Australia's upcoming gas market review is set to shake up the LNG export industry, with potential implications for major players. A delicate balancing act is at play, as the government aims to ensure a stable domestic market while maintaining international commitments.
The review, expected soon, could prioritize local supply over exports, especially from the populous east coast, where demand is highest. This move aims to address the tricky issue of balancing affordable gas prices for domestic consumers and international buyers.
"The government wants a win-win situation, but it's a complex problem," says Tony Wood, an energy expert from the Grattan Institute. "They're trying to ensure everyone gets reasonably priced gas."
While the review is likely to provide a framework, with detailed measures coming later, industry sources suggest Gladstone LNG (GLNG) might face the toughest challenges. GLNG has heavily relied on third-party domestic gas to meet export demands, which has caused concerns about supply security.
But here's where it gets controversial: GLNG argues that any new domestic gas commitments would undermine their existing contracts. Meanwhile, the other two eastern exporters, Australia Pacific LNG (APLNG) and Queensland Curtis LNG (QCLNG), have called for equal contributions to the domestic market from all three producers.
"In the long run, targeted investment in gas fields near demand centers is crucial for supply security," says APLNG.
The Labor government has promised to honor existing contracts, but Shell, a key player in APLNG, has criticized the approach, calling for a simpler model for gas reservation. Shell believes this would strengthen the domestic market and encourage future investment.
And this is the part most people miss: Australia's east coast LNG industry, centered around Queensland's coal seam gas fields, has faced criticism for surging power prices and limited long-term contracts for manufacturers.
Both the energy market operator and competition watchdog have warned of potential gas shortages since 2017, leading to government interventions to divert cargoes to the domestic market. As a result, successive governments have imposed controls on exports and prices.
"A genuine market, free from constant government intervention, is what both buyers and sellers want," Wood emphasizes.
Tor McCaul, from Comet Ridge, a Queensland gas producer, agrees: "The long-term solution is more supply."
So, what do you think? Should the government prioritize the domestic market over exports? Or is there a better way to ensure a stable gas supply for all? Let's discuss in the comments!
