Business Recorder
SYDNEY: The Australian government said on Thursday energy exporters must reserve 20% of their natural gas for the domestic market on the country’s east coast to avert supply shortfalls and help lower energy bills. The scheme will apply from July next year and not affect existing contracts, the government said. Three liquefied natural gas export projects on the east coast operated by Origin Energy, Shell and Santos, respectively, will be affected by the reservation scheme. In December, the government proposed a plan to reserve between 15% to 25% of gas. “This is a carefully calibrated model which ensures that Australia’s national best interests are put first,” Energy Minister Chris Bowen told reporters. “This is a policy which will obviously not please everyone - often good policy doesn’t - but it’s good policy.” Bowen said the policy would only apply to prospective contracts and the spot market. Pakistan seeks two LNG cargoes for May It is intended to create a “modest oversupply” of gas in the domestic market to force down energy prices, he said. “It’s going to put downward pressure on prices. And what it will also do is to a certain degree, disconnect Australian gas from spikes in international prices,” Bowen said. Australia is one of the world’s largest LNG exporters and ships more gas overseas than it consumes domestically. But most of the country’s large gas reserves are located in the northwest, far from the more populous southeast where demand is concentrated. The state of Western Australia already has its own reservation scheme that requires offshore export projects to divert 15% of their gas to its local market. ‘Historic shift’ in gas policy Resources Minister Madeleine King added the policy was part of broader gas market reforms that involve scrapping the Australian Domestic Gas Security Mechanism, a policy that allows the government to restrict exports from the three east coast LNG plants. The government will also remove an agreement under which the three exporters committed to offer any uncontracted gas volumes to the domestic market on internationally competitive terms. “Today is a very important and historic structural shift in Australia’s domestic gas market policy settings,” King said. Shares in Santos, which operates the Gladstone LNG project in Queensland, fell 3% in afternoon trading. Origin Energy, which leads rival export consortium Australia Pacific LNG, was down 1.2%. The declines came as energy stocks weakened broadly due to lower oil prices. “A national 20% gas reservation scheme will help underpin manufacturing investment, energy transition and energy security for future generations,” Manufacturing Australia CEO Ben Eade said in a statement. But think tank The Australia Institute said it was the “wrong solution” to address high energy prices, and instead called for a tax on gas exports. The government recently ruled out plans for such a tax in next week’s federal budget over fears it could jeopardise relationships with Asian trading partners that send fuels such as gasoline and diesel to Australia.
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