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Senex Energy announced it was suspending an investment project in the Surat Basin in Queensland after the Australian government approved a cap on domestic gas prices that caused outrage in the industry.
“New laws passed by the Albanese Government that could arbitrarily dictate investment returns for gas producers puts at risk Senex Energy’s $1 billion investment plan to bring new gas to the east coast market,” the company, which is a subsidiary of South Korean steel major POSCO, said in a statement.
“This will result in less gas, electricity shortages, fewer jobs and weaker regional communities that rely on the resources sector.” Senex Energy also said, noting that its expansion project in the Surat Basin had attracted a lot of buyer interest, resulting in an oversubscription of five times the available, with interest extending to 2039.
The Albanese government announced caps on the price of natural gas and coal earlier this month. The price of natural gas will be capped at $8.15 (A$12) per gigajoule and at $85 (A$125) per ton of coal and the cap will be in effect for a year.
"Extraordinary times call for extraordinary measures, and we know, with the Russian invasion of Ukraine, what we've seen is a massive increase in global energy prices," Albanese told media.
Criticism from the energy industry was quick. “A policy of such significance, proposed without any meaningful consultation with industry, creates an environment of uncertainty that will result in investment activity dropping across energy markets. This will make solving the underlying structural problems in the energy market harder, not easier,” Woodside said in a statement soon after the announcement was made.
"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," Senex’s CEO Ian Davies said this week.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.