Producers on notice

LNG gas producers received formal notice from former Minister for Resources and Northern Australia Matt Canavan that the Government intends to consider whether 2018 will be a gas shortfall year under the Australian Domestic Gas Security Mechanism (ADGSM).

The new ADGSM, introduced on 1 July, allows the Government to intervene, if necessary, to ensure there is a sufficient natural gas supply to meet the forecast domestic needs.

LNG producers drawing gas from the domestic market to fulfil overseas contracts could be required to limit exports or find offsetting sources of new gas.

The spectre of a shortfall in domestic gas supply, mainly on the east coast, has been a growing concern for States and Territories.

“The Australian Government is focussed on ensuring domestic gas users have access to a sufficient supply of gas at a reasonable price,” Mr Canavan said.

“Under this first step of the ADGSM I will be consulting with the Australian Energy Market Operator, the ACCC and major gas producers and users.

“The mechanism enables the Australian Government to take action to secure domestic gas supply because of its importance to the Australian economy, at the same time bearing in mind the gas export industry’s long-term viability.

“The ADGSM is a mechanism of last resort to be applied in accordance with our international trade obligations and will only be used if there will not be a sufficient supply of gas for Australian consumers.

“The mechanism will balance domestic gas market considerations with the operational and planning requirements of a globally integrated and highly competitive export industry.”

However, oil and gas industry body Australian Petroleum Production & Exploration Association (APPEA) warned restricting gas exports to boost domestic gas supply was likely to be counterproductive.

APPEA Chief Executive Dr Malcolm Roberts said the government’s proposed ADGSM was a short-term fix and not a long-term solution.

“The industry has tripled east coast gas production in the past five years, creating an entirely new supply from coal seam gas,” Dr Roberts said.

“This is despite the political restrictions and bans imposed by some State and Territory governments.

“We acknowledge the critical importance of gas in the Australian economy and support the need for more gas in the domestic market, but restricting a successful export industry is not the answer.

“Export controls are a sovereign risk issue for Australia, threatening the $50 billion in new investment needed to maintain current supply. Restricting exports will only redistribute existing gas supply – it will not deliver new supply.

“The only sustainable solution to the challenges facing the east coast gas market is more gas supply. The government should be working with industry on regulatory reforms that reduce the cost of developing new supply.

“And it should continue to pressure state and territory governments to immediately remove their bans and moratoriums and consider all new projects on their merits.”

But Mr Canavan said Australia was not the only economy that operated some form of export permission.

“Our longer term goal is to increase domestic gas supplies and improve the transparency and efficiency of the gas market supply chain,” he said.

“I am committed to working closely with the gas supply industry and domestic gas users to address potential gas shortfalls through a non-regulatory approach as part of the ADGSM consultation process.

“In addition to the ADGSM, the Government will spend over $90 million to bring on new gas supplies and promote gas market reform.

“We are working with States and Territories that want to develop their own gas resources through the new $26 million Gas Acceleration Program (GAP) to fast track new gas to the east coast market.”

Image: Supplied.