London: The head of global energy giant Santos says he is worried about sovereign risk and warned the Turnbull government that retrospective intervention in the gas sector could see Australian mimic Argentina in crippling its own gas industry.
And Kevin Gallagher told an audience in London that only in Australia does he encounter a backlash to gas as a source of energy, but conceded the business community needs to do more in contributing to the public debate to prevent the conversation and policy responses being dominated by the industry's critics.
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Turnbull reveals new gas policy
To tackle rising power prices and ensure reliable supply, Prime Minister Malcolm Turnbull has announced his government's new gas policy.
Speaking on a panel for the Menzies Centre for Australian Studies at London's King's College alongside former Labor Resources Minister Martin Ferguson, Mr Gallagher said: "I see the risk of retrospective government intervention as a massive sovereign risk for Australia. And he warned Australia is close to becoming known internationally as not just 'high cost' but also 'high risk'.
Last month Prime Minister Malcolm Turnbull slapped the gas sector with export controls effective from January 1, 2018 when Australia is poised to become the world's largest exporter of LNG.
On Friday, speaking ahead of a meeting of the federal and state energy ministers, the prime minister blamed export gas prices for the shortfall.
"The principal reason for the recent increase in energy prices has been the big increase of the price of gas and that has been driven by a shortage because more of the gas is being exported and there is not a mark now for the domestic market," he told the Seven Network.
When announcing the policy on June 20, the prime minister rejected any notion of sovereign risk which is defaulting on agreed contracts of supply.
But Mr Gallagher said he held grave concerns about "the longer term unintended consequences of rushed through government intervention."
And he said Australia risked bringing the gas industry to a halt which in 2015/16 exported $16 billion worth of LNG, mainly to China, Japan and South Korea.
"If you look at what happened in Argentina for example in the 2000s when the government…tried to stimulate its economy by capping domestic gas prices…the result of that was they stopped all new development," he said.
"Now we could get into that place pretty quickly if we're not careful," he warned.
"And as much we've got green and red tape slowing down development the last thing we need is economic uncertainty and the lack of an ability to sell into free markets to scale up investment."
'We could get into that place pretty quickly if we're not careful'
Former Resources Minister Martin Ferguson also said sovereign risk is a live issue.
"One of the hallmarks of our nation for many, many decades has been that we are a reliable supplier in terms of our contractual obligations."
"To potentially put at risk the capacity of our exporters to meet the requirements of our customers raises very serious issues about sovereign risk in Australia and that is a major problem for Australia," he said.
Simon Flowers, an analyst at Wood Mackenzie, said Australia was not at crisis point - yet.
"There are big issues coming next decade and there's a real challenge for the politicians to get to grip with that so a real crisis is averted because it is looming," he said.
'Crazy debate'
Mr Gallagher said attitudes towards natural gas were out of step with the rest of the world and said he and other business leaders needed to do more to educate the debate. He cited the US' use take up of shale gas under the Obama administration as a way of that country reducing its emissions. The US Energy Administration says LNG, which is higher in methane, emits almost half as much carbon dioxide when burned compared to coal.
"Australia's quite unique because I go all over the world to talk to investors and everywhere I go gas is good."
"Then you come to Australia and we're having this crazy debate about a clean resource that we have in abundance," he said.
He said he and other company leaders had been "complacent" and needed to do more to counter campaigners and help politicians overcome activist pressures.
"I agree we have to do better," he said. "I take that challenge on."
He cited the taxi-driver measure as an example that attitudes towards gas extraction can be changed.
"Every taxi driver opposes fracking passionately but has no idea why. And you have a five-minute conversation with them and say 'we've been doing that safely for nearly fifty years in South Australia' and they say 'wow.'"
Political leadership blamed
Mr Ferguson said the shortage of gas domestically was not the fault of the private sector.
"We got here through a lack of political leadership, that is the start and end of the debate."
He took aim at the Victorian Labor government, which in March banned fracking until 2020. At the time, Premier Daniel Andrews said the ban was a "triumph of one of the most amazing community campaigns that our state and indeed our nation has ever seen."
But Mr Ferguson said the decision had contributed to the squeeze on gas supply domestically driving up electricity prices.
"If the Victorian government had not put the moratorium in place then we would not have the problems that we currently have on the east coast of Australia because we would have more than sufficient gas both for the purposes of exports and energy security," Mr Ferguson said.
Paul Schreier was the Deputy Secretary of the Department of Prime Minister and Cabinet between 2010 and 2013.
He said the states decision to introduce their own energy efficiency schemes, bans on coal seam gas exploration and renewable energy targets, as consensus on carbon pricing broke down federally had contributed to the parlous state of Australia's energy policy and supply shortages.
"There are fewer pools of energy available then might otherwise be the case for producers onshore because of regulatory action by governments responding to political pressure," he said.