‘Historic’ gas reservation policy to force major producers to set aside up to a quarter for Australian use | Energy

The country’s three major LNG companies will be forced to reserve a quarter of their gas for domestic use as part of the government’s long-awaited gas reservation policy aimed at lowering prices on Australia’s east coast.

Minister for Climate Change and Energy Chris Bowen in Canberra said the “historic” export permit scheme would only be valid from 2027 but should be reflected in new contracts made by gas companies by then.

“Australian gas is a top priority for Australian users,” Bowen said.

“The fundamentals of the market are such that it is becoming more expensive to extract gas in Australia – [the amount of gas available to extract in] Bass Strait diminishes, this foundation remains the same; “But this is the government’s way of putting maximum downward pressure on prices by slightly over-supplying Australia’s needs.”

Under the policy, the trio of major east coast exporters in Queensland will be required to dedicate 15-25% of their gas to domestic consumption, equivalent to 200-350 petajoules per year.

Bowen said more details would be shared with the industry and other stakeholders in the coming months.

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Although Australia is the world’s third-largest exporter of LNG, its energy regulator has warned states such as New South Wales and Victoria could face gas shortages by winter 2028.

While large amounts of gas are being diverted to more lucrative offshore markets, heavy industry complains it faces an existential crisis without access to cheaper energy.

Gas costs for Victorian households have nearly doubled over the past decade; This roughly corresponds to the period when the country’s LNG exports started.

Josh Runciman, Australia’s leading gas analyst at the Institute for Energy Economics and Financial Analysis, said the proposed export licensing model was “clearly the best option” because it would be easy to implement and would therefore provide certainty to the industry.

“Targeting the largest LNG exporters [gas] Even though there are already reserves, the government is getting its money’s worth without complicating the market any more than it needs to,” Runciman said.

“Once additional gas becomes available, we expect this price impact to be seen fairly quickly, which will lead to lower electricity prices.”

While many users will have to wait until 2027 for lower gas prices, Runciman said large industrial users entering into new, multi-year contracts should be able to include future cheaper gas in those deals.