Pressure eases on gas trigger finger

The Turnbull government is talking down the prospect of tough intervention on gas exports, as the major industry players respond to the threat of regulation.


The Australian Energy Market Operator reported in March a projected decline in gas production could lead to a shortfall of gas-fired electricity generation, pushing up the risk of 2019 summer blackouts in NSW, Victoria and South Australia.

AEMO warned this was because exports of liquefied natural gas were being put ahead of shoring up domestic supplies.

The prime minister has been seeking to put pressure on the gas industry to ensure there is enough domestic supply, holding out the option of export controls from January 1, 2018, if adequate action is not taken.

But Finance Minister Mathias Cormann on Friday said the gas industry was taking “significant steps” to address the shortage.

“The market has already responded, exports are already being diverted into the domestic market and wholesale gas prices have started to come down,” he told Sky News.

Senator Cormann hinted any market intervention could be scaled down.

The government had given itself until November 1 to seek advice from the Australian Competition and Consumer Commission about the appropriate market information needed to ensure the scale of any restrictions was right.

Pulling the so-called gas trigger was not the government’s preferred course of action, Senator Cormann said.

An updated AEMO forecast is expected to be released early next week.

Industry sources suggest the forecast will be revised to show no shortfall for the summer of 2018-19, but a potential problem in 2021.

The Australian Industry Group said the government should keep up pressure on gas exporters by proceeding towards invoking the trigger, known as the Australian Domestic Gas Security Mechanism.

AI Group chief Innes Willox said businesses continued to experience “extreme contract prices and poor contract availability” and while there had been positive signs from exporters, it was too early to know how effective they would be in rebalancing the market.

The government should determine 2018 is a shortfall year and – if circumstances warrant the tightening or loosening of export controls – there was leeway in the regulations to do so, Mr Willox said.

Warwick King, chief executive of Australia Pacific LNG, said the company expected to supply around 173 petajoules of gas into the Australian domestic market this year.

“APLNG also expects to supply a significant amount into the domestic market in 2018 and is actively marketing expected volumes above contractual obligations for that time period,” Mr King told AAP on Friday.

APLNG’s domestic portfolio comprises long term contracts involving 1,400 PJ committed to Australian natural gas customers, with some contracts going as far out as 2040.

Shell said this week it was selling 75 petajoules of gas to east coast customers, representing 10 per cent of the entire east coast gas market, from the QGC project.

Santos announced earlier in September that with its GLNG joint venture partner it would supply 30 petajoules of gas to the east coast domestic market over 2018 and 2019, which would otherwise have been exported.