Small increase in domestic gas supply could significantly reduce prices, APLNG research finds

Some 82 per cent of Australians support some form of national gas reservation policy.

There’s an old rhyme about a leaking bucket – no matter how many clever fixes are suggested, it continues to leak because the real problem isn’t addressed.

Right now, Australia’s east coast gas market is that bucket: patch after patch has been applied, but the fundamental leak remains.

It’s time to stop the back and forth and finally fix the hole. The current east coast market review is a chance to do just that – by ensuring Australian gas goes to Australians first, and by delivering the lower gas prices Australian businesses and households expect.

And that’s not hyperbole; recent polling by DemosAU showed 82 per cent of Australians support some form of national gas reservation policy. Australians also believe this sort of policy should begin immediately (73 per cent) and apply broadly to all exporters (73 per cent) – with no exceptions or carve-outs.

The solution is clear and there’s national support for it.

We’re calling for a fundamental reset of gas policy that delivers an enduring framework, ensures all exporters contribute to local supply, and gives Australian manufacturers access to the gas they need. Increasing supply is the only way to deliver the reduction in prices customers have been crying out for.

Independent modelling by Energy Edge, commissioned by Australia Pacific LNG, indicates that a relatively modest increase in domestic supply from around 150 petajoules to 180PJs over the next three years could significantly reduce gas prices.

This 6 per cent boost – enough to power an alumina smelter or over half a million households – would lower average prices by about $2 a gigajoule, an 18-20 per cent reduction off a projected baseline price across all three eastern states.

But these price reductions won’t be achieved if we resort to more patches on the bucket and allow domestic supply to be sold offshore. For example, in 2024 Australia Pacific LNG topped up the domestic bucket with 150PJ of gas, while another exporter drained the same amount from the domestic market and shipped it offshore.

This makes it clear we need a reservation policy that provides the incentive for exporters and local producers to develop their own gas reserves and increase supply to Australians first, while disincentivising the purchase of domestic gas to sell to overseas buyers. Export permitting is a simple solution that achieves both.

A model that does not deliver both will not be sustainable in the long run. It will not support the competitiveness of Australian manufacturing, nor provide the necessary supply for the gas power generation needed to back up variable renewable energy and keep the lights on.

At the heart of any reform, it must result in enough gas for the Australian market. This reserved gas should stay in Australia, and any potential loopholes that allow it to find its way back on to an export ship must be limited. Otherwise, Australians will not realise the price reductions that will flow from increased supply.

We need to fix the leak in the bucket for good.

Otherwise, like in the rhyme, Australia will never fill a bucket that continues to have a hole in it.

Dan Clark is CEO of Australia Pacific LNG