Origin Energy boss Grant King says a proposal to restrict gas exports in an effort to rein in expected price rises would ultimately hurt Australia.
Origin Energy boss Grant King has rejected calls to shield consumers from an expected surge in gas prices by restricting exports.
He says the expected price rises won’t be as steep as some fear and that restricting exports could damage Australia’s economy.
Gas prices are expected to rise sharply over the next few years as major LNG projects come on line in Queensland, opening up new markets overseas for producers.
That’s great news for gas companies but bad news for east coast consumers.
A Grattan Institute report this week warned the price increases would add $300 a year to the average household gas bill in Melbourne and $100 in Sydney and Adelaide.
Unions and community advocates have called on the federal government to move to protect households, by reserving a percentage of gas production for domestic use.
But Mr King says that would ultimately hurt Australia and crimp royalty payments to governments.
“I should think at the end of the day such a policy would be an impost on the Australian community at large,” he told reporters after the company’s annual general meeting on Wednesday.
“We’re a natural resource country and we’re a primary industries country and the value of all of those activities is maximised if they receive the best price they can for their production.”
Mr King said the impact of rising prices would not hurt households as much as some expected.
“Gas prices will go up as the value of gas goes up, (but) the increase at the customer level in percentage terms is much less than the percentage increase that people are talking about in the field.”
Origin’s Australia Pacific LNG is one of three major LNG projects under construction at Gladstone, on the Queensland coast, alongside Santos’s GLNG and BG Group’s QCLNG.
All three are expected to come on line in the next year.
Mr King also weighed into the debate over Australian National University’s decision to divest its holdings in companies linked to fossil fuels.
He said investors were to free to invest their money how they liked but shouldn’t base their decisions on ideological positions.
“I would expect investors who are very smart people to make their decisions based on objective and analytical advice, not ideological advice,” he said Meanwhile, Mr King told shareholders Origin would cut back its gas production this year to take advantage of a current supply glut.
He said there had been a ramp up of supply ahead of the three Gladstone area projects, which had allowed Origin to buy cheap gas and save its own reserves to sell at higher prices down the track.
“Origin is able to buy that gas, largely to put into power generation and therefore lower our cost of energy, but in order to do that we are deferring our own gas production and buying gas from third parties,” he said after the meeting.
The move would hurt earnings this year but Origin expects earnings to grow substantially from the 2016 financial year.