Finance Finance News Plenty of gas on east coast, says AGL

Plenty of gas on east coast, says AGL

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The solution to the predicted gas supply crisis facing 17.5 million east coast Australians is under peoples’ feet, the head of utility giant AGL Energy says.

Chief executive Michael Fraser says Australia has enough gas resources to supply domestic businesses and households, but government policies that block investment in new projects are the problem.

AGL, Australia’s second largest energy utility, recently wrote down the value of its NSW coal seam gas (CSG) assets by $344 million, on the back of new tougher NSW bans on drilling.

“We’ve got the answer right underneath our feet,” Mr Fraser told reporters at the company’s annual general meeting.

“The key policy issue is exactly what (federal resources minister) Ian MacFarlane is doing at the moment – trying to work out along with the NSW government what needs to happen to allow the resources to be developed.”

He said AGL was currently selling gas to Queensland commercial customers at $9 to $10 a gigajoule, compared to traditional prices of just $3 to $4.

The same thing would happen in NSW soon and possibly even in Victoria if those states did not invest in new supplies before gas fields in Bass Strait are used up.

Cooper Basin companies such as Beach Energy have also long promoted the central Australia region as containing vast reserves of unconventional gas for the east coast.

There is an $80 billion investment boom in liquefied natural gas in Queensland, but that involves diverting the resource for exports.

Community opposition to coal seam gas drilling is also leading to a shortfall.

A group of residents from the NSW Hunter Valley travelled to Melbourne to protest against AGL’s Gloucester CSG project.

Former Gloucester mayor Julie Lyford said the project threatened local drinking water supplies for 100,000 people, plus air quality and agricultural land.

AGL says the project can be safely developed.

Chairman Jerry Maycock said Australians want cheap, reliable energy with no impact on the environment, but that was not yet technically or economically possible.

“Some of these comments are passionately against coal fired generation, others equally passionately against wind farms and coal seam gas developments,” he told shareholders.

Government had added to the problem with policymaking driven by short-term political imperatives with little weight given to longer-term state energy interests, Mr Maycock said.

The company on Wednesday forecast underlying profit of $560 to $610 million in the 2013/14 financial year, with a warm winter hurting it by $25 million to $30 million.

AGL’s underlying profit in 2012/13 was $585.4 million.

Its shares dropped 28 cents, or 1.8 per cent, to $15.30.

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