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Summary

Australia's local manufacturing needs together with the opportunity to drive large-scale developments to access the Asian market are underpinning a vibrant multi-decade expansion in the eastern Australian natural gas sector, Santos Vice President Eastern Australia James Baulderstone said today.

In a speech to the APPEA Onshore Gas Conference in Adelaide this morning, Mr Baulderstone said the debate over developing eastern Australia’s abundant natural gas resources needs to be based on a robust assessment of the facts surrounding the region’s gas market and energy needs.

“Natural gas is used by over 60% of Australia’s homes, meets 45% of the energy needs of our manufacturing and construction sectors and provides over 20% of our power generation capacity, making it abundantly clear that a secure supply of gas is essential to our economic prosperity,” Mr Baulderstone said.

“Too often, public discussion of the eastern Australia gas market ignores the reality that the balanced development of this vital resource underpins the energy security and economic well-being of millions of Australians.”

Mr Baulderstone said the eastern Australia gas market was undergoing a dramatic transformation with the region’s demand set to triple once three large export projects entered production from 2015.

The economies of scale that these large projects have delivered can ensure that eastern Australian domestic gas users have reliable supplies for decades to come.

“But that will only be the case if the industry is able to develop those resources in a timely fashion, and if there is an understanding of the need for additional supply to come into the market to meet demand.  It is that extra supply that will lower prices for domestic customers,” Mr Baulderstone said.

Mr Baulderstone rejected as counter-productive calls for intervention in domestic markets to reserve gas. His presentation to the APPEA conference pointed out that all Australian industries relied on access to export markets to achieve the scale to enable efficient production levels.

Mr Baulderstone said increased regulation would further slow development, resulting in less gas and higher prices.

The state most at risk in this scenario is NSW, the only mainland state without significant gas production of its own – and where all current and proposed near-term gas production is targeted at the domestic market. Mr Baulderstone said reliance on interstate suppliers exposed NSW gas users to significant price increases.

“The only way to ensure Australians continue to enjoy reliable and affordable natural gas supplies is to ensure the orderly and sustainable development of known gas resources. The market will naturally drive this development, starting with the resources that are closest to major markets and existing transport infrastructure and therefore most economic.

“Gas producers like Santos are able to do that, but require stable and certain regulatory frameworks and supportive governments and communities to deliver major projects in a timely and economic manner,” he said.