Santos Company

Industry, regulation and other external factors

The current issues of Europe's sovereign debt crisis and US weaken economy are making a large influence on the global economy. The crisis hurricane has become to be worse than ever before, it seems that no economy can stand out of damage. Despite Australia is not immune from economy hurting, the country still high evaluated by being lest affected by global turmoil. While most other developed countries experienced low or even negative GDP growth, Australia has been sustainable its GDP growth of 1.3 percent. As the matter of fact, the reason behind this growth comes from the increasing demand for energy from emerging countries such as China, India etc (Beijing Review, 2011).

As the matter of fact, Australia has limited resource of crude oil; however, it has abundant natural gas resources. Australia is ranking as the third largest producer of liquefied natural gas (LNG) in Asia-Pacific region and holding fifth largest LNG producer all over the world (Roarty, 2008). Another kind of valuable co-product of oil and gas and petroleum from Australia is Liquefied petroleum gas (LPG). Particularly, there is a significant development of coal seam gas (CSG) industry recently in Australia.

Figures obtained from Australia Stock exchange index indicates that the energy sector generate AU$176 billion of a cumulative market capitalisation, account for nearly 7% of the total market capitalisation of the ASX/200. The energy sector is one of largest weighting stocks, only behind financial sector (32%) and Metal mining sector (25%), with making up 12 % of the S&P 500. Interestingly, major industry players has been making up over 78% of market capitalisation for energy sector (Denning, 2011), tables below show top-ten players.

The Australia government offer a very intensively competitive strategy for investment in energy resource regarding to maintain its low sovereign risks and assure low unemployment rate and other economic benefits for Australians. The strategy presented in the transparency, predictability and practice of Australia‘s regulatory, which comprehend all stages of the operation of energy resource.

Recently as a new trend rising by Green Party, there is some news in the Government plan and regulation. With the concern of environment and then, to reduce pollution, there is some change such as collection of tax on carbon, encourage in innovation and investment in producing "clean energy". Besides, there is a changing in energy structure as avoiding monopoly power in the gas, as given the fact that, regional transmission and distribution systems are natural monopolies. To address those risks associated to market power of this sector, there is a regulatory regime, which allow third-party enter to natural gas pipelines, was introduced by the Australia government recently.

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