Sabra Lane reported this story on Thursday, March 9, 2017 08:04:00

SABRA LANE: Josh Frydenberg is the Federal Energy Minister, he joined me a short time ago from Melbourne.



Josh Frydenberg, thank you very much for joining AM.



JOSH FRYDENBERG: Nice to be with you, Sabra.



SABRA LANE: The Energy Market Operator is warning of energy shortages in the summer of next year due to gas shortages. How can we avoid it?



JOSH FRYDENBERG: Well, we have a real challenge in Australia's gas market and that's coming from a confluence of factors, particularly the state based moratoriums on gas exploration, particularly on unconventional gas, but also in the state of Victoria on conventional gas.



This is drying up production and exploration.



But we're also now exporting two thirds of what we produce and that has led to higher parity pricing in a very tight gas market.



So what we need is more gas supply and more gas suppliers.



And that's why we as the Federal Government are imploring these state governments to lift their moratoriums and get more gas out of the ground.



SABRA LANE: Some groups have called for the quarantining of gas for use here instead of export. Is that an option?



AEMO Chief Mike Cleary warns that Australia will have to choose between our own domestic energy security and exporting.



Would you examine quarantining some of that gas for domestic use?



JOSH FRYDENBERG: Well, as you know, in Western Australia they have a domestic gas reservation of 15 per cent and other countries like the United States have historically put export controls on their energy sector.



The issue in Australia has always been that it would be a deterrent to further investment, if you were going to restrict the gas merely for domestic suppliers opposed for international export.



In fact, 10 years ago Australia was looking to import gas from Papua New Guinea and it was only with the exploration by these international companies to supply coal seam gas to the world that led to further investments in exploration and further production.



But I've recently seen what has happened in Queensland where that State Government has offered a tenement for companies to invest in, on the condition that that gas is supplied domestically.



And I think that's quite a creative way forward because it doesn't introduce the possibility of sovereign risk because it doesn't affect existing investments, but it does encourage further investment to supply the domestic market.



SABRA LANE: So you're suggesting new discoveries and exploration be perhaps quarantined for domestic use rather than exporting.



JOSH FRYDENBERG: Well I think that was a very creative suggestion and solution from the Queensland Government and one that is worthy of further consideration by other state governments.



SABRA LANE: You're saying that other companies want certainty for further investment, but surely that also hinges on actually having the power to produce things here and it's an essential solution to the problems that they face right now.



You can't produce anything if you've got no power.



JOSH FRYDENBERG: Well, certainly gas is a critical feed stock for businesses like the fertilizer business.



It's also important in the production of glass and plastic and food processing.



It's critical for households, for heating and for their cooking.



But also it supplies 20 per cent of Australia's electricity for both business and households, and increasingly gas is in demand because it's setting the price of power as more renewables come into the system.



So, we really do need urgently to get more gas and more gas suppliers because we need more competition between these companies into the market and that's what the Turnbull Government is focussed on.



SABRA LANE: Do you need to bang heads with COAG with the state process given that many of the states have prohibited further exploration and they've got bans on where coal seam gas can be explored?



JOSH FRYDENBERG: Well, it has been a topic of discussion at the COAG table and I have to say some states like Queensland have been enlightened in this regard.



Ninety-eight per cent of Australia's unconventional gas comes from that one state of Queensland, whereas New South Wales is importing 95 per cent of the gas that it uses.



And in Victoria, which historically has relied heavily on gas, has now got the incredible position where it is putting in place moratoriums and bans on both conventional and unconventional onshore gas exploration.



Now I'm pleased that the Liberals in Victoria have distanced themselves from the Andrews Government on this regard.



But Daniel Andrews has a real case to answer here.



He's got a 40 per cent renewable energy target, he tripled the royalties on coal, which in part has led to the closure of Hazelwood, and now he's got a moratorium on onshore gas developments.



So I don't know where he expects Victorians and Victorian businesses to get their power from in the future.



SABRA LANE: BHP Billiton, Origin Energy, Energy Australia and AGL Energy have all called for an emissions intensity scheme to be back on the table.



Will the Government reconsider that?



You've already ruled it out. Was it unwise to rule it out so early?



JOSH FRYDENBERG: No, we have ruled it out and it has to be said it will not solve the gas problem that we're dealing with. What we need is…



SABRA LANE: But you've got no one backing the Government on this particular point.



You've got all these companies calling for an emissions intensity scheme for the energy sector to be on the table; the experts are calling for it.



How long can the Government ignore these calls?



JOSH FRYDENBERG: Well we've got the Finkel review looking into the various options to stabilise the system and also to ensure affordable power.



But the whole concept of an emissions intensity scheme will not drive more gas into the market, and in fact what it will do is drive more renewables into the system.



And as we've seen from South Australia, Sabra, there are real challenges faced by higher rates or higher levels of intermittent power into the system and that is a danger that we have to watch and we have to prepare for.



So, I am not a supporter of the emissions intensity scheme and the Government won't be going down that path.



SABRA LANE: Nick Xenophon and his party say that they won't consider the Government's corporate tax cuts until the energy crisis is sorted. How do you respond?



JOSH FRYDENBERG: Well, I can understand Nick Xenophon's concern, particularly being a South Australian, and he's seen in his state this push for a 50 per cent renewable target, which is being copied by Bill Shorten, which has led to real problems in that state.



But the Government has many orders of business and the Australian people expect us to get on with those and I think they should be dealt with on its merits.



That being said, we're very focused on finding solutions, practical solutions without the ideology to meet the energy challenges that we face as a nation.



SABRA LANE: Okay, Minister, thank you very much.



JOSH FRYDENBERG: Good to be with you.



SABRA LANE: The Federal Energy and Resources Minister Josh Frydenberg.

