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Oz gas reservation policy on the cards

Government unveils raft of reforms aimed an increasing domestic gas security

The Australian government has revealed it is considering implementing a gas reservation scheme as the world’s largest exporter of liquefied natural gas faces domestic shortages.

Currently Western Australia is the only statewith a domestic gas reservation policy, with the federal government noting previous approvals for large export projects, such as the three giant LNG export plants on Curtis Island in Queensland, had not adequately considered the impact on the domestic market.

The government said it would look as to whether or not a reservation scheme would work at a national level but added that the implementation of such a scheme would have to coincide with state and territory governments removing “unwarranted restrictions” on gas developments.

New South Wales, Victoria and Tasmania all currently have blanket bans on fracking, while Victoria also currently has a ban on onshore conventional exploration.

Meanwhile Western Australia and the Northern Territory have recently lifted moratoriums on the practice.

“State and territory governments must do their part by freeing up supply and supporting investment through the removal of bans on gas exploration,” Australia’s Minister for Energy & Emissions Reduction, Angus Taylor, said.

“I encourage all State and Territory governments to take this action, and to work with the Australian government to consider a national gas reservation scheme and further COAG (Council of Australian Government’s) Energy Council action on gas market reform.”

The government also announced Tuesday that it would bring forward a scheduled review of the Australian Domestic Gas Security Mechanism (ADGSM) from next year to this year.

The AGDSM was introduced by former prime minister Malcolm Turnbull and allows the government to intervene to ensure there is enough gas supply to meet domestic demand if a shortfall is identified, however it is yet to be triggered since it was introduced in 2017.

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The government will now asses whether the ADGSM in its current form is “fit for purpose to deliver a functional domestic gas market with the lowest possible prices for consumers while ensuring strong investment in new gas production”.

Finally the government said it intended to increase transparency as supply in the gas market, including improved transparency from gas producers and LNG exporters on prices, reserves and resources, and a comprehensive review of pipeline regulation.

Australian Minister for Resources Matt Canavan noted that that Australia’s gas exports had grown 22% to reach 70 million tonnes between 2017 and 2018 and are expected to top 81 million tonnes in 2020-21.

“While we are proud that Australian gas powers industry around the world, we must also be able to reliably and affordably harness gas to grow our own industries and create more Australian jobs,” he added.

“Price and supply are inextricably linked. To put downward pressure on prices and shore up supply, we need more exploration and production. For too long we’ve seen some State and Territory governments shelve onshore gas exploration for political purposes and the price we’ve paid is restricted supply and price creep. The plan outlined today tackles that and a host of other issues from all directions.”

The government said it would also look to improve supply by engaging with LNG plants to explore whether some of their processes could be electrified, to free up more gas for domestic use, while it will also open talks with the manufacturing sector to explore opportunities to lower gas costs and reduce demand through increased energy efficiency and electrification measures.

It will also consider the feasibility of establishing mechanisms to facilitate collective bargaining and improve the negotiating position of large industrial users for gas supply.

The Australian Petroleum Production & Exploration Association (APPEA) said the industry would work with the government on the proposed gas market reforms, but warned against “unintended consequences” of market intervention.

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“Sensible reforms can improve the efficiency of the gas market and its operation,” APPEA chief executive Andrew McConville said.

“But market interventions can adversely affect confidence in the oil and gas sector and discourage new market entrants and supply diversity. We will work closely with the government to ensure confidence is restored, not undermined.”

McConville also echoed the government’s call for restrictions on exploration in states such as New South Wales and Victoria to be lifted.

“Removing these restrictions is the best way to ensure sustained gas supply,” he added.

“Some of the measures flagged in the government’s announcement today could bring increases in supply, but unless significant new supply can be brought to market, they may fall flat.”

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