While most of Queensland’s gas is locked into long-term export deals and sold as LNG to buyers in Asia, two of the state’s three LNG producers – the Origin Energy-backed APLNG joint venture and Shell’s QCLNG – are also key suppliers of east coast domestic gas, together accounting for about 40 per cent of the market.
But as shortfalls loom and prices rise, consumers, including gas-intensive manufacturing companies that need the fuel to make products such as steel, cement, bricks, fertilisers and food, have been pleading for the government to clamp down on the LNG sector with export restrictions.
Former opposition leader Peter Dutton had promised to slug LNG exporters with a charge on uncontracted gas supplies that were shipped overseas instead of sold locally if he had won the May 3 election.
While dismissing Dutton’s idea as a “thought bubble”, King said on Tuesday that the government was preparing to launch a review of laws and regulations governing the LNG sector to “make sure they are delivering as intended”, and urged the industry to co-operate and participate in the process constructively.
This will include changes to the so-called Australian Domestic Gas Security Mechanism (ADGSM), which gives the government power to force Queensland LNG ventures to hold back more gas to supply local homes and businesses in the event of a looming shortfall. The mechanism, however, has never had to be triggered.
“I think there is a case to be made for industry and industry groups turning their consultancy spends to practical policy responses instead of simplistic CEO surveys,” King said.
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The prospect of a gas shortage underscores a deepening challenge for governments that are having to balance goals to combat climate change with the need to shore up polluting fossil fuels for those who still depend on them.
Consumers are increasingly making the switch from gas stoves and heaters to electric alternatives, aided by government schemes and policies banning gas hook-ups in new dwellings. However, the transition is still not happening fast enough to avert the need to boost supplies, warns the Australian Energy Market Operator.
Global consultancy Wood Mackenzie on Tuesday said east coast gas demand “remained resilient” while supply dwindled.
“Australia faces a future of chronic gas shortages, particularly during winter months,” it said.
Holding back more export gas for local buyers could boost domestic supply, Wood Mackenzie added, but also risks damaging Australia’s reputation as a reliable LNG supplier. There is also limited pipeline capacity to transport its gas thousands of kilometres south to consumers in NSW and Victoria, especially in winter, when gas heater demand is highest.
Simon Younger, local chair of US energy giant ExxonMobil, which operates the Gippsland Basin gas fields, said it was vital that the government’s imminent review of gas industry policies boosted investor confidence rather than hurt it. He said investment conditions had been badly damaged the last time the government intervened in the market, with price caps to tame soaring energy bills following the onset of the Russia-Ukraine war.
“It’s incredibly important we come out of that process with stability and certainty,” Younger said.
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