One of Australia’s biggest gas producers says more of it needs to stay home

The largest producer of liquefied natural gas (LNG) on the east coast of Australia wants the federal government to force east coast producers shipping gas overseas to set some aside for local use.

In a submission to the government’s review of the nation’s gas market, Australia Pacific LNG (APLNG) says an export licensing and permitting regime that guarantees supply for the domestic market is the best way to tackle concerns around looming supply shortfalls and higher prices.

The proposal, to be submitted to the government’s review on Friday, comes amid widespread fears of gas supply shortages in Victoria and NSW which the Australian Competition and Consumer Commission warned could occur by the winter of 2028, and long-running concerns that too much gas is being shipped overseas instead of kept onshore.

APLNG – a joint venture between Australia’s Origin Energy, US giant ConocoPhillips and China’s Sinopec – said it was crucial a new market framework discouraged producers buying gas from the domestic market to ship overseas.

“All east coast LNG producers have a role to play to support the domestic market; however, east coast LNG producers alone cannot be the solution for the entire projected shortfall in southern gas supply,” according to the APLNG submission, seen by this masthead.

“Without fundamental reform that delivers equitable domestic supply obligations across all east coast LNG producers, the existing instruments will continue to make projected future shortfalls worse by discouraging investment. A reformed policy framework must address LNG producer purchases from the domestic market for export.

They should have to equitably contribute gas for Australian jobs and power generation.”

While most of Queensland’s gas is locked into long-term export deals and sold as LNG to buyers in Asia, APNG and the Shell-backed QCLNG joint venture are also key suppliers of east coast domestic gas, together accounting for about 40 per cent of the market. The state’s third LNG exporter, the Santos-backed GLNG business, however, is a net withdrawer of domestic gas to meet its export commitments.

The APLNG proposal stops short of suggesting a specific figure that should be reserved for the domestic market, but says it should be a certain percentage of the east coast demand at the time.

It also says the proposed reservation should apply to existing gas contributions, which varies from other reservation schemes that would only apply to new supply.

“An export licensing and permitting regime … could address projected gas supply shortfalls in coming years while providing the investment certainty for the east coast LNG producers and all market participants to develop new supply,” APLNG wrote.

The Coalition took a gas reservation policy to the May federal election, and reports the Albanese government was likely to consider its own reserve scheme was swiftly rejected by the Queensland LNP government, whose state provides the majority of the nation’s gas along, with Western Australia.

But, importantly, the export permit reservation scheme put forward by APLNG would be a federally mandated move that avoids the need for state intervention.

“We are the most gas rich nation in the world, but we don’t see the benefits of it.”

Australian Workers’ Union national boss Paul Farrow

Grattan Institute energy policy expert Tony Wood has been critical of previous reservation policies but told this masthead the APLNG submission that is linked to east coast demand was broadly in line with the institute’s contribution to the government’s review.

“A reservation policy has fundamental problems and is therefore not as good as something which is not based upon a fixed percentage or an absolute volume, it’s based upon the circumstances of the market, and responds to the changing of the market dynamically,” he said.

Australian Workers’ Union national boss Paul Farrow supported APLNG’s proposal for a gas reservation scheme, which he said would force exporters to sell their fair share into the local market.

“We are the most gas-rich nation in the world, but we don’t see the benefits of it. Instead, our gas exports tie us to the same high prices paid by overseas customers,” he told this masthead.

“We need an east coast gas reservation so we can restore sustainable gas prices, which we haven’t had for a decade.

A gas reservation will deliver much-needed stability for manufacturers that employ tens of thousands of workers and make products we all need.”

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