Divided gas sector looks for consensus and influence ahead of east coast review reveal

Labor is just weeks away from revealing its hand as the industry seeks last minute clout to influence the Albanese government. Senior figures involved in the talks say a form of gas reservation is inevitable.

APLNG, part owned by Origin Energy, has said a rival backed by Santos is to blame for the looming gas shortfall.

Top gas executives will gather in Perth this week in a last-ditch attempt to shape the Albanese government’s overhaul of the east coast gas market, but widening grudges may prevent a unified step forward.

Labor is preparing to unveil reforms within weeks that will dictate how the east coast market operates. The reset is widely viewed as the government’s final attempt to prevent a looming supply crunch forecast from 2029, when the east coast will face an annual shortfall that would be economically devastating for manufacturing, heavy industry and households already grappling with high energy costs.

The Australian Energy Market Operator has issued the warning assuming there are no new sources of gas developed.

The review marks the most consequential rewrite of the sector’s operating rules in more than a decade, with Santos and its Gladstone LNG venture emerging as a central focus of policymakers. Gladstone LNG is the only one of Queensland’s three LNG exporters that does not produce enough gas to meet its long-term export contracts. For years, it has filled the gap by buying gas on the domestic market, a practice critics argue has tightened supply for local users and pushed up prices. Santos-backed Gladstone LNG disputes that.

That dynamic has fractured the once tight-knit LNG sector. The two other major exporters — Australia Pacific LNG, partly owned by Origin Energy, and Queensland Curtis LNG, operated by Shell, have broken ranks in recent months, urging the government to impose limits on Gladstone LNG’s ability to draw on domestic market gas for export.

Both companies insist an enduring fix is needed to ensure long-term supply adequacy and to prevent the chronic tightness AEMO has warned about from spilling into crisis.

Santos and Gladstone LNG argue they have steadily reduced their reliance on third-party gas and that any restrictions would undermine investor confidence and jeopardise energy security across the Asia Pacific. Allies such as Japan, Korea and China are customers of Australian gas.

Santos would like to increase its domestic contribution but it is waiting on regulatory approvals for its prospective Narrabri project in NSW.

Industry executives concede the political momentum appears to be swinging toward intervention. Senior figures involved in the talks say a form of gas reservation — targeted specifically at LNG exporters with significant domestic shortfalls — is “likely inevitable”.

“A gas reservation, most likely on the Queensland LNG exporters, I think is the most likely outcome,” one senior industry source said, who declined to be named. “That will hurt Santos. How much will depend on how much GLNG has to contribute to the domestic market.”

Some have suggested LNG exporters should make a domestic contribution worth some 15 per cent of the east coast market, a figure that would be expensive for Gladstone LNG.

It would be forced to increase drilling and or purchase credits from the other two Queensland exporters to meet its shortfall. In contrast, Australia Pacific LNG – which has in recent years supplied more than 20 per cent of the east coast market – would be free to increase sales into the lucrative export market.

Ties were strained when Santos endorsed a policy of curtailing exports of uncontracted LNG cargoes proposed by the Coalition and led by Peter Dutton. Such a policy would have severely restricted the returns of Australia Pacific LNG and Queensland Curtis LNG.

While the policy would create some division within the powerful industry, Labor is under growing pressure. Manufacturers, which enjoy strong ties to Labor, have warned their viability is being threatened by high gas prices. Meanwhile the fuel source is increasingly setting the price of electricity which has risen sharply to be a major contributor to inflation and the broader cost-of-living crisis.

The Perth assembly will test whether the industry can mount any meaningful final push to influence the outcome. Several sources familiar with the agenda said discussions are expected to focus on the shape of any reservation mechanism, potential compensation arrangements, and the future of upstream development in the Bowen and Surat basins. Few are hopeful of crafting a single pitch capable of swaying Canberra.

Originally published as Divided gas sector looks for consensus and influence ahead of east coast review reveal