Australian govt strikes deal with gas exporters on domestic supply

PERTH (miningweekly.com) – Australia’s three largest gas exporters, Shell, Origin Energy and Santos, have struck a deal with the federal government to supply the expected gas shortfall in 2018.

The Australian Competition and Consumer Commission (ACCC) and the Australia Energy Market Operator (AEMO) have both warned of major gas shortages starting in 2018, with the ACCC projecting supply shortfalls of up to 55 PJ on the Australian east coast in 2018, with the AEMO placing the expected shortfall at between 54 PJ and 107 PJ, while the 2019 shortfall is expected to be between 48 PJ and 102 PJ.

The three producers have now guaranteed that the east coast market will not be short of gas in 2018, with the producers promising an additional 54 PJ to 107 PJ of uncontracted gas to the local market, depending on demand.

Prime Minister Malcolm Turnbull said on Thursday that the three producers had also committed to provide the ACCC with regular reporting on sales, offers to sell gas and bids to buy gas from customers that had been declined.

“One of the big problems in the gas industry, as the ACCC's report identified, is that it has been very opaque. There has been very, very little transparency. We are going to bring that to an end by putting the ACCC on the case.

“They of course have the ability to investigate with compulsory powers, and they have been able to get behind what is going on in the gas sector and, therefore, identify the way in which the market is not working,” Turnbull said.

The Australian Petroleum Production and Exploration Association (Appea) said this week that the industry would ensure there would not be a shortfall of gas in the domestic market, and that all uncontracted gas would be offered to the domestic market first.

“We have also committed to improving transparency in the domestic market by reporting regularly to the ACCC on gas sales, offers to sell and bids declined,” said Appea CEO Dr Malcolm Roberts.

“The industry has already moved to ensure a ready source of gas is available to meet any energy security risks by supporting the Gas Peak Demand Guarantee. This will ensure gas is always available for power generation during peak demand periods in the national electricity market.”

Roberts said the industry applauded the Prime Minister’s leadership and commitment to finding a market-based solution that guaranteed gas supply to the domestic market without harming a vital export industry.

“More gas supply and more gas suppliers is the only sustainable way to meet long-term demand and put downward pressure on prices,” he said.

“It is essential that state and territory governments remove their political bans on developing local gas. New South Wales and Victoria, in particular, are heavy gas users but have blocked local projects.”