A $1 billion expansion of a natural gas development in south-west Queensland has been put on hold, a week after the federal government’s announcement to cap energy prices for 12 months.
Senex Energy, which is owned by Gina Rinehart's Hancock Energy and South Korean steel maker POSCO, announced the decision four months after signalling it would expand its natural gas developments in the Surat Basin in August.
The expansion was set to produce enough electricity to power more than 2.7 million homes each year, equivalent to more than 10 per cent of the east coast's annual domestic gas requirements.
Last week, the federal government announced it would cap energy prices at $12 a gigajoule for the next 12 months in a bid to curb how much gas companies could charge for the gas they sold to the Australian market.
Senex said the new laws meant its Atlas and Roma North natural gas developments were at risk.
Senex chief executive officer Ian Davies said the project had been put on hold pending the outcome of the government’s consultation process in February.
"While Senex supports measures to provide relief to Australian households and businesses from rising energy prices, this legislation goes much further and now challenges the commercial rationale for investing in future gas supply projects," Mr Davies said.
"Until we know the scope of future government actions under the yet-to-be-developed Code of Conduct, and the potential for retrospective application of measures, including the breaking of agreed contracts, it is prudent to review all investment.
"Price controls drive up demand, however do nothing to increase supply – a situation that can only lead to unintended consequences requiring more intervention.
"This legislation has the potential to choke gas supply into the east coast market and put at risk the essential role that natural gas will play in the energy transition to enable reliable electricity supply for homes and businesses."
Senex said its expansion would create 200 jobs during construction and 50 ongoing roles and inject $200 million into the region's economies.
Despite the company’s concern, a spokesperson for the Minister for Resources, Madeleine King, said the cap did not apply to new projects such as Atlas.
"The government wants to design a measure that does not have a chilling effect on investment, and ensures investment continues to flow to new products," the spokesperson said.
"The gas code of conduct, once it enters into force, is not about stripping profits off producers, it’s about ensuring that where gas enters the domestic market, Australian households and businesses are not subject to the exponentially skyrocketing prices that we have seen throughout the course of this year.
"It’s about ensuring fair and equitable contracts between gas producers and gas consumers in this country."
Ms King said she was confident Senex would continue to engage constructively with the government as it designed and implemented the gas code of conduct.
Ellen Roberts, the national coordinator of Lock the Gate, a grassroots organisation against coal seam gas projects, questioned the reasons behind Senex’s decision.
She said property owners in Queensland’s Western Downs have "borne the brunt" of the gas industry in Australia.
"We're certainly pleased to see that Senex is reconsidering this project as coal seam gas has a huge impact on agricultural land, on water resources, on regional communities," Ms Roberts said.
"We’ve seen gas companies gouging the Australian public for over a decade, as they sell gas at low prices to Asian customers and at very high prices to Australians.
"The price cap is still very high, it will still enable companies like Senex to make a considerable profit."
