By Paul Sakkal
Australia is set to take a big step to wrest control of spiralling power prices by forcing gas companies to keep fuel onshore, as Labor moves to assure its closest Asian ally, Japan, that plans to limit gas exports will not deprive the resource-poor nation of contracted imports.
Labor is poised to announce an east coast gas reservation scheme as soon as next week, marking what would be another strident government intervention in the problem-filled energy market.
Resources Minister Madeleine King and Industry and Science Minister Tim Ayres are helping develop the long-awaited gas plan.Credit: Riccardo Savi
Former opposition leader Peter Dutton announced a reservation policy before the last election, which Labor criticised because it applied retrospectively to existing projects, creating risk for firms.
High east coast gas prices, which have tripled over the past decade and are steeper than competitor nations, have pushed the Albanese government to spend billions bailing out steelworks and large metal smelters in Mt Isa and Port Pirie, and they are widely expected to provide a lifeline to Tomago’s aluminium smelter.
Rising wholesale prices are also feeding into higher household power bills, which the energy market operator warned could continue for a decade, risking ongoing public support for the green transition.
Cabinet has not signed off on the final details of the reservation scheme, but several senior government sources unauthorised to speak publicly said the government was preparing to announce a framework within weeks to keep more gas onshore amid an ongoing feud between the Coalition and Labor on how to manage the balance between emissions reduction and power prices.
The amount of Australian gas that is sold overseas has been a talking point for years.Credit: Bloomberg
An option under consideration, according to one source, is a form of permits for firms to export in either the long-term or spot markets, forcing them to keep a portion of gas onshore.
Australia’s outgoing intelligence chief and next ambassador to Japan, Andrew Shearer, argued in October that Australia’s huge energy exports to allies were critical to maintaining stability in the Indo-Pacific amid intense competition with China.
Trade Minister Don Farrell told this masthead that Japan, which must import resources to meet its energy demands, could still rely on Australia, pointing out that big proposed gas projects in the Beetaloo Basin, Narrabri and Barossa would go a long way to fixing the domestic gas shortage.
The director-general of the Office of National Intelligence, Andrew Shearer.Credit: Louie Douvis
“We’ve not failed to deliver one kilojoule of contracted gas into Japan, and we will not fail to deliver. They should be comfortable in that knowledge,” Farrell said on Wednesday.
“There will be enough gas particularly with those three big projects coming.”
The energy market regulator has warned of an east coast gas shortfall by the winter of 2028.
Labor has been trying to balance the need to keep alive blue-collar manufacturing firms, some of which are considered critical infrastructure, with the need to balance the budget and its ambitions to invest in high-tech manufacturing.
Australian Workers Union national secretary Paul Farrow is pushing for the government to mandate capped gas prices for industrial energy users to stop market spikes threatening their business.
“Gas generators can absorb much higher prices than manufacturers because electricity users have no alternative when the grid needs firming. That’s why the Commonwealth needs emergency powers to set prices for industrial users if market dynamics threaten manufacturing viability,” Farrow said.
“These powers would ensure that, if gas generators do threaten manufacturing, we don’t lose jobs and capabilities while we develop a more permanent solution.”
Industry and Science Minister Tim Ayres said earlier this month that the gas reforms were close.
“What you want is the Goldilocks amount of gas,” he said on Sky News. “You want not too much and not too little. You don’t want too much because it’s expensive, and actually, solar and wind are much cheaper. You want gas to be that reliable backstop.”
Ayres’ office declined to comment, as did the office of Resources Minister Madeleine King.
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