to the ACCC. We'll get more details of this but there will be a delay.
Suck shit, David.
Can you tell me how much, uh, have the profits of the LNG exporters grown, since the war in Ukraine?
🤑🤑🤑🤑🤑🤑🤑🤑🤑🤑🤑🤑🤑
David, what I can tell you, is that the strong demand for our LNG exports, is delivering returns for
us the gas industry, at the expensive of
Australian budgets and the Australian people.
Well I'm asking about the profits for the companies though. There are estimates it's around $26 billion in profit growth.
I don't have an estimate for individual companies, they report this on a quarterly basis. But what I can say, is that we're seeing more
which is a euphemism for fuck-all
returns to the Australian people in the budget […].
To be clear on that, the petroleum resource rent tax, this financial year, is returning very little… $2.6 billion, and that's barely moved from before the gas price spike. So is that really fair given the sort of profits that are estimated to be $26 billion in profit growth?
The petroleum resource rent tax is projected to provide $11 billion, to the federal government budget, in the forward estimates…
Over four years.
Nice try. I'm not innumerate.
[…] What are profits over four years, if you want to use that figure?
This is already a profits-based tax
which you all ought to be grateful for
of at least 40%
of the excess of assessable receipts over the deductible expenditure and transferred exploration expenditure
and it's just one aspect of the
measly
financial contribution of the industry to government revenues.
Why can't you tell us the profits they're raking in?
…
How dare you leave me speechless for a few seconds!
… Look, I'm… I'm representing the industry, the… these are
allegedly tax-avoiding
international companies too of course, David, but what I can tell you is the direct contribution that we're making, to the Australian governments, and to Australian people,
whom we do shaft with glee,
will triple this year according to our estimates. […]
OK.
But triple an infinitesimal amount is still infinitesimal.
That includes royalties, it includes taxes, […].
[…]
Alright. Samantha McCulloch, we'll have to leave it there. Thanks for joining us.
Thank you David.