Industry Warns of Capital Flight From Australia

Australia's tough regulations and bold market interventions over the past year have put future investments in the country's gas sector at risk. Australia's recent bold efforts to lower energy prices and greenhouse gas emissions have unnerved leading operators, who believe these measures will have negative long-term consequences on the country's business climate. Frustrations were on display at the recent Appea conference in Adelaide, where operators lamented the introduction of several disruptive policies and regulations over the past 12 months. These include a controversial cap on gas prices, a reform of the Petroleum Resource Rent Tax, the introduction of a mandatory code of conduct and a reform of the country’s emissions-capping safeguard mechanism. “Large investors are now seeing investment in gas as unwelcome in Australia,” said Credit Suisse analyst Saul Kavonic, adding that the consequences will extend beyond fossil fuels, as Japanese investors interested in developing hydrogen projects may now prefer to invest in the US rather than Australia. Steven Callaghan, Chevron Australia's general manager of finance, also thinks Australia’s business environment has deteriorated since the federal Labor government took power last year. “It is probably harder to do business [now] than it was 12 months ago,” Callagan said. This could make it harder for companies focused on the development of resources for the domestic market to attract joint venture partners to share investment risks and advance projects, said Cooper Energy CEO Jane Norman.