Queensland gas exporters’ annual review to become quarterly
Queensland LNG exporters will be subjected to quarterly rather than annual reviews of how much gas they can export.
Queensland LNG exporters will be subjected to quarterly rather than annual reviews of how much gas they can export, as part of tougher rules introduced by the federal government to boost supplies in the domestic market.
The three LNG plants — owned by Santos, Shell and Origin Energy — are currently 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 a clunky measure that takes too long to implement because 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 changes will balance the need to guarantee sufficient domestic gas supplies while safeguarding Australia’s global reputation as a stable and reliable supplier of energy to regional partners,” Resources Minister Madeleine King said.
“The best protection for long-term contracts is a situation where the domestic market is well supplied and there is not a predicted domestic shortfall.”
Still, the decision to push ahead with reviews every three months drew criticism from Credit Suisse which questioned the impact it would have on sovereign risk concerns.
“Overall it’s a policy that betrays Australia’s assurances to allies and trading partners that their contracted supply would not be curtailed at a time of their utmost energy security concerns, as there are no clear protections for contracts beyond ministerial discretion, the policy explicitly enables the same effective result as breaking contracts and openly contemplates the prospect of physically breaking contracts entirely in its final paragraphs,” Credit Suisse analyst Saul Kavonic said.
Still, the Ai Group — an employers’ association body — said it may prove a more nimble tool should it be needed to solve domestic shortfalls.
“The old ADGSM was like a fire brigade that would only take bookings more than a year in advance. The revised ADGSM is still for emergencies only, but it now looks more capable of actually responding if and when needed,” Ai Group chief executive Innes Willox said.
In August, the Australian Competition and Consumer Commission warned of a “looming” shortfall in the east coast gas supply, saying domestic supplies could fall short of projected 2023 demand by more than 55 petajoules, which could see prices spike in the winter – a situation the government’s market intervention is designed to prevent.
However, a heads of agreement agreed in September 2022 saw LNG exporters agree to provide an extra 157 petajoules for the domestic market next year and charge domestic users no higher than international customers.
The gas industry is already on edge as Labor moves to revamp the gas industry’s code of conduct to cut prices, while gas and coal price caps have also unsettled major producers.
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