Australia Moves Closer to Imposing LNG Restrictions
In a move that could lead to potential restrictions on Australian LNG exports, minister for resources and Northern Australia, Matt Canavan, July 24 gave formal notice to LNG producers that he intends to consider whether 2018 will be a gas shortfall year under the Australian Domestic Gas Security Mechanism (ADGSM).
The new ADGSM, introduced July 1, allows the Australian 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 which are drawing gas from the domestic market to limit exports or find offsetting sources of new gas.
Canavan will consult the Australian Energy Market Operator, the Australian competition regulator and major gas producers and users. However, he said that ADGSM “is a mechanism of last resort to be applied in accordance with our international trade obligations and will only be used if there will not be a sufficient supply of gas for Australian consumers”.
The government sees this as part of a target 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 non-regulatory approach as part of the ADGSM consultation process,” the minister said.
The oil and gas industry body APPEA warned that restricting gas exports to boost domestic supply was likely to be counterproductive.
APPEA chief executive Malcolm Roberts said July 24: "Export controls are a sovereign risk issue for Australia, threatening the $50bn in new investment needed to maintain current supply. Restricting exports will only redistribute existing gas supply – it will not deliver new supply."
“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,” he added.
Shardul Sharma