Yamagami added that Tokyo’s “neon lights” would go out if Australia ever stopped producing resources exports that account for 70 per cent of Japan’s coal, 60 per cent of its iron ore, and 40 per cent of gas. And while that was only a small taste of Ueda’s speech, which is available on the ambassador’s website, his message left many who heard it stunned. Japanese business leaders rarely like to rock the boat in public, none more so than Inpex.
In Tokyo, the speech has sparked incredulity from some in the corporate world. But it is also being read in the context of the fact that Japan’s government owns 21 per cent of Inpex, ensuring it never falls prey to a hostile takeover – a point Ueda made in the speech. “Unfortunately, the investment climate in Australia appears to be deteriorating,” he said.
Ueda must have realised his impact as he apologised to the audience for “being so direct”.
“But good friends must speak frankly,” the CEO said according to one observer.
As the news of the inflammatory speech began to spread, the government swung into damage control, with ministers insisting that Australia remains a reliable and safe export partner.
But there is clear annoyance as well, not least because the government feels it has maintained an open-door policy with Inpex and consulted it closely on policy changes and ensured it remains quarantined from fights over east coast gas.
“It was extremely disappointing”, said one senior Labor figure of the speech. “It was an interesting way to deal with the friendship.”
But by calling out the mixed messaging of Labor and the parliament and Australia’s public debate more broadly on fossil fuels, Ueda has done what the politically risk-averse business community has largely avoided. Propelled by savvy think tank campaigns, many have become accustomed to trashing industries that deliver the bulk of national export income.
“The energy sector is Australia’s ‘golden goose’ and deserves to be celebrated not vilified,” said Ueda.
Anthony Albanese and King routinely speak about the vital importance of mining and gas extraction. But it is the government’s deeds that have left the industry feeling under growing siege.
Costs are going up on industrial relations, taxation, and regulation, as well as via this week’s safeguard mechanism changes, which will directly hit around $60 billion in “backfill” gas export projects with the cost of being completely carbon free from day one.
And while the prime minister and senior ministers say the right thing, there’s a sense that a good portion of the caucus and perhaps half the front bench are largely indifferent and even hostile to the industry’s fate.
Or as Ueda so cheekily put it – adopting the 2022 social media-invented term to describe passive-aggressive workers opting after the pandemic to do the absolute minimum necessary for their jobs – “they’re quietly quitting” gas.
To be fair, some of the blame for Australia’s drift falls squarely on the Coalition. This week’s safeguard mechanism reform was a direct result of the fact that Peter Dutton vacated the field when the time came for the Senate to debate a policy that Labor had an election mandate to deliver.
Rather than shielding the gas and resources industry more broadly, the Coalition’s absence forced Bowen to deal with Bandt. “You have to work with the parliament you get,” said a Labor source.
That meant giving Bandt some red meat for his base, by putting additional costs on gas companies and embedding a carbon policy that means ensures another Ichthys-scale development will never see the light of day. From here on out, new gas fields will be “backfill” for existing LNG terminals. With the exception of Santos’ ever-delayed Narrabri project, future gas investments will be modest and more expensive to deliver. For Bandt that gave him enough to win over a sceptical Greens party room.
The safeguard deal means 215 of the nation’s biggest polluters will need to cut their combined emissions from 137.5 million tonnes in the year ended last June 30 (according to Clean Energy Regulator figures released on Friday) to 100 million tonnes by 2030.
In an extraordinary development, the deal will force buyers of gas from Tamboran’s Beetaloo project in NT to offset or capture the company’s “scope three emissions” – ie the emissions that are effectively caused by the customers of a product. The hard legislated emissions cap represents a “big hit” on fossil fuel companies, cheered Bandt.
And while much of that rhetoric is overstated, there is no doubt the changes will add significant costs to many of the gas industry’s biggest emerging projects, including Woodside’s $30 billion Browse facility off WA.
Other than the Japanese, the great bulk of Australian and foreign-based gas companies are staying quiet to these challenges. Some of that is strategic. As pressure builds on the government to ensure Australia meets its 43 per cent emissions reduction target, the industry needs to pick its fights carefully.
Industrial relations reforms loom, as do changes to the so-called industry code of conduct, which Labor introduced late last year alongside price caps to ensure producers only sell at a “reasonable price”. Those changes have all but frozen the gas market, and talks are underway to revive contract-making before the lights go out.
But by far the biggest battles are on permits and approvals for future projects. Labor promised voters at the last election that it would introduce tough new environmental protection laws and establish an independent Environmental Protection Agency to police land users, including miners and drillers.
If the Coalition repeats its safeguard tactic, Environment Minister Tanya Plibersek will have to again negotiate with Bandt, who will demand the inclusion of a “climate trigger” on resources applications.
Unlike the safeguard mechanism, which was strongly backed by business, a battle this term over the Environmental Protection and Biodiversity Conservation Act is already keeping executives and business lobbyists up at night.
And finally, the gas industry is pressing Labor to address “lawfare” concerns following a court case that chided Santos for failing to consult widely enough with Indigenous people on its $5.8 billion Barossa gas project in the Timor Sea.
With this year’s Voice referendum about to dominate the political debate, the government will be in no hurry to help out on that front. And then there are wild-card developments that will require government support.
Take this week’s United Nations General Assembly vote to get the International Criminal Court of Justice at The Hague to give an opinion on what obligations nations have to act on climate change.
Australia needs a more sophisticated debate over gas and the critical role it needs to play as the region moves beyond carbon.
Japan Inc’s intervention this week is a reminder that while Australians are happy to indulge in fights over resources that veer towards the infantile we forget that grownups abroad are listening with growing alarm.