Santos’ Gladstone LNG tries to cool push for limiting using third-party producers to meet its LNG exports
Santos is resisting a push that it be prohibited from buying domestic gas to sell overseas. With rivals, unions and some customers calling for curbs, the company’s position may prove difficult to sustain.
Santos has urged the Albanese government to limit a proposed east coast gas reservation policy to new projects only, a position that leaves the South Australian company increasingly isolated as unions, major domestic buyers and rivals push for curbs on its ability to resell gas.
The Australian Energy Market Operator predicts looming supply shortages on the east coast, with seasonal gaps possible before the expected 2029 crunch. The decision looms as a key test of how far Labor is willing to bend Australia’s energy policy away from serving global markets in the name of domestic security.
Analysts have warned a domestic shortfall would carry significant economic and social consequences.
Santos has argued for a modest set of reforms – faster approvals, clearer regulation to remove legal risks for developers, and a reservation scheme that applies only to new fields. The company insists new supply is the only sustainable fix.
But Santos’ position is far less aggressive than others in the market, and its Gladstone LNG venture is why. Unlike rivals, Santos’ east coast LNG operation buys gas from the domestic market and channels it into export contracts. That practice, long a sore point among competitors and unions, is now under direct fire in submissions to the government.
The Australian Workers Union, with historic ties to Labor, was explicit in its attack: “The cost pressures triggered by dominant producers linked to international markets are exacerbated by one such operator,” the AWU wrote. “GLNG has come to heavily rely on third-party producers to meet long-term LNG export contracts. For workers whose future depends on fair and sustainable gas prices this conduct is nothing short of galling.”
The union’s intervention underscores the political risk for Labor. Ignoring its call for stronger reservation rules risks inflaming internal critics, but moving against Santos would destabilise a major LNG player and allies in Asia.
Santos insists the concerns are overstated. And the company argues that Narrabri, if approved, would add substantial new volumes to the market.
Australia Pacific LNG, part-owned by Origin Energy, has broken ranks with Santos, urging the government to clamp down on Gladstone LNG. The split among the east coast LNG exporters is unusual.
GLNG, in its own submission, turned its fire on APLNG and Shell’s Queensland Curtis LNG, pointing out that those ventures are expected to sell between 10 and 20 spot cargoes into the international market each year. Gladstone LNG, it argued, is locked into long-term contracts, unlike APLNG and QCLNG and if domestic buyers want to purchase that excess gas – they would need to pay “international prices” to keep it “Australian.”
Both APLNG and QCLNG are compelled to first offer the excess gas to the domestic market. Critics of GLNG insist there would be less pressure on domestic buyers if they were not competing with Santos.
Santos has repeatedly warned that restricting its ability to source domestic gas could force it to break long-term export contracts with Japanese and Korean buyers – allies that Canberra is wary of alienating, and compelling APLNG and QCLNG to sell more in the domestic market is perhaps the easiest solution for a government that is wary of upselling key regional partners.
Korea Gas Corporation, a shareholder in Gladstone LNG, has urged the government to respect contractual commitments, warning that any intervention that undermines them risks further damaging Australia’s investment reputation.
Japan’s INPEX, one of the country’s largest energy companies, told Canberra that any intervention should exclude Northern Territory projects, after the ACCC floated the idea of widening the rules to cover northern facilities.
“We believe the best way to sustainably resolve potential shortfalls in the east coast gas market and curtail resulting high prices is to facilitate more investment in gas development and infrastructure in Victoria and NSW,” INPEX wrote.
The submissions frame the competing pressures Labor must navigate. With rivals, unions and even some customers calling for sharper curbs, the company’s demand for a limited, forward-looking reservation scheme may prove difficult to sustain.
The Offshore Alliance, combining the AWU and the Maritime Union of Australia, demanded Jim Chalmers block Abu Dhabi’s bid over fears the Middle East operator will tap cheaper foreign labour to displace workers in the Australian energy industry.
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