Australia’s Gas Industry Expects Government’s Export Controls to Worsen Supply Situation
Australia’s gas industry and the federal government are at odds over LNG export control measures scheduled to come into effect July 1, with the Australian Petroleum Production and Exploration Association labelling the move as potentially counterproductive.
The export controls, known as the Australian Domestic Gas Security Mechanism (ADGSM), “risks exacerbating the fundamental problem on the east coast it is intended to solve,” APPEA chief executive Malcolm Roberts said June 13.
That problem on the east coast is a potential gas supply shortfall as soon as 2018-2019, which was flagged by the Australian Energy Market Operator earlier in the year, and has largely been blamed on the increase in demand brought on by the LNG export projects on Curtis Island at the Port of Gladstone in Queensland.
Critics of the ADGSM see the government’s move as kneejerk and with the potential of stymying investment in new gas development, while unfairly targeting the LNG exporters.
“It is disappointing that such a significant intervention by the Commonwealth has not been subject to a longer consultation period or the normally required regulation impact assessment,” Roberts said.
“While the industry has tripled gas production over the last five years, this has required unprecedented investment in developing new resources. Most of that investment has been made directly by the three liquefied natural gas projects on Curtis Island or indirectly by third parties contracted to supply the projects,” he said.
He said that whether the mechanism is used or not, investors must now consider the prospect of the Commonwealth intervening in the market to force a project or projects to default on contracts.
“To date, Australia has succeeded in the global competition for investment by being a high cost but low risk country; we cannot succeed as a high cost, high risk country,” he said.
Resources minister Matt Canavan was quoted by The Australian newspaper defending the measures June 14.
“While Australia is on track to become the world’s largest exporter of LNG, it’s simply not an option for us to do so at the expense of affordable and reliable gas for Australian users,” he said.
“No company investing in Australia would expect anything less than for the Australian government to ensure gas for domestic users, as well as for the international market,” he said.
An update to AEMO’s supply forecasts is expected this week, which may shine a new light on the situation.
Roberts said that APPEA is concerned about the government consulting on the ADGSM before the update is released.
Nathan Richardson