Prime minister Malcolm Turnbull told LNG exports to shore up domestic supply or face export limits © PA Images
Prime minister Malcolm Turnbull told LNG exports to shore up domestic supply or face export limits © PA Images

Gas exporters squeezed as domestic shortfall worsens

25 September 2017

Australian prime minister Malcolm Turnbull has ordered gas giants to shore up supplies or face strict export limits after announcing the eastern states are facing an energy shortfall three times higher than previously forecast. 

Turnbull said the government had received two reports from the Australian Energy Market Operator and the Australian Competition and Consumer Commission (ACCC), both showing gas shortages in the east coast domestic market over the next two years would “be considerably higher than the estimated six months ago”.

“It’s estimated there will be a shortfall of around 100 petajoules (PJ) of gas—more than three times the figure we were advised earlier in the year,” he said. 

He added that recent rises in gas cost were the single biggest factor in the current rise in electricity prices, because gas sets the wholesale electricity price.

“More expensive gas has huge implications for industry and for struggling families but it feeds directly into the electricity market,” he said.

Turnbull said he pressed the east coast liquefied natural gas (LNG) exporters—Shell at Queensland Curtis LNG, ConocoPhillips and Origin Energy at Australia Pacific LNG, and Santos at Gladstone LNG—for plans to plug the 100PJ supply gap in a meeting earlier today.

“We will not let the power bills of Australians rise further and further because of a shortfall of gas on the east coast of Australia,” he said.

“We want to see a plan from them, we want to see a commitment, then we want to be satisfied that it meets the requirements of the ACCC.

“If we are not able to receive the assurances from the industry to our satisfaction and that of competition watchdog, the ACCC, then we will impose those export controls.”

The three LNG export plants, which were completed between 2014 and 2016, have long-term contracts to sell gas in Asia but have been selling cargoes overseas instead of locally due to high costs and access issues on pipelines in Australia. 

In July the government passed a law, known as the Australian Domestic Gas Supply Mechanism, which would allow the government to intervene and limit exports from any of the three LNG plants to meet the predicted needs of Australian consumers.

The government has until 1 November to enact the mechanism, which would come into effect on 1 January.

Turnbull said he would also be writing to the Victorian and NSW premiers and Northern Territory chief minister, urging them to lift moratoriums on gas exploration and development, which the states passed into law earlier this year.

Victoria’s government banned gas extraction known as fracking in response to community concern earlier this year. In NSW, there is a ban on BTEX chemicals used in fracking, as well as bans on coal seam gas exploration within 2km of residential areas and in key horse-breeding areas.

He said the states with a moratorium on gas exploration had “failed” and the ban on exploration was “one of the biggest long-term problems”.

“Queensland is producing most of the gas on the east coast of Australia but both Victoria and NSW are not doing enough,” he said.

Josh Frydenberg, federal energy minister, said it had been estimated there could be 200,000PJ of gas potentially undeveloped in the Northern Territory—dwarfing the 110PJ shortfall.

“We are now starting to pay the price of the states’ mindless moratorium and bans on gas development,” he said.

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