Big users back quarterly gas export reviews for east coast producers

Australia’s big aluminium producers back quarterly reviews of how much LNG Queensland companies can export.

A worker at the Curtis Island liquefied natural gas plant in Queensland. Picture: Bloomberg

Australia’s big aluminium users have backed a controversial move to subject Queensland LNG exporters to quarterly rather than annual reviews of how much gas they can export, while also calling for a national gas reservation policy to free up more supplies for heavy industry.

The three LNG plants – owned by Santos, Shell and Origin Energy – are controlled by the Australian Domestic Gas Security Mechanism, which gives the government power to halt LNG exports if a domestic shortfall year has been declared.

However, since coming to power Labor has criticised the ADGSM, or gas trigger, as an unwieldy tool that takes too long to put in place as the government must make its shortfall declaration before November prior to the following calendar year.

Reforms to the mechanism, due to start on April 1, means a ­decision to activate the trigger will be reviewed every three months rather than annually.

The Australian Aluminium Council supports the move, saying it would make the gas export trigger more responsive to meet domestic demand.

“The council has previously supported facilitation of a more immediate trigger to make the ADGSM, rather than for the following year, should a shortfall in gas become apparent to the minister to help address sudden shocks or shortfall risks. The council believes the measures proposed in the guidelines are adequate, with the trigger now being quarterly,” Australian Aluminium Council chief executive Marghanita Johnson said in a submission to the federal government.

“The council recognises the need to balance Australia’s contribution to the world’s energy ­security and the trust trading partners and international investors have shown in Australia’s ­resources and energy sectors, with the needs of domestic consumers. The measures in the guidelines to protect long-term contracts are adequate.”

A shortage of gas on the east coast this year is still possible ­despite an improvement in the outlook for the market, the competition regulator warned in January, although LNG exporters have sufficient supplies to plug any gaps.

Users could face a supply shortfall of 30 petajoules of gas if the big Queensland LNG producers export all of their uncontracted gas, less than a 56PJ gap forecast last July. While the three LNG players have enough gas to dodge a domestic shortfall, some uncertainty remains in the market, according to the Australian Competition and Consumer Commission.

Prime Minister Anthony Albanese said in ­December that his government would consider adopting a ­national gas reservation policy as a longer-term solution to drive down energy prices.

The Aluminium Council said there was merit in pursuing keeping a set amount of gas for local use. Western Australia’s reservation policy requires LNG producers to set aside 15 per cent of production for domestic use.

“The industry has experience operating under the Western Australian domestic gas reservation policy for almost 15 years. This policy has helped provide domestic market security to the alumina industry, including a recent agreement with a smaller energy company which was sufficient to underpin the development of a new onshore gas field,” Ms Johnson said.

“But it also demonstrates the mutual value which can be created between the mineral processing industry and its energy suppliers, with supportive policy settings. Australia should adopt a strategic national approach to gas and its manufacturing sector, as many of its competitors have. A prospective gas reservation policy should be one part of the government’s strategy.”

NSW and Victoria have pushed for a national gas reservation scheme and Queensland says it does the heavy lifting on domestic gas supply.