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CHINA LNG BAN COULD HAVE SILVER LINING

16 May 2021

Senator Patrick has noted reports that the Chinese Communist Government is considering banning up to $13B of Australia's LNG from import to China.

“While a Chinese ban on Australians LNG would constitute a further downturn in bilateral relations, there could be a silver lining for Australian gas consumers,” said Senator Patrick. “It should also serve to remind the Government that they should not be using taxpayers' money to subside a Chinese State-owned company proposing to build a gas pipeline in Queensland.”

In 2015 Australia massively increased its LNG exports causing shortages of supply in the domestic market and an associated increases in price. Australian manufacturers found themselves in a position where they couldn’t even get gas supply, such was the size of the diversion of domestic supply to overseas markets.

With the introduction of the Australian Domestic Gas Security Mechanism in 2017, as a result of negotiations between Senator Patrick (an advisor to Senator Nick Xenophon at the time) and the Government, gas supply was restored, but prices have still remained high.

“The big gas companies put their profits far ahead of Australia’s national interests,” said Senator Patrick.

An April 2016 ACCC report into the East Coast Gas market found evidence of monopoly pricing in the market. Its subsequent ‘never ending’ 2017-2025 Gas Inquiry has consistently found Australians are paying too much for their gas.

“The gas industry operates as a cartel. They pay very little in resource taxes, in many cases no corporate tax and they operate without social licence,” said Senator Patrick. “High gas prices have harmed our high energy intensity manufacturing industries and have directly harmed consumers, given electricity prices are strongly influenced by the gas price.”

“China’s threat, if implemented, could come with a silver lining. It presents an opportunity for Australia to restore international competitiveness to many of our industries through lower domestic energy costs caused by plentiful gas supply. It would also negate the need for the Government to spend taxpayers' money on gas projects, as announced in the budget.”

“Given we are in a trade dispute with China, the Government must also immediately cease plans to subsidise Jemena’s proposed pipeline from Mount Isa through the Galilee Basin to Roma through the Northern Australia Infrastructure Facility. Jemena is 60 percent owned by The State Grid Corporation of China - the Chinese State,” said Senator Patrick.

"Furthermore, Jemena's Australian holding company, SGSP, is being audited by the Tax Office in relation to transfer pricing."

“Only a Government that has completely lost the plot would subsidise the Chinese State whilst Beijing has imposed and is threatening to impose further unlawful trade sanctions on Australia.”