Government must focus on new gas supply to avoid shortages: Appea

Australia’s peak oil and gas industry body, the Australian Petroleum Production & Exploration Association (Appea), on July 10 called on the federal government to address forecast gas supply shortfalls in order to prevent blackouts and mitigate rising costs of living.

The government has introduced a Mandatory Code of Conduct, which places it at the center of the gas market and allows it to negotiate agreements with gas producers to determine the conditions for new supply, Appea said.

Key elements of the Code include a price cap of $12/GJ, which was first announced in December last year, and an exemptions framework to incentivise producers to commit more gas to the east coast gas market in the short term and facilitate new investment to meet ongoing demand in the medium term. Small and domestically focused producers would be exempt from the price cap.

There will be a two-month transitional period to allow companies to adapt to new conduct provisions, record-keeping and reporting obligations. 

Samantha McCulloch, CEO of Appea, said the test for the government’s Mandatory Code of Conduct would be if it can support investment that is urgently needed to bring on new gas supply.

“After more than six months of uncertainty as the Code was developed, investment in new gas supply is now urgently needed to avoid shortages that will add to energy security concerns and cost of living pressures for Australian households and business,” she said.

With the government now responsible for the east coast gas market, McCulloch said, there is the need for sufficient supply and investment certainty. She mentioned that the industry has consistently shown its commitment to the domestic gas market, with 260 PJ of new indicative supply commitments made during the consultations on the Code.

“Gas producers will work constructively with the government and users within the new framework established by the Code and in the development of the Future Gas Strategy announced in the May budget,” she said.