Santos chief executive David Knox.
SANTOS chief executive David Knox has warned that a domestic gas reservation policy would be ''simply counterproductive''.
In a speech to be given to an Australian Institute of Energy conference in Sydney on Monday Mr Knox says ''no one should be fooled, a gas reservation policy will create market distortions, inefficiencies and would lead to a shortage of gas in Australia, and ultimately higher prices than otherwise. It would also create further uncertainty for gas companies, their investors and lower confidence in Australia as a supplier of gas to the region.''
East coast gas prices are expected to double over the next three to four years as Queensland's coal seam gas to LNG projects come online and the local market approaches ''export parity''.
Manufacturers have called for a certain amount of gas production to be set aside for domestic users.
But the federal government's energy white paper, released this month, rejected such calls saying they should be ''undertaken only where there is clear evidence of market failure''.
Mr Knox said Australia had ample gas to supply domestic and export markets and should focus on remaining competitive to attract a potential $145 billion in extra investment for new LNG projects, on top of $188 billion already committed.
''The prize up for grabs for Australia and its competitors is nearly 90 million tonnes per annum of uncontracted Asian LNG demand in 2020,'' he said.
At $US3016 per million metric tonnes per annum (mmtpa) of LNG export capacity, capital intensity of the LNG projects under construction was 2.5 times more expensive than the global average of $US1212.
Mr Knox said much of this extra cost was Australian labour, which was twice as high as in competing countries although productivity was ''in most cases lower''. Labour accounted for 50 to 60 per cent of Santos project costs, he said.
Mr Knox said Santos was open to collaborating with other oil and gas companies ''especially where it avoids duplication and creates synergies. Two strikingly obvious places for Santos to collaborate with others are in Gladstone - the site of our LNG plant and port for the GLNG Project - and Moomba, the birthplace of Santos and the hub of activity for our Cooper Basin gas and liquids program.''