A new east coast gas reserve will 'drive down' prices, according to the federal government and ensure Australia is no longer 'hostage' to international markets.
The long-promised reservation policy is designed to avert looming east coast gas shortages. An east coast gas reserve will force gas giants to save 20 per cent of their export volumes for the Australian market.
The new policy is expected to reduce domestic gas prices, but Energy Minister Chris Bown won't say by how much. The new scheme, similar to one already operating in Western Australia, will take effect in the middle of next year. Share article A new east coast gas reserve will "drive down" prices, according to the federal government and ensure Australia is no longer "hostage" to international markets.
From July next year, Queensland's three LNG ventures will be required, by law, to set aside 20 per cent of their export volumes for Australian users, creating a "modest oversupply" in the domestic market.
"There'll be a requirement on gas producers to sell that 20 per cent to Australian users," Energy Minister Chris Bowen said, unveiling the biggest intervention in the market in over a decade. A long-awaited scheme to force east coast energy giants to set aside gas for Australian use is being finalised in down-to-the-wire negotiations.
"It will ensure a modest oversupply of Australian gas use, which will put downward pressure on prices. " With gas prices currently sitting at about $12 a gigajoule, Mr Bowen would not say how much prices would fall under the new scheme. But he did reject suggestions it would "flood" the market with gas and render smaller developments uneconomic.
"This is not going to be uncontroversial, but people said similar things when Western Australia introduced their reservation policy 15 years ago," Mr Bowen said.the government killed off a campaign to increase taxes on gas giants in this year's budgetRelevant embassies were briefed ahead of today's announcement, with the government assuring customers that foundational contracts and those entered into before December last year would be preserved. Resources Minister Madeleine King, who has previously likened a gas reservation scheme to a tax, said the "historic" change would ensure the prices Australians pay for Australian gas were no longer "hostage to international markets".
Under the scheme, producers will need to prove to Ms King that they have supplied, not just offered, gas to the domestic market, before they are given permits to export.
"They have to go further than simply offering gas, which is the current requirement. They have to actually supply," she said.
"It's a structural shift which creates a buyers' market … where producers have to compete among themselves for contracts to supply the domestic market. The gas field off the south-west coast of Victoria could provide up to 4 per cent of the east coast's energy supplies.
Australia is one of the world's biggest LNG exporters, but according to the Australian Competition and Consumer Commission , east coast gas supplies could fall well short of demand from 2028, "despite there being sufficient reserves and resources for at least the next decade".pushing up power prices and pushing energy-intensive industries, including aluminium smelters, to the brink of closureOnce fiercely opposed, the LNG industry is now broadly supportive of an east coast gas reserve, if only to end the years of ad hoc and heavy-handed interventions by successive governments, which according to the ACCC are "exacerbating the risk of domestic supply shortfalls".
Between them, the Shell-backed Queensland Curtis LNG and Origin Energy's Australia Pacific LNG ventures already meet about 40 per cent of the east coast's gas needs through uncontracted gas. The Santos-led Gladstone LNG joint venture does not currently supply any gas to Australia and, in fact, buys gas from the domestic market to fulfil its export contracts with Malaysia and South Korea.
Budget Gas Policy Exports Katherine King Chris Bowen Energy Policy Electricity Prices Lng Reserves Gas Reserves
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