Albanese government to force gas exporters to reserve supply for domestic market

“The majority of Australians think gas should be available to Australians at affordable prices, and Australians are right about that,” Bowen said.

The long-running push for east coast bookings has been fiercely opposed by the gas industry since 2015, when LNG export hubs at Gladstone revived and began sending gas to Asia for the first time.

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The gas reservation on the east coast is similar to the scheme implemented in Western Australia in 2006. The two sides of the continent constitute separate markets and cannot share gas due to long distances from land and the lack of shipping import terminals.

Bowen said forcing producers to reserve gas for the local market would create an oversupply, which would drive down wholesale prices.

“The federal government’s promise to reserve gas on the east coast is a welcome and important milestone for Australian manufacturing, but it must now be delivered,” said Ben Eade, chief executive of Manufacturing Australia, which represents major gas users including BlueScope Steel, Brickworks and Tomago Aluminum.

“Gas reserves of at least 25 percent should be the focus of reform, but it cannot be the only measure.”

The government will consult the industry on the details of the plan in the coming months. The inclusion of the Northern Territory could cause controversy because Ichthys and Barossa, two Japan-backed projects, have long-term agreements to supply LNG to Japan, which relies on Australian supplies for energy security.

The severe shortage on the east coast is compounded by three factors: huge onshore fields in Queensland export significant amounts to Asia; the pipeline connecting these areas to NSW and Victoria is already operating at full capacity during winter periods when demand is peak; The 50-year-old gas fields in the Bass Strait, which have long provided energy to the southeast, are rapidly depleting and there are almost no new projects to replace them.

The policy will only apply to new contracts, Bowen said.

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“Under this policy, no existing contracts, domestic or international, will be disrupted or canceled,” Bowen said. “Contracts signed from today will need to ensure sufficient domestic supply going forward.”

Warnings from the Australian Energy Market Operator about local gas shortages in the south-eastern states mark a deepening challenge for governments who must balance goals of tackling climate change with the need to shore up polluting fossil fuel supplies for those still reliant on them.

Households are increasingly switching from gas stoves and heaters to electric alternatives, helped by government incentives and policies banning gas hookups in new homes. However, the market operator says this change is not happening quickly enough to eliminate the need to increase gas supply.

For the first time, the booking push also received high-level support from the oil and gas industry. Two of three Queensland LNG producers – joint ventures backed by Origin Energy and Shell – have signaled they are open to working with the government on the development of a booking scheme, provided all exporters contribute equally.

But the Santos-backed Gladstone LNG venture, which relies heavily on buying gas on the domestic market to meet its export commitments, along with major Asian LNG customers in Korea and Japan, have raised serious concerns that some proposals for the design of the scheme would risk attracting investment and jeopardizing trade relations.

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