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The head of Japan's biggest oil and gas producer has warned that Australia risks undermining global security through a decision to "quietly quit" the international gas trade.
Key points:
- A gas company executive says Japan has been rattled by government interventions in Australia's gas industry
- He says Russia, China and Iran will likely fill any void if Australia exits LNG production
- A Japanese ambassador says his country depends on Australia for resources
In an extraordinary speech delivered at a federal parliamentary event on Thursday, Inpex chief executive Takayuki Ueda suggested Japan had been rattled by government interventions in Australia's gas industry.
The Albanese government legislated to cap coal and gas prices for 12 months late last year while requiring producers to abide by "reasonable pricing" guidelines indefinitely.
The decision came after chaos in global energy markets that sent coal and gas prices soaring to record highs and left households facing electricity bills about 40 per cent higher.
But the laws also affected a raft of multi billion-dollar liquefied natural gas projects, including Inpex's flagship $60 billion Ichthys development off Australia's north-west coast.
Mr Ueda said while Japan sympathised with Australian government concerns last year over the state of domestic markets, the North Asian country was worried about any potential ripples that could jeopardise its own energy security.
'Sinister' unintended consequences
Along with Japanese ambassador Shingo Yamagami, Mr Ueda pointed out Japan's heavy reliance on Australia for resources.
He said Ichthys provided about 10 per cent of Japan's LNG imports, while it was also the country's single biggest investment in Australia.
Amid warnings of a "deteriorating" investment climate in Australia, Mr Ueda said Canberra risked causing unintended consequences in its efforts to control the gas industry.
"The consequence of these well-intentioned policies will be that the increasing energy demand in our region will be met by coal and not by natural gas," Mr Ueda told MPs at private parliamentary function.
"The result will be much higher global greenhouse gas emissions and will make net zero by 2050 an impossible task.
"On the geopolitical front, Australia's 'quiet quitting' of the LNG business has potentially very sinister consequences.
He said the question of who would replace Australian supply into the market was front and centre.
"Alarmingly, the 'inconvenient truth' is most likely that Russia, China and Iran fill the void," he said.
"I hope this point is obvious to all of you and that you appreciate that this outcome would represent a direct threat to the rules-based international order essential to the peace, stability and prosperity of the region, if not the world."
Concerns from Japan have flowed steadily since the state and federal governments imposed price caps in December.
Despite being the world's third biggest economy, with a gross domestic product of $US5.5 trillion [$8.2 trillion], Japan is famously poor in energy and mineral resources.
'Lights go out' without Australia
Mr Yamagami said it was for those reasons Australia was a "trusted and stable energy exporter", providing Japan 70 per cent of its coal imports, 60 per cent of its iron ore and 40 per cent of its gas.
"Japan and Australia have grown – and continue to grow – together," Mr Yamagami said.
"You only have to look at the vibrant streets of Japan's never-sleeping capital.
"It's hard to imagine the neon lights of Tokyo ever going out, but … this is exactly what would happen if Australia stopped producing energy resources."
Mr Ueda said energy security was likely to become increasingly important for most countries in the decades ahead, and this extended to green technology.
He said Australia was a natural partner for Japan given the countries' historic trading links and strong bilateral ties.
But he cautioned it was far from certain, arguing Japanese investment in Australia could suffer if there were policies that hurt the security of trading partners.
Government rejects reputation concerns
Resources Minister Madeleine King was present for Mr Ueda's speech and thanked in his opening remarks for her support for the industry.
Ms King defended the government's market interventions, and said protecting Australia's trade reputation was a priority in any future measures.
"We know rising energy prices are among the greatest challenges facing Australian families and Australian businesses this year — which is why we took urgent action late last year to deliver the Albanese Government's Energy Price Relief Plan," she said.
"Reforms to Australia's energy markets balance the need to guarantee sufficient domestic gas supply while also safeguarding Australia's global reputation as a stable and reliable supplier of energy to our export markets.
"Australia will always remain a reliable supplier of energy to Japan and a safe destination for foreign investment."
But Shadow Foreign Minister Simon Birmingham leapt on the comments, and urged the government to listen.
"This is the biggest recent investor into Australia, and they are saying there is real consequence," he said.
"And so [Trade Minister] Don Farrell, Anthony Albanese and this entire Labor government should really heed the message, and take the wake-up call delivered."