Export restrictions risk exacerbating domestic gas supply problem – Appea

PERTH (miningweekly.com) – The Australian Petroleum Production & Exploration Association (Appea) has again warned against plans to restrict gas exports to boost domestic supply.

The warning comes as Resources Minister Matt Canavan gave formal notice to liquefied natural gas (LNG) producers that he would consider whether 2018 would be a gas shortfall year under the Australian Domestic Gas Security Mechanism (ADGSM).

The ADGSM, introduced on July 1, allows the government to intervene, if necessary, to ensure there is a sufficient supply of natural gas to meet the forecast needs of Australian consumers. It will do this by requiring LNG projects that are drawing gas from the domestic market to limit exports or find offsetting sources of new gas.

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

“Under this first step of the ADGSM, I will be consulting with the Australian Energy Market Operator, the Australian Competition and Consumer Commission 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.”

Canavan said that the ADGSM was a mechanism of last resort to be applied in accordance with Australia’s international trade obligations and would only be used if there would 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.”

“Our longer term goal is to increase domestic gas supplies and improve the transparency and efficiency of the gas market supply chain. I am committed to working closely with the gas supply industry and domestic gas users to address potential gas shortfalls through a nonregulatory approach as part of the ADGSM consultation process.”

Appea CEO Dr Malcolm Roberts said the government’s ADGSM was a short-term fix and not a long-term solution, and warned that export restrictions risked exacerbating the problem they were meant to solve.

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

Roberts said that export controls were a sovereign risk issue for Australia, threatening the A$50-billion in new investment needed to maintain current supply, adding that restricting exports would only redistribute existing gas supply – it would 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.”

In addition to the ADGSM, the government will spend over A$90-million to bring on new gas supplies and promote gas market reform, with Canavan saying on Monday that the federal government was working with states and territories that want to develop their own gas resources through the new A$26-million Gas Acceleration Programme to fast-track new gas to the east coast market.