Gas supply ‘threat to 100 regional cities’

Australians are exposed to gas shortages so great they could halt power to 100 regional cities over the course of a year.

Josh Frydenberg, Scott Morrison and Malcolm Turnbull at a press conference in Sydney today. Picture: AAP.

Australians are exposed to gas shortages so great they could halt power to 100 regional cities over the course of a year, according to a grim new warning that gives Malcolm Turnbull clear advice to impose drastic export controls to prevent the crisis.

Mr Turnbull yesterday vowed to keep household power bills down by ­releasing more gas into the domestic market after the revised forecasts showed the shortages were three times greater than outlined just six months ago.

The government escalated its demands on the nation’s three giant gas exporters to rescue the economy from the crippling short­ages next year, threatening to impose extraordinary controls on the companies if they do not volunteer to help.

The revised forecasts clear the ground for more drastic measures to release more gas into the domestic market, with a deeper impact on the financial performance of Santos, Origin and Shell from their export hubs in Queensland.

Mr Turnbull called the chief executives at each of the companies yesterday to tell them of the scale of the shortages revealed in two reports from the energy and competition regulators, asking the companies to act on the shortages by November 1 or face legal controls over their exports.

The Prime Minister vowed to ensure the shortfalls did not happen by using export controls if needed, with the legal measures taking effect on January 1.

“We will not let the power bills of Australians rise further and further because of a shortfall of gas on the east coast of Australia,” he said.

Australian Industry Group chief Innes Willox warned of an “emergency” for manufacturers that required the formal intervention, while Australian Workers Union national secretary Daniel Walton said the government had to “pull the trigger” on the export controls now.

Labor energy spokesman Mark Butler turned the issue into a test of the Prime Minister’s willingness to activate the gas export mechanism he announced in June.

“We think the trigger has to be pulled. There has to be a formal declaration that the gas market in Australia is up to 100 petajoules of gas short. That is being seen by households in power bills that are going up and up and up,” Mr Butler said.

The Australian Competition & Consumer Commission said next year’s shortfall would range from 55 to 108 petajoules. ACCC chairman Rod Sims said one petajoule was enough to power the NSW ­city of Wollongong for a year, signalling the risk to the economy if the gas companies did not free up supply for manufacturers, power stations and households.

A separate analysis by the Australian Energy Market Operator said the shortfalls would be as big as 107 petajoules next year and 102 petajoules the following year, equivalent to about 17 per cent of domestic demand.

Mr Turnbull ramped up pressure on state leaders by telling NSW Premier Gladys Berejiklian, Victoria’s Daniel ­Andrews, and Northern Territory Chief Minister Michael Gunner to end their bans on new gas production to help prevent a crisis.

“Blanket moratoriums on new gas development in some states and territories are putting our ­energy security, industries and Australian jobs at risk,” Mr Turnbull wrote.

The minimum forecast for next year’s shortage is close to the ­potential annual output of the Narrabri coal-seam gas field in northern NSW, a Santos project that has been blocked by Liberal and Labor state governments ­despite warnings from Canberra four years ago that prices would soar if the field was not tapped.

While Queensland Labor Premier Annastacia Palaszczuk has allowed the expansion of the state’s coal-seam gas projects, the NSW and Victorian bans deprive those states of more supply at a time when the gas exporters are shipping as much as possible to Asia.

The two reports yesterday ­revealed the key forecasts that will determine how much gas exporters will have to redirect to the domestic market, setting out deeper requirements than the companies expected in June.

Mr Sims lashed the three ­exporters for expecting to sell 63.4  petajoules on the international spot market when they knew they had customers in Australia who needed the gas.

The ACCC said commercial and industrial customers were being asked to pay between $10 and $16 per gigajoule when these rates were far higher than the world parity price that was expected to apply once the three Queensland gas hubs began exporting.

However, Mr Sims said the prospect of the export controls had already convinced exporters to ­release more gas to the local market. “It has happened, there’s no doubt,” he said.

“It’s hard to put a precise number on it but I’d say you’d probably had at least around 30 petajoules come into the domestic market that wouldn’t have otherwise, ­because of that pressure.”

The gas industry lobby called the reports “alarming”, saying the shortfall was due to a jump in forecast gas-fired power demand.

“This analysis reinforces how vital it is for all governments to support developing new gas supplies as quickly and as cheaply as possible,” Australian Petroleum and Production Association chief Malcolm Roberts said,

Australia Pacific LNG chief executive officer Warwick King said the company was actively marketing gas to domestic markets next year.

“We plan to review the AEMO data and consider what APLNG can do help make sure the domestic market has the gas it needs in 2018,” Mr King said.

Origin Energy, which owns 27.5 per cent of APLNG said it would also look at other measures outside the APLNG project.

Additional reporting: Matt Chambers