Gas reserve a win for manufacturing, if it delivers
Australian energy customers will get their first share of locally produced gas in a move celebrated by a manufacturing sector squeezed by high fuel costs.
Gas exporters will have to reserve 15 to 25 percent of gas for domestic use under a widely expected policy move from the federal government.
The regime will apply to gas contracts entered into from Monday but will come into full force from 2027.
Producers were quick to applaud the move, provided it delivers the lower gas prices promised by Energy and Climate Change Minister Chris Bowen.
“To be effective, the reservation needs to significantly reduce local gas prices,” Manufacturing Australia CEO Ben Eade said.
Despite Australia’s huge energy resource reserves, wholesale gas prices have jumped from $4 per gigajoule to $12 per gigajoule or more, putting pressure on steelmakers and other heavy industries that rely on the fuel to produce goods.
Monash Business School energy policy expert Guillaume Roger said the gas reservation scheme, which effectively reserves a predetermined amount of gas for domestic use from any new extraction, was designed to reduce prices.
However, it was not clear to Professor Roger how much of a reduction to expect.
“It depends on a lot of things,” he told AAP: how quickly new projects come online and how cheaply and effectively supplies can be moved to the southern states as the Bass Strait projects run out.
Options to solve congestion problems include widening pipelines from Queensland or building import terminals in places such as Newcastle or Melbourne so liquefied gas can be transported by ships, Prof Roger said.
While governments are under pressure to lower gas prices, the country is also trying to restrict fossil fuel use in line with climate goals.
Industry Minister Tim Ayres said the gas reservation scheme was designed to support heavy industry businesses that lack fast-tracks to electrification and decarbonisation.
The federal government is also helping industry switch from gas to electric heating processes with concessional funding, Senator Ayres told reporters on Monday.
Greenpeace Australia Pacific campaigner Geoff Bice said the reservation plan risked locking the country into more gas production and exploration that was not needed.
“While this policy takes some overdue steps to prevent export problems, it is concerning that the government continues to double down on new gas, despite the clear fact that Australia already has sufficient gas to meet our domestic needs,” Mr Bice said.
“If implemented effectively, this reservation policy should mean there will be no need for new gas projects, but without strong guardrails it risks further entrenching our dependence on expensive, harmful fossil fuels.”
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