Federal government to go ahead with gas reservation on east coast
Matt Canavan has indicated the federal government will proceed with a gas reservation scheme covering the nation’s east coast.
The federal government has indicated it will proceed with a gas reservation scheme covering the nation’s east coast, despite prices easing and a boost in supplies for domestic users.
Resources Minister Matt Canavan has been seeking industry feedback on replicating a reservation system similar to the one in Western Australia on the country’s east coast, to help provide relief for manufacturers and heavy industry still struggling with high tariffs.
Talks are being held with state and territory governments to implement a scheme aimed at helping address forecasts of tight conditions for stretched southern states.
“Western Australia has shown that a successful LNG export industry can survive and thrive with a gas reservation policy. I will ensure that gas is available and affordable for industry on the east coast as well, and will work with states and the Northern Territory and industry to implement a National Gas Reservation Scheme,” Mr Canavan said on Thursday, noting a final decision would be made by February 2021.
The government has been working on a raft of gas policy reforms after agreeing a pact with Centre Alliance senator Rex Patrick to replicate WA’s reservation policy on the east coast. The potential tightening of the LNG export trigger to free up more supplies for users is also being considered as part of a deal agreed with the minor party after it lent support for the Coalition’s income tax cuts in June.
WA’s regulations require 15 per cent of gas reserves at LNG export projects to be set aside for use within the state. The Energy Users Association of Australia has pointed to early signs of success from the Queensland government’s move to grant exploration licences with gas solely to be used for domestic use.
Others like Cooper Energy, developer of the Sole gas project off the Victorian coast, said a reservation policy would fail to bring down prices with tariffs ultimately determined by the cost of producing new gas resources.
While the worst of the east coast’s gas crisis now looks to have passed, Mr Canavan said some manufacturers were still struggling with conditions.
“We recognise that many businesses are still doing it tough with energy prices and I am focused on keeping gas prices down so we have a vibrant manufacturing and processing sector in rural and regional areas,” he said.
Gas output on the east coast surged to a record 500 petajoules in the September quarter, with the largest surplus supply of gas since LNG exports began in January 2015, consultancy EnergyQuest said on Thursday.
The east coast had a 17PJ surplus in the third quarter, compared with a 17PJ deficit a year earlier, driven by record coal seam gas production from Queensland producers. Short-term east coast gas prices fell by nearly 8 per cent in the third quarter to $8.23 a gigajoule, from $8.93 for the same period a year ago.
EnergyQuest said the “significant fall in prices is likely to weaken the case for tightening the Australian Domestic Gas Security Mechanism,” the consultancy said. “A review of the ADGSM was provided to the government at the end of September. No subsequent announcement has been made.”
Mr Canavan said the figures showed the success of Coalition energy policy and criticised the Victorian government for its onshore ban on gas exploration.